Surfactants Monthly – February 2015
This months outlook contains news drawn from our friends at ICIS, whose news service I recommend, and from many other sources. The responsibility for errors and omissions is mine and the opinions are also mine and if you don’t agree with them, I’ll be happy to print your opinions here, also.
I don’t know about you, but I find the subject of ethylene oxide, endlessly fascinating, which is why again, we will have a paper on EO at our upcoming 5th ICIS World Surfactant Conference in New York, May 14th and 15th.
As you know, the AFPM (formerly NPRA) reports EO production and they noted at the beginning of February that US production of ethylene oxide slipped 4.8% in the fourth quarter 2014 on a year-on-year basis. Quarter on quarter, EO production was relatively stable, showing only a 0.57% rise as shown in the table below.
|US EO||Q4 2013||Q4 2014||% chg||YTD 2013||YTD 2014||% chg|
EO pricing in North America however, continued to fall in line with ethylene. –ICIS reported that (EO) contract prices for January slipped 3.7%, following the 7.8% drop in the feedstock ethylene contract price. January EO contract prices were assessed at 57.20-66.70 cents/lb ($1,261-1,470/tonne) FOB (free on board), down 2.400 cents/lb from 59.60-69.10 cents/lb FOB in December. The January ethylene contract price was settled at 35.25 cents/lb, a 3.00-cent decline from December, tracking weaker ethylene spot prices throughout the month of January.
By contrast, EO in Europe continues to rise following Euro – ethylene. March ethylene has settled at an increase of €100/tonne compared with February, to €910/tonne FD (free delivered) NWE (northwest Europe). The new ethylene contract translates to an increase of €82/tonne, taking EO prices to €1,090-1,257/tonne FD (free delivered) NWE (northwest Europe) and €1,145-1,302/tonne FD Mediterranean. Demand is characterized as “stable” by ICIS, which may be very charitable. Shell’s problems and force majeure at the Moerdijk facility in the Netherlands cannot help the situation despite no obvious shortages.
In EO news from the Middle East, Saudi Kayan is planning to boost the ethylene (C2) production capacity at its Jubail petrochemical complex by at least 93,000 tonnes/year by 2017 after securing higher natural gas allocation from the Saudi Arabian government. The company was given extra allocation of 10m standard cubic feet per day of natural gas effective 1 July this year. The extra gas will also enable Saudi Kayan to increase its ethylene oxide (EO) capacity by 61,000 tonnes/year by the second quarter of 2017. That’s a healthy slug of EO for the region and will doubles increase the momentum of ethoxylate production and export to North Africa and, of course, Europe, putting further pressure on somewhat embattled European EO producers.
Another key surfactant feedstock that we discuss here on the blog is fatty alcohols and ICIS reported that C12-14 fatty alcohol prices in Europe firmed in the first quarter on the back of recent floods in Malaysia and a weakening euro. Upward pressure has been exerted on the European market as feedstock crude palm oil (CPO) and palm kernel oil (PKO) prices continue to rise in Asia. The weakening euro is also adding to the firmer figures.
Additional ripples in the fatty alcohol supply chain, resulted from the shutdown of Ecogreen’s 30,000 tonne/year fatty alcohol plant in Medan, Indonesia, due to a gas supply shortage in the area. Gas supply in Medan dwindled to 7m standard cubic feet per day (mmsfcd) from the minimum 29.54 mmsfcd required by industries at the site, according to reports from Indonesian media. It is unclear if the other major fatty alcohols facility, which has a total nameplate capacity of around 200,000 tonnes/year, was affected.
By contrast, in SE Asia, at least, LAB prices remained stable during the same period – around $1,200-1,250/tonne CFR SE Asia. This of course trickled down to LAS where spot prices also stuck fast around $1,200-1,220/tonne FOB NE Asia, according to ICIS.
Symptomatic of the abundance of LAB in the Asian market, India’s Tamil Nadu Petroproducts Ltd (TPL) announced that it is currently operating its 120,000 tonne/year linear alkylbenzene (LAB) plant at 70% of its capacity. The company added that it was the usual run rate for the plant, which is located near Chennai in the Indian state of Tamil Nadu, because of competition with import material. Ouch! As attendees at our regular Surfactants Business Essentials Course know, running a plant at 70% is no way to make money!
A feedstock we do not discuss much is propylene oxide (PO). It is used in surfactants, but not much and primarily in EO/PO adducts for use in oilfield and other specialized industrial applications. The main uses are in polyether polyols, which are used to make polyurethanes (PU) and in monopropylene glycol (MPG). In any case, readers may find a recent ICIS profile interesting, which lists the following schedule of PO producers in Europe.
|Dow Chemical||Stade, Germany||630|
|Lyondell Basell||Maasvlakte, NL||300|
|Lyondell Basell||Botlek, NL||260|
|Lyondell Basell||FOs, France||220|
|Oltchim||Rimmicu Vilcea, Romania||110|
|PCC Rokita||Brzeg Dolny , Poland||40|
|Shell Chemical||Moerdijk, NL||210|
Further upstream in the palm plantation, despite a recent uptick, falling palm oil prices since mid ’14 have started to take their toll on the plantation companies. Kuala Lumpur Kepong Bhd (KLK), which saw its net profit fall 26.8% to RM214.2mil in the first quarter ended Dec 31, 2014, announced that it expects profit from its palm oil business for the current financial year ending Sept 30 (FY15), to be lower than that of last financial year on weaker palm prices. However, a seasoned commodity player like KLK, with over 100 years in the business should not be fazed by this volatility. Expect continued downstream investment in surfactants in Europe, Asia and perhaps even North America (my speculation only).
We don’t usually plumb the minutiae of the tax and duty laws here, but it is worth noting that the palm situation continues to become more complex. Malaysia is expected to resume imposing tax on exports of palm oil next month. Crude palm oil (CPO) export tax in Malaysia was scrapped for a period of five months from October last year to entice buying interest and manage the country’s growing stockpile. Typically, the CPO export tax in Malaysia is calculated based on monthly average prices from MPOB. A 4.5% tax will apply if CPO prices moved above Malaysian ringgit (M$) 2,250/tonne ($623/tonne). Recent statistics from industry regulator Malaysian Palm Oil Board (MPOB) showed double-digit monthly declines in the country’s CPO stocks and production in January.
Mid-February, Stepan announced their 4th Quarter Results. Net income fell 41% year over year to $6.2m because of restructuring charges and lower volumes in the company’s core surfactants business. Sales for the three months ended 31 December fell 4% year over year to $454m, mainly because of a 7% decline in volumes. Operating income fell 35% to $9m. Results included $3m in restructuring charges to account for an early retirement incentive programme and certain asset write-offs. Results were also “significantly impacted” by lower surfactants income on lower commodity consumer product volumes in North America and Brazil. Surfactants’ fourth-quarter operating income was down 41% year over year to $12m, with sales down 6% to $309m. Surfactants are Stepan’s largest business, accounting for 68% of sales.
Stepan’s surfactant sales volume declined 10% from the 2013 fourth quarter, mainly because of a 10% volume decline in North America. Specifically, surfactant use per load of laundry has declined due to customer reformulations and as a result, certain customers who are backward integrated are now able to produce more of their requirements in-house, the company said.
Regular attendees at our surfactant conference series will recall these results being presaged by comments from Quinn Stepan in May at our New York event and so will not come as a surprise. I have no doubt that the company’s continuing diversification and business development efforts within the surfactant segment will reduce their vulnerability to these sorts of “make v buy” shocks in the future.
In other earnings news, Oxiteno reported on reais (R) 98m ($34m) in Q4 earnings before interest, tax, depreciation and amortisation (EBITDA), down 9% year on year because of lower sales of specialty chemicals sold in Brazil and because of lower operating rates in Venezuela. Operating rates in Venezuela have been low since the first quarter of 2014 because of limitations in importing feedstock. Specialty chemical volumes in Brazil fell because of the nation’s slow economy. Other factors dragging down earnings included lower international prices for glycols and one-time expenses to pay for studies and projects. For the full year, EBITDA totalled R404m, down 8% from 2013. Sales were R3.41bn, up 4% from 2013.
By contrast, Oxiteno’s parent, Ultrapar, did quite well considering their exposure to the same struggling Brazilian economy. They reported net earnings of R372m in the fourth quarter, up from R371m in Q4 2013. Net sales were R17.8bn, up almost 10% from R16.2 reported in Q4 2013. For the full year, net earnings were R1.25bn, up nearly 2% from R1.23bn in 2013. Net sales were R67.7bn, up about 11% from R60.9bn.
In conclusion, I remind you of two major initiatives: First, if you have not already taken our Surfactant Value Chain Survey, please do so, as I think there are some days left. Analysis of the survey results, are only available to participants and to attendees at our conference series this year.
Also you should be at the 5th World Surfactants Conference in NYC, May 14 – 15, featuring Henkel, L’Oreal, Omnova, Clorox, Sasol, Flotek, Solvay and many others. Study in depth, the Turkish, Chinese and of course North and South American Surfactant Markets. The event is in the largest auditorium available at the Jersey City Hyatt, but I am concerned we will still sell out, so if you are thinking of coming, please book now.
Our next initiative in the surfactants field will most likely be the soft launch of our Surfactants Business Update Quarterly newsletter. This will be a subscription only service and a sample issue will be available to qualified reviewers later in April of this year. Your best way to keep tabs on this venture is to join our LinkedIn Group of the same name.
As always, please keep your comments and suggestions coming in and we will talk again next month.
Surfactants Monthly – January 2015
This months outlook contains news drawn substantially from our friends at ICIS and other sources. The last week of January saw the annual ACI meeting in Orlando, FL. Regular readers know by now, my philosophy on industry meetings and conferences. In short it is: “you gotta be there”. So we do not provide here transcripts of what was said or copies of papers and we certainly do not report information gained in off-line meetings and discussions, of which there were many for us that week. Having said that, I do heartily recommend the Twitter summaries of the inestimable Green Blogger, Doris De Guzman. It was great to see Doris back at ACI.
A theme of this month seems to have been LAB/LAS down in price while FA (Fatty Alcohols) and AS/AES up in price. The continued low price of crude has rendered LAB once again the feedstock to beat in the price/performance contest. The future of palm based MES as a true workhorse seems to have been cast into doubt.
Hedging these two key feedstocks for the surfactant value chain is represented by the JV between CEPSA and SInar-Mas around a 160 KMT/yr fatty alcohol plant to be started up in Indonesia in Q1 2106. A big new step for both companies. Best wishes to Jose Maria Solana, co-CEO from the CEPSA side.
January started with floods and accompanying problems in Malaysia. ICIS reported that prices for mid-cut fatty alcohols in Europe were expected to rise in the first quarter of 2015, due to floods in Malaysia’s eastern states affecting palm oil feedstock plantations. In light of the floods in east Malaysia, CPKO prices have risen and exports prices into Europe have firmed in turn. Export prices have seen further upward pressure due to the Ringgit to Euro exchange rate which has been favoring the Ringgit in recent weeks. While prices for the first quarter of 2015 have not settled yet, numbers have been quoted higher at €1,200-1260/tonne free delivered (FD) northwest Europe (NWE). The fourth quarter 2014 price range was assessed at €1,150-1,250/tonne FD NWE. These increases were seen despite ample supply on the European continent.
Throughout the month, mid-cuts continued to rise. On 14 January, C12-14 fatty alcohols prices rose $30-100/tonne week on week to $1,280-1,400/tonne FOB (free on board) southeast (SE) Asia, according to ICIS data. The spike in CPKO prices over a short span of time in the previous week, amid worries of supply disruption, led producers to raise asking prices by around $200/tonne compared to target prices in December. On 14 January, CPKO were stable at MR 230 /pikul, the local measurement for the commodity, or at $1,058/tonne DEL (delivered) south Malaysia on 14 January, according to data from a palm oil broker. Crude palm oil (CPO) prices rallied to a six-month high on 9 January, at Malaysian ringgit (M$) 2,383/tonne, as worries of flooding in the palm-producing areas to exacerbate the already low production season at the end of 2014.
I clearly remember my first business meetings in the early nineties with the company Vista (now Sasol O&S) as we discussed trends in feedstocks like LAB and 1214/15 alcohols and the impact of the weather on the (then critical) coconut crops. The weather remains difficult to predict and impossible to control!
For more perspective on what is happening in the fatty alcohols market, ICIS published an excellent outlook article (subscription may be needed to access). Additionally, Chemical Week magazine published an interesting article on the monsoons last week.
In contrast to alcohols, LAB and LAS started the year on a different trajectory. Spot export prices of drummed 96% purity linear alkylbenzene sulphonate (LAS) for cargoes from India heading to neighboring Asian countries declined, amid falls in the feedstock linear alkyl benzene (LAB) and other raw material, ICIS reported earlier in the month. According to ICIS data, prices fell by $20-40/tonne to $1,160-1,200/tonne FOB (free on board) India in the week ending 7 January. Throughout the month, Asian LAS and LAB prices continued to fall. On 14 January, LAS export prices in the northeast Asian (NE) market were assessed $50/tonne lower at $1,200-1,230/tonne FOB (free on board) NE Asia, according to ICIS data. Import prices in southeast Asia (SE), meanwhile, fell by $40-50/tonne to $1,220-1,260/tonne CFR (cost & freight) SE Asia over the same period.
As an indicator of the state of the LAB market, China’s Fushun Petrochemical Co currently runs it 280,000 tonne/year linear alkyl benzene (LAB) plant at 70% of capacity. The company has shut down one of the three lines at the plant because of ample supply in the local market.
The Chinese EO Tsunami has been a consistent recent them of our blog and ethylene oxide (EO) prices in China, as reported by ICIS, have been falling since November and they are expected to continue the downtrend amid burgeoning supply of new EO capacities. As much as 540,000 tonnes of new EO capacity came on stream in China in the past month, knocking off prices as global crude futures plunged to new lows and Brent crude even traded below $60/bbl. EO prices in eastern China spiraled down during the week ended 17 December, extending further losses amid ample supply. Prices fell by CNY500/tonne EXWH from the previous reporting week to CNY8,300/tonne EXWH during the week ended 17 December. Compounding the situation, China will be adding 1.3m tonnes of EO capacity by the end of the first quarter next year, taking the country’s total EO capacity to 3.5m tonnes. The new capacity, will be mainly in the southern and eastern coastal areas.
In news from our favorite Polish surfactant company, PCC Rokita and Thailand’s IRPC Polyols Company (IRPCP), signed an agreement to create a Bangkok-based joint venture. The 50:50 venture will sell polyols and polyurethane (PU) systems from the portfolio of IRPCP, as well as new products produced by the Thai unit’s owner, IRPC Public Company, with technology licensed by PCC Rokita.
Last month’s panic over European EO supply seems to have abated. BASF is due to close its ethylene oxide (EO) plant in Ludwigshafen, Germany, for around 10 days in June, as reported last week. The site has a nameplate capacity of 345,000 tonnes/year EO and 25,000 tonnes/year of by-product ethylene glycol (EG), according to ICIS data. INEOS Oxide has currently shut down its Lavera facility in France for a scheduled outage. Shell’s force majeure on EO is ongoing, according to sources, although there is no official comment from the company. Nonetheless, panic over where customers would get lost volumes from seems to have dissipated and arrangements have clearly been made. Consumption is steady and in line with availability.
In conclusion, I remind you of two major initiatives: First, if you have not already taken our Surfactant Value Chain Survey, please do so as I think there are some days left. Analysis of the survey results, only available to participants and to attendees at our conference series this year. Also if you have not yet registered for our 5th World Surfactants Conference in NYC, May 14 – 15, featuring Henkel, Clorox, Sasol, Flotek, Solvay and many others, you probably should now, as the space will again sell out.
As always, please keep your comments and suggestions coming in and we will talk again next month.
Surfactants Monthly Review – December 2014
Thanks again to my good friends at ICIS for providing much of the news-feed for this blog. The links are mostly to ICIS articles and many, but not all, require a subscription to read. So again, I really do recommend an ICIS News subscription to anyone interested in chemicals. You should also check out the growing list of ICIS pricing reports. I have been particularly impressed by the new ones on Asian LAB/LAS and FAE’s. And no, I don’t get any commission from ICIS on blog readers who subscribe to ICIS products! Here follows our traditional monthly review and then I round out the article with some ideas for you to consider about initiatives that I want to launch in 2015.
Speaking of LAB, the month started with weakness in the Asian LAB market. Where prices on SEA imports of LAB dropped by $80-100/tonne, driven largely be price drops in benzene and jet kero. On 3 December, import prices were around $1,500-1,550/tonne CFR according to ICIS data. As one might expect, prices for LAS in Asia also declined. As of 3 December, import prices in SE Asia were down by $10-20/tonne at $1,340-1,380/tonne CFR. Again largely feedstock driven, but continued weak demand is not helping (sellers that is).
Not directly surfactant related, but relevant, Lubrizol signed an agreement (and the deal just closed New Year’s Eve) to acquire Weatherford International’s oilfield chemicals and drilling fluids businesses for an undisclosed sum. Engineered Chemistry supplies additives and fluids for a range of oilfield activities, including cementing, drilling, flow assurance and fracturing. Integrity Industries, based in Kingsville, Texas, and operating in around 14 locations, manufactures drilling fluid systems, including diesel, mineral oil and synthetic oil based fluids. With this move, Lubrizol follows the path set out by Solvay with their recent acquisition of Chemlogics oilfield business. The deal comes around the same time as Lubrizol’s announcement of the acquisition of Warwick International. Warwick, known for its TAED business in the laundry sector, takes Lubrizol deeper into homecare business and bulks up the LZ Personal and Homecare segment, which got its big boost more than 15 years ago when they acquired Chemron’s surfactant business. It is clear that Lubrizol’s owner (Berkshire Hathaway, the legendary Warren Buffet’s vehicle) has money to invest and is pushing Lubrizol to invest it. I would watch this space in 2015 for more large – mid-sized deals in the surfactant / home / personal care space by Lubrizol and perhaps some deals taking further pages from the Ecolab / Solvay playbook in the energy sector.
The Ethylene Oxide market continues to interest and excite with a rash of news from around the world. For December, this seems to be the bulk of our Blog.
In the US, EO contract prices for November declined 5.4% from October, following a 9.9% drop in the feedstock ethylene contract price. November EO contracts were assessed at 65.40-74.90 cents/lb ($1,442-1,651/tonne) FOB, down 4.0 cents/lb from 69.40-78.90 cents/lb FOB in October. In comparison, the November ethylene contract price was fully settled at 45.50 cents/lb DEL (delivered), down 5.0 cents/lb from the October contract price of 50.50 cents/lb DEL. The decline was based on a steep drop in ethylene spot pricing and a small drop in cash costs. Demand for EO in the downstream ethylene glycol (EG) market is starting to slow as EG downstream markets are in their slow season due to the end of the year holidays. Downstream of the monoethylene glycol (MEG) sector, the polyethylene terephthalate (PET) market is in its off season, while downstream of the diethylene glycol (DEG) sector, unsaturated polyester resins (UPR) and polyester polyols are in their slowest time of year. Some of the more recent tightness in EO, meanwhile, has started to loosen as the EO unit at LyondellBasell’s Bayport, Texas, facility is back in operation, except for a 10-day shutdown in December meant to install new equipment that will permanently fix the unit.
News from Croda, which in my view is huge in terms of the EO market for ethoxylates in personal care, cosmetic and food applications. Croda in North America (Atlas Point, DE) will use bio-ethanol to make ethylene and conver the ethylene into EO for use in its existing ethoxylation activities. This is builds on a small but growing interest in bio-derived EO we first heard about from Solvay and India Glycols (both, by the way at our surfactant conferences produced with ICIS). Companies like Aveda, Ecover / Method and 7th Generation continue to be users of Bio – ethoxylates and apparently their customers continue to be willing to pay for the privilege. I have noted elsewhere that 7th Gen’s laundry detergent sells for more than Tide per oz (let alone wash-load). The market exists and I would also expect there to be additional opportunity in the food area for Croda’s ethoxylated Sorbitan esters. An additional benefit. Every lb of EO made at Atlas Point via this route is one less point moved by rail from the US Gulf Coast. I’m not saying that this in any way closes the likely cost gap of bio EO vs Petro EO, but the mere fact of less transportation appeals to the same constituency as appreciates the bio-sourcing of the ethylene.
Over in Singapore, Shell is set to restart its EO unit at Pulau Bukom in January, after the unit’s turnaround of about three months. The 550,000 tonne/year unit was shut along with Shell’s cracker at the site in October for maintenance and expansion. Shell is set to complete construction of its 140,000 tonne/yr ethoxylation facilities in Singapore in the first quarter of next year. These will add to Shell’s existing capacities for alcohol ethoxylates (AE) at 40,000 tonnes/year from its acquisition of its partner’s shares in ethylene glycols (Singapore) in 2010.
Back in Europe, Shell’s propylene oxide (PO)/styrene monomer (SM) unit 1 – known as MSPO/1 – and its ethylene oxide (EO) plant at Moerdijk, Netherlands, are back in operation but the cracker is not likely to be online again until the end of 2015′s third quarter. In early October, chemical operations at the Moerdijk site were closed down due to problems with steam supply and a resulting high pressure steam leak.
In Russia, SIBUR has completed the expansion of its ethylene unit in Kstovo, central Russia, to take its capacity to 360,000 tonnes/year. SIBUR completed the works to increase the C2 capacity of its Kstovo plant by 60,000 tonnes/year in order to increase supplies to SIBUR-Neftekhim’s EO and glycol plant in Dzerzhinsk, as well as its new polyvinyl chloride (PVC) in Kstovo, which belong to SIBUR’s subsidiary RusVinyl. The company said the C2 project had been “syncronised” with an earlier ethylene oxide (EO) capacity expansion project, it said, referring to the expansion of 36,000 tonnes/year that plant was subject to earlier this year. Total EO capacity was increased at the site from 264,000 tonnes/year to 300,000 tonnes/year.
Back in the US, with more EO relevant news: Sasol has completed its $4bn credit facility for its proposed ethane cracker and derivatives (including EO and Ethoxylates) complex in Lake Charles, Louisiana. A syndicate of 18 international banks and other financial institutions are lenders for the credit facility, the company said in a news release. In October, Sasol announced it had made a final investment decision on the project, which it had valued at $8.1bn but recently raised that estimate to $8.9bn. Expected to come online in 2018, the complex will consist of a 1.5m tonne/year ethane cracker, 900,000 tonnes/year of polyethylene (PE) capacity split about evenly between low density PE (LDPE) and linear low density PE (LLDPE); 300,000 tonnes/year of ethylene oxide/ethylene glycol (EO/EG) capacity; and 300,000 tonnes/year of specialty alcohols capacity.
In China, EO have seen prices falling since November and they are expected to continue the downtrend due to new investment in EO capacity. As much as 540,000 tonnes of new EO capacity came on stream in China in November. Consequently, EO prices in eastern China dropped December. According to ICIS, prices fell by CNY500/tonne EXWH from the previous reporting week to CNY8,300/tonne EXWH during the week ended 17 December. Compounding the situation, China will be adding 1.3m tonnes of EO capacity by the end of the first quarter 2105, taking the country’s total EO capacity to 3.5m tonnes.
In Korea, KPIC attained on-spec production at its new ethylene glycol (EG)/ethylene oxide (EO) swing plant in Onsan on 23 December, a source close to the company said on Friday.
Long-time Mexico chemicals hands can scarce believe it still, but Mexico will start the new year by awarding energy contracts to third parties for the first time in 76 years. The Ethylene XXI integrated PE complex is scheduled to open in September 2015. The project, a 75:25 joint venture between Brazil-based Braskem and Mexico-based Grupo IDESA, will have a 1.05m tonne/year ethane cracker, two high density polyethylene (HDPE) units of 400,000 tonnes/year and 350,000 tonnes/year, and a 300,000 tonne/year low density PE (LDPE) unit. Ethylene XXI will receive feedstock ethane from Mexican state producer Pemex through a 20-year long-term contract, based on Mont Belvieu reference prices. Mont Belvieu, Texas, is the US hub for natural gas liquids (NGLs). Because of the advent of shale gas, US supplies of NGLs have increased substantially, causing their prices to fall. Since Ethylene XXI’s ethane prices will be based on Mont Belvieu’s, it will benefit from this trend, even though Pemex is the state energy producer in Mexico. In addition to Ethylene XXI starting up in 2015, Mexico will also award the first contracts under its reformed energy regime.
First up, Mexican polyester producer Alpek is planning a 750,000 tonne/year ethylene glycol (EG) project in Mexico, while Pemex plans to expand its ethylene oxide (EO)/EG facility by 80,000 tonnes/year and build a new 500,000 tonne/year paraxylene (PX) project in the country. Meanwhile, Mexico’s Grupo IDESA is aiming to more than double ethanolamines production by 50,000 tonnes/year at Coatzacoalcos.
Tough times ahead for fatty alcohol producers – but therefore, by inference, good times for users? – Some highlights from an interesting analysis by ICIS: South East Asia is center of gravity for production and consumption has been recently driven by China and of course traditional markets in North America and Europe. Looking ahead, there is a lot of capacity coming on-stream at the same time as economic growth is projected to slow. According to projections by the International Monetary Fund (IMF) in October 2014, China economic growth is expected to moderate in 2014 to 7.4%, as compared to 7.7% in 2013 and decline further to 7.1% in 2015. Meanwhile, the IMF data also projected growth in the Asean-5, comprising Indonesia, Malaysia, Philippines, Thailand and Vietnam, to slow down to 4.7% in 2014 before recovering to 5.4% in 2015, compared to 5.2% growth in 2013. Outside Asia, growth in the US is projected at 2.2% in 2014 and 3.1% in 2015, compared to 2.2% growth in 2013, while growth in the euro area is expected at 0.8% in 2014 and 1.3% in 2015 after a 0.4% contraction in 2013.
Meanwhile, two new fatty alcohols plants, including one plant outside the Asia Pacific (Wilmar), is expected to start up in 2015, a delay from the initial start-up schedule of 2013/2014. These new plants will potentially boost the total annual nameplate capacity of Asia’s fatty alcohol market by an 260,000/tonnes by the end of 2015, according to a survey by ICIS. Talks of four new fatty alcohols plants in China, since July 2014, which will total around 400,000 tonnes/year of capcaity, further fuelled worries about the oversupply situation. These four plants are expected to start in late 2015/2016 according to local sources. Export prices for C12-14 fatty alcohols were at $1,230-1,300/tonne FOB SE Asia, on 17 December, based on ICIS pricing. This represent more than 40% decline from its highest price at $2,000-2,200/tonne FOB SE Asia in 12 March 2014 following the decline in PKO prices.
In late December, PKO in the cash market was at around $930/tonne DEL south Malaysia, although drastic fluctuations of around $50-100/tonne were seen within a few days on 8-10 December, on worries of typhoon Hagupit’s disturbance, lead several market players to the sidelines. Slower seasonal production in year-end also boosted PKO prices which further prevented significant downward trends in C12-14 fatty alcohols prices despite the slower-than-expected demand.
However, the overcapacity in derivative downstream market, particularly in the Chinese alcohol ether sulphate (AES) sector, for the production of SLES, lead many of these buyers to be resistant of higher prices in fatty alcohols pricing despite firm feedstock costs. Also, the drastic downward trend for ethylene oxide (EO), the co-feedstock for alcohol ethoxylation production, further fuelled the wariness and buying resistance in the major Chinese market. Nevertheless, high PKO costs in the third quarter, which contributed to the major production cost for fatty alcohols, coupled with buying resistance , consequently lead several major suppliers to reduce operating rates since the second half of 2014.
That’s it for December and for the year. Now for some ideas I want you to consider for 2015. I have a couple of ideas at different stages of development.
First is the Surfactant Business Survey that will be launched in 2015 in partnership with ICIS. Here is a DRAFT that you can try out and comment on: https://www.surveymonkey.com/r/surfactantssurvey This is just a test and the real survey will be officially launched by me and ICIS some time in January. (And so some of you will be asked to participate again in the final survey!). This will be an annual business survey of around 50 surfactant manufacturers and 50 users of surfactants; spread across the globe and in a variety of end-use sectors. The survey will focus on business issues and trends such as vertical integration, feedstock platforms, market trends (sustainability, multifunctionality etc), challenges for users (ditto manufacturers) and drivers of demand. The results will be analysed and compiled into a briefing book, available only to participants in the survey and to attendees at our surfactants conference series (currently 3 per year in US, Europe and Asia – potentially adding a 4th in another region), where the briefing will be presented also as a paper. The survey will be done annually and therefore some good time series data will be built up. Try it out and let me know https://www.surveymonkey.com/r/surfactantssurvey
Second is the Surfactant & Feedstock Monthly Market Report . This is a much earlier stage idea as I just thought about it in any depth over the Christmas break. However, I am thinking about a service in which information, analysis, insight and opinion on the surfactant value chain will be provided monthly to subscribers. Think of it as an Economist Magazine for the surfactant value chain. The content will be heavy on analysis and insight but will also provide basic data on key market indicators like pricing and capacity related to major building blocks. Opinion, of course, will be woven in where I consider it helpful. The aim will be to bring our subscribers information and insight that they just can’t get anywhere else. I want also to build in a responsive / interactive feature to be used among subscribers, but I have to admit this is even less well defined the monthly report idea. I will work on a prototype this month and send it to select folks for their critical eyes. At this stage, however, I’d like to get blog readers comments on this idea. Any guidance, encouragement, cautions, requests etc. are welcome. Comment here or get in touch directly (neil [a] neilaburns.com)
Of of course, we can talk at ACI in January. Please do say hi – if we don’t have a meeting already scheduled. You can catch me for sure at the P&G reception or the BASF wine-tasting or of course the legendary Clariant cigar bar.
Surfactants Monthly Review – November 2014
Thanks again to my good friends at ICIS for providing much of the news-feed for this blog. The links are mostly to ICIS articles and many, but not all, require a subscription to read. November is always a great month for me as we have our Asian Surfactants Conference, then (reviewed in the previous post). I also really have grown to love the US holiday of Thanksgiving which we just celebrated last (long) weekend. We have the usual crop of projects in this months review, but to me, the most interesting piece is the last paragraph (go on – skip ahead). Bio-surfactant at $245/Kg! We must know more..
In news that did not seem to make it into our October review, INEOS, as of Oct 31, has suspended its EO/EG project in LaPorte, TX. Earlier in October, INEOS wrote to the Environmental Protection Agency (EPA) that the project had been discontinued. The plant would have had 500,000 tonnes/year of EO and derivatives capacity, the company said in December 2011. A few days later, INEOS, CEO Jim Ratcliffe explained that the decision to indefinitely suspend a proposed INEOS ethylene oxide/ethylene glycol (EO/EG) plant in La Porte, Texas, was taken as a result of increased capital costs. The unexpected capital costs were not related to expenditure in developing the unit, but instead to an increase in outside battery limits (OSBL) costs. OSBL refers to areas in a refinery or process plant outside the primary process unit’s boundary, such as secondary aspects of the development such as utilities and tankage. The huge rush of construction in the US as petrochemicals players move to capitalise on lower feedstock costs on the back of the shale gas boom has resulted in an increase in some service sector costs, INEOS director Tom Crotty added.
INEOS and other companies had announced new projects in the US to take advantage of low-cost feedstock, made possible by the advent of shale gas. However, a small number of these companies have started withdrawing their plans.
A joint venture made up of Mitsui and Idemitsu Kosan has withdrawn its air permit application for a 330,000 tonne/year alpha olefins plant in Freeport, Texas.
In December 2013, Shell decided not to build a $12.5bn gas-to-liquids (GTL) plant in Louisiana because the project became too expensive.
Meanwhile, EO drama continues in Europe as Shell is working towards resuming production of ethylene oxide (EO) and ethylene glycol (EG) at its site in Moerdijk, the Netherlands, before the end of the year. Shell had previously declared force majeure on EO due to a damaged heat exchanger in September, according to market sources, and the more recent steam leakage has caused the company to extend this to a number of other products. The outage has caused tightness in the EO market and demand has been boosted by customers attempting to find new suppliers. This should again reinforce the point that even the most expert companies running the most mature processes, can hit serious production problems.
For manufacturers of FAEs’, alcohols started the month going the other way as European mid-cut fatty alcohol prices for the fourth quarter have dramatically declined from third-quarter levels. Fourth-quarter contracts settled at €1,150-1,250/tonne FD (free delivered) NWE (northwest Europe), a decline of €250/tonne on the low side and €300/tonne on the high side. PKO values were at $951.20/tonne DEL (delivered) south Malaysia, compared with $1,202.09/tonne on 4 June. Expectations of a further softening of feedstock values, and therefore fatty alcohol values, had led some buyers to delay negotiations. However, with PKO values strengthening in recent weeks, the majority of buyers are now thought to have finalized their discussions. However, many anticipate extra material soon being made available to the European market, with additional capacity coming onstream in Asia, as well as from Wilmar’s new plant in Rotterdam, which is thought will lengthen supplies further. Volatility in alcohols is the norm today, however as by November 5th, C12-14 fatty alcohols prices rose $20-50/tonne week on week to $1,250-1,350/tonne FOB SE Asia. This follows Feedstock PKO prices which gained by around $100/tonne.
As further evidence of the difficult conditions in Brazil, Oxiteno saw a 32% year on year drop in third quarter EBITDA amid lower volumes of specialty chemicals and a higher cost of sales. EBITDA for the three months ending 30 September reached Brazilian reais (R) 99m compared with R146m in the prior-year period. Oxiteno’s quarterly sales of specialty chemicals slipped a percentage point to 175,000 tonnes, mainly due to reduced operating levels in Venezuela, while the company’s cost of sales rose by 10% to R682m Oxiteno’s parent company reported net earnings of R329m, flat compared with the prior-year period, while EBITDA increased by 3.2% year over year to R790m. Net revenues were up by 8.7% to R17.3bn.
More Asian overcapacity news; this time in LAS. Spot prices for 96% LAS in northeast and southeast Asia were stable. Sellers continued to offer material, but buyers had sufficient stocks and stayed out of the market, industry sources said. In the Indian export market, however, prices fell by as much as $30/tonne amid poor demand and ample supply.
Notwithstanding such a short tem outlook, Thai Oil and Japan’s Mitsui & Co is still on track to begin commercial operations at the new 100,000 tonne/year LAB facility at Sri Racha, Thailand, in the fourth quarter of next year. The company expects to sell a greater proportion of the plant’s output in the domestic market and less overseas once the material is commercially produced. Thai Oil, via its wholly owned subsidiary Thai Paraxylene Co, and Mitsui & Co earlier last year formed a joint venture, Labix, to build the LAB facility. Thai Paraxylene Co owns a 75% stake in Labix while Mitsui owns the remaining 25%.
When I started this blog, I did not think I would be writing so much abut Bolivia. In October, state energy company YPFB inaugurated the Gran Chaco natural gas liquids (NGLs) separation plant. The plant will eventually process around 32m cubic metres/day (mcm/day) of natural gas to produce 2,247 tonnes/day of liquefied petroleum gas (LPG), most of which has been earmarked for export to Brazil and Argentina. The plant will also produce 3,144 tonnes/day of ethane to serve as feedstock for an ethylene and PE plant that the company plans to build in Gran Chaco, and propane for a proposed propylene and PP plant, also in the region. Bolivia’s central bank has also granted YPFB’s downstream subsidiary EBIH financing to build a 10,000 tonne/year tubing and film plant in La Paz. The plant will use PE as feedstock, which will initially be imported, then supplied by the proposed Gran Chaco ethylene/PE plant. The project is part of the company’s $2.73bn investment plan through 2017 to build a number of new industrial complexes. Projects include a 1m tonne/year methanol petrochemical complex, currently at the conceptual engineering stage; a nitrogen fertilizer plant; a PVC plant; an aromatics plant; and an ethylene oxide (EO) and ethylene glycol (EG) plant. Hmm … let’s see.
More news from the inestimable (the term has a number of meanings, including “great” and “fathomless”. Both are appropriate as anyone who has done business with the company can attest) Pemex. The company is planning to expand its ethylene oxide/ethylene glycol (EO/EG) plant in Morelos, and is building a new paraxylene (PX) plant in Cangrejera. Pemex is in the engineering stage of expanding its 280,000 tonne/year EO/EG plant in Morelos, Mexico, by another 80,000 tonnes/year by 2017.
Further EO/EG expansions to come in Korea, where KPIC plans to start up its ethylene glycol (EG)/ethylene oxide (EO) swing plant in Onsan in December. When fully operational, the plant will be able to produce 200,000 tonnes/year of EG.
Elsewhere in Asia, China’s Dynamic (Nanjing) Chemical Industry has started up its new 100,000 tonne/year ethylene oxide (EO) unit at Nanjing in Jiangsu province. The start-up of the plant has been postponed a number of times, with some market participants attributing the delays to “weak derivative market conditions” (no kidding!). Dynamic operates a second, 60,000 tonne/year EO unit at the same site. Dynamic (Nanjing) Chemical Industry is a subsidiary of Dynamic International Enterprises, which specialises in producing glycol ethers.
As evidence of said “weak conditions” in the derivative markets, Spot fatty alcohol ethoxylates (FAE) prices in Asia have nosedived to a 17-month low this month, with the downtrend likely to continue into early next year amid a demand lull during the winter season in China, according to an analysis by Angeline Soh at ICIS. On 26 November, FAE-7 and 9 grades were assessed at $1,490-1,540/tonne CIF (cost, insurance & freight) China, down by $10/tonne from the previous week, according to ICIS data. In the Chinese domestic market, the same FAE grades were assessed at yuan (CNY) 11,000-11,200/tonne EXWH (ex-warehouse), down by CNY200-300/tonne over the same period, ICIS data showed. Mid-cut C12-14 fatty alcohols were assessed at $1,280-1,350/tonne FOB (free on board) SE (southeast) Asia in the week ended 26 November, down by $50/tonne at the high end of the price range compared with the previous week, according to ICIS data. Prices of fatty alcohols have been on a downtrend since April, with the lowest levels hit in mid-October at $1,230-1,300/tonne FOB SE Asia. South east Asian producers have recently been targeting the Middle East – which is expected to have a strong demand for FAE- and other northeast Asian market, where competition is scant.
Finally, In some absolutely fascinating news from Poland, Boruta-Zachem has signed a contract for the sale of all its planned 2015 production of bio-surfactants to a buyer in the United Arab Emirates. The company, which currently makes dyes and pigments, plans to launch bio-surfactant production in July next year. The expected 2015 output of 100 tonnes would be sold to the UAE buyer at $245/Kg meaning the value of the contract signed in Dubai was $24.5m. The buyer is not known. Boruta-Zachem plans to make a bio version of surfactants from rapeseed, which is a contains Erucic and Oleic acids. The company is based in Bydgoszcz, northern Poland, where there is extensive rapeseed cultivation. So, either this is a super-niche application where $245/ Kg for a surfactant is in line or, much more likely, this is a pilot plant whose start-up has been sponsored by the buyer in return, one must assume for privileged sourcing from the commercial plant down the road. $24.5 Million in my view has to more than cover the plant’s Capex. Also rapeseed oil is not that expensive and so, unless this is a complex multi-step synthesis. COGS has to be low. Of course, at 100 MT/yr, labor assumes much more importance that it would at a commercial plant of, say 10 KMT/yr capacity. Anyway, I am just speculating. Can someone let me know what is the real story here?
That’s it for November. I’ll publish the December Review around January 2nd.
4th ICIS Asian Surfactants Conference
November 2014 – Singapore
Here are my thoughts and opinions on some of the highlights from our surfactant conference held recently in Singapore. This was the 4th in Asia and the 11th in the series of conferences, produced by me and ICIS. It was the biggest and, in my opinion, the best yet.
Opening up the proceedings, I gave some introductory remarks, building on my theme for 2014, which is “What have Surfactants done for us?” This of course, building on a classic sketch from Monty Python.
For more on what this is all about, I intend to build on this theme in a presentation at CESIO in Istanbul, June 1 – 3, 2015. That is if the organisers accept my paper, which is not a foregone conclusion by any means.
In any event, back to Singapore: Chris de Lavigne, of Frost & Sullivan led off with a paper on outlook for the Asian Surfactants Markets. The theme of vertical integration was featured heavily. The question of the viability of small, independent companies was raised. In my view, the jury is still out on this question. Many small independent (that is non-vertically integrated) companies will fail and or be gobbled up by the big players (established ones like BASF or emerging ones like KLK). That is not a bad thing or a good thing. It is, in fact, a trend noticed in many other industries over time and one that is in full swing today in our surfactant industry.
LMC delivered as usual impeccable analysis and information of great interest to our audience. The speaker. Yu Leng Khor, new to the company and to our industry, did an outstanding job, pouring cold water on the MES phenomenon (for now) and also (for now) on the commercial viability of West Africa as a source of palm oil in the near future.
Next up, Wonsoo Byun of Nexant delivered a data-rich analysis of the Asian EO market. Capacity, especially in China, is growing through the roof. The question remains as to whether demand can even keep close to the same pace.
An interesting paper from a brand new participant in our conference series, Inventa Technologies, dealt with the use of pilot plants in the surfactant industry. Some very interesting engineering aspects to scale-up of continuous stirred tank reactors vs loop reactors. Loop reactors being easier to scale and operate vs the CSTR.
In the same vein, that is chemical technology, our firm friends and favourites, Desmet Ballestra, gave a masterful survey of advances in process technology for surfactant manufacturing. Some interesting perspectives from the point of view of total value added to surfactant feedstock were presented.
Another first time presenter than captivated the audience. This was Derom Bangun, Chairman of the Indonesian Palm Oil Board. Derom delivered a detailed account of the Indonesian Palm Oil Industry and the steps it has taken to set and meet standards with respect to sustainable agriculture.
With an update on the Phillipines, Marco Reyes of the Hancole group was up next. This extremely resource-rich country is, according to Marco, hobbled by a lack of infrastructure, in order to fulfill its true potential.
Rounding out day 1, we had a trio of papers that dealt with future trends in consumer markets and how these impact the surfactant markets. Jane Barnett of Mintel led off with a presentation of the Mintel “6 futures” that impact the consumer markets. Then Yulia Fransisca of Euromonitor went more in – depth to look at the future of laundry cleaning. I then, did my best to interpret both these looks into the future to derive what they meant in terms of the surfactant industry. I built on some favorite themes such as the emergence of the large vertically integrated palm-based companies and the value of “cheap and cheerful” surfactants and formulations, not only in emerging markets but in the so-called rich but aging markets.
Day two started with an outstanding but very sobering assessment of the Chinese economy by noted ICIS author and analyst, John Richardson. John’s message is simple and powerful. Don’t rely on optimistic projections of China growth for your business. To get the full flavor of what he is saying, I urge you to attend his next speaking engagement, or visit the blog.
Another ICIS speaker, Angeline Soh, followed up with an outstanding paper on alcohol ethoxylates in Asia. Angeline is the author of the highly successful new ICIS pricing report on alcohol ethoxylates and deftly showed her expertise in this subject area – acquired over a relatively short period of time.
Newcomers to the conference series, Indian consulting company, Tata Strategic Management Group, presented a compelling analysis of the new growth applications for oleochemicals. This was of course of immense interest to many of our attendees in light of the enormous over-capacity in this sector.
Another newcomer to the conference series, Dr. Mujizat Kawaroe of the Surfactant and Bioenergy Research Center in Indonesia, presented a fascinating survey of the use of algae in the chemicals value chain. All the more remarkable as the work is taking place at the very heart of the global palm industry.
A new perennial favorite topic is the oil and gas industry and their use of surfactants. Solvay, once again, displayed their mastery of this subject and market area with a presentation from Brian Downward.
Finishing up the conference, a paper from Archroma on the subject of textiles. This is a market of great importance for surfactants but one that we do not hear too much about. Rajesh Ramamurthy gave an outstanding introduction to this growing field.
That finishes up the conference series for 2014. Next year, we have our first scheduled event in May and that is the 5th World Surfactant Conference, at our usual venue in Jersey City, NJ, just over the river from Manhattan. We have moved into the largest auditorium the hotel has to offer and we are expecting a sell-out crowd. I look forward to seeing you all there. In the meantime, stay tuned, we are working on a couple of new initiatives, including a potential new conference in another region of the world and a new surfactant business survey initiative for which invitations will be sent early next year. As always if you have suggestions or questions, please get in touch.
Surfactants Monthly Review – October 2014
Thanks are due again to ICIS for much of the newsfeed behind this blog. I retain responsibility for any errors and for the opinions woven in amongst the reportage. I’m also responsible for reminding you about the 4th ICIS Asian Surfactants Conference (a production of Neil A Burns LLC, in case you wonder why I am constantly promoting these events) in Singapore, November 13 – 14th at the beautiful Pan-Pacific Hotel. Join ~100 of the region’s leaders as they network, discuss and debate all things surfactant related. The day before the conference, I teach my “Surfactants Business Essentials” class to smaller group. If you would like to attend, contact Roland in Singapore.
First, in news which hit the last week in October, Stepan’s third-quarter net income fell by 34% year on year, as a result of weak North American surfactants performance. According the company surfactant results were dragged down by lower workhorse surfactant volumes for its North American consumer products, specifically in the laundry sector. Now, this will have been no surprise to any of the ~200 of you who attended our Surfactants Conference back in May in NY. Our keynote speaker, Quinn Stepan, highlighted the challenges the company faced in the laundry sector as formulation trends have impacted surfactant loading. These trends, specifically the use of enzymes and the surge in monodose, took a big bite out of workhorse surfactant demand in this sector. Quinn frankly stated that the size, and speed, of this bite took the market by surprise. Having said that, Stepan, as Quinn emphasized, sees some compensatory upside in the future, particularly in the oil and gas sector.
Stepan’s Third-quarter sales increased by 3% compared to the same period in 2013 to $491.4m, while operating income fell 28% year on year to $22.3m. Similar to the first six months of the year, Stepan chose to not participate in the biodiesel market.
In remarks, supportive of many companies, including Stepan, who are investing in EOR activities, Peter Huntsman recently noted that the recent sharp drop in crude prices have yet to disrupt demand for chemicals used in enhanced oil recovery. A sudden drop in oil prices is not enough to encourage oil companies to abandon multi-million-dollar enhanced-oil-recovery projects, said Peter Huntsman, CEO of Huntsman. He made his comments during an earnings conference call.
The other big surfactant news this month was the announcement from Sasol that they expect to sell all or almost all their specialty alcohols downstream from the planned complex in Lake Charles, LA, into the domestic market, but significant amounts of commodity polyethylene (PE) will be exported. The Lake Charles complex is of course planned around Sasol’s new (1.5 m tonnes/yr) cracker. The cracker, part of an $8.1bn investment along with derivative facilities, is expected to start up in the first quarter of 2018. Planned downstream capacity will consist of 900,000 tonnes/year of PE split about evenly between low density PE (LDPE) and linear low density PE (LLDPE); 300,000 tonnes/year of ethylene oxide/ethylene glycol (EO/EG); and 300,000 tonnes/year of specialty alcohols. The specialty alcohols include Sasol’s linear (Ziegler) detergent range alcohols and also their branched Guerbet alcohols. For now, alpha olefins are out (probably wise) although could be added back into the mix if the market demand is proven. In related news, Sasol noted that they have secured contracts for 70% of the ethane needed for the planned cracker which will use around 100,000 bbl/day of ethane.
More surfactant related investments are on the cards for Sasol and they will make a final investment decision on a big GTL facility in late 2016. The GTL project, previously estimated to cost $11bn-14bn, would produce around 100,000 bbl/day of transportation fuel, including GTL diesel. In addition, the planned facility would also produce GTL naphtha, liquefied petroleum gas, GTL base oils, medium and hard wax, paraffin and linear alkyl benzene (LAB). Who said MES will be the death of LAB? Not so fast. 4 Million tonnes of LAB capacity, and counting..
The beginning of the month saw lower LAS and LAB prices in Asia due primarily to weak demand from a slowing China economy. Import LAS prices in southeast Asia were assessed at $1,430-1,450/tonne CFR during the week ending 1 October, down by $20 from the previous week, according to ICIS data.
More shale-fuelled investment continued to impact surfactants as LyondellBasell announced plans to further expand its petrochemical plant in Channelview, TX in a project that would add around 250,000 tonnes/year of ethylene capacity. The proposed expansion is in addition to work already underway to install two large cracking furnaces at the site that are expected to raise production by 113,000 tonnes/year once completed in early 2015. If the project proceeds, the anticipated time frame for completion would be 2017.In addition to increasing capacity at Channelview, LyondellBasell has just completed a 363,000 tonne/year ethylene expansion at its La Porte, Texas cracker. That expansion takes ethylene capacity at La Porte up to 1.152m tonnes/year. The company is also adding an additional 363,000 tonnes/year at its site in Corpus Christi, Texas which is due for completion in late 2015.
When all three projects are completed, a total of 1.85bn lbs of ethylene capacity are expected each year. This figure will increase to 2.4bn if the additional expansion project is finalised. Essentially we are talking about the equivalent of a stand-alone world scale cracker.
Separately, LyondellBasell said that its ethylene oxide/ethylene glycol (EO/EG) production unit, and solvents and acetates production unit in Bayport, Texas, remain shut down. Further sales allocation has been implemented on several of its glycol ethers.
Over in Europe, ongoing EO shortages continued as Clariant delayed the restart of its ethylene oxide (EO) and ethylene glycol (EG) plant in Gendorf, Germany due to technical problems. The plant has a nameplate capacity of 240,000 tonnes of EO equivalents and 140,000 tonnes/year of EG, according to ICIS data, and was originally due up on 6 October. This news alongside other maintenance programmes and a force majeure at Shell, created a tight EO. Most units at Shell in Moerdijk NL will not be back in operation before the end of 2014, according to Shell.
Back in the US EO contract prices for August and September rose on the back of a higher double-month settlement in feedstock ethylene contracts. August EO contracts were assessed at 70.20-79.70 cents/lb ($1,548-1,757/tonne) free on board (FOB), up 1.6 cents/lb from 68.60-78.10 cents/lb FOB in July. September EO contracts were assessed at 72.60-82.10 cents/lb FOB, up 2.4 cents/lb from August.
EO and feedstock ethylene contract prices were pushed up largely by the rising trend in ethylene spot prices, which reached record highs in September on tight supply. Tight EO in general, as noted above, has not helped with spot pricing.
Clariant continued to invest in surfactants as the company inaugurated its first Regional Innovation Center (RIC) in India, where research efforts will focus on the areas of Surfactants, Specialty Polymers and Functional Chemicals. The RIC, located in Navi Mumbai, bundles research, application development and analytical laboratories, business functions and technical marketing under one roof.
An intriguing piece of news caught my eye mid-month, regarding the European F3 factory project. Apparently, it is an EU-sponsored public-private initiative to develop the factory of the future, which it terms the F3 factory – for flexible, fast and future production processes. The project, part of the SusChem initiative, was initiated in June 2009 and ended in July 2013, with an overall budget of €30m, of which €18bn was provided by the EU’s FP7 innovation program (Following this? Stay with me. It involves surfactants). The main facility is the INVITE demonstration unit founded jointly by TU Dortmund University and Bayer Technology Services and located at Chempark in Leverkusen, Germany. This is an open research facility for developing and demonstrating future manufacturing technologies in the chemical sector. Apparently, in seven case studies there it was shown that drugs, polymers and surfactants can be produced with energy consumption reduced by up to 30%, solvent reductions of up to 100%.
Major chemical producers active in the F3 Factory project include BASF, Bayer, Evonik, Arkema, Rhodia (now part of Solvay), AstraZeneca and Procter & Gamble. Other partners include universities and technology institutes. It looks like a surfactant project was sponsored by P&G and involved sulfonation. (http://www.f3factory.com/scripts/pages/en/about_f3/industrial_case_studies/cs6/index.php). Two key areas were “process intensified” SO3 generation and the sulfonation reaction itself. A fair bit of detail is provided in the final F3 report published in September (http://www.f3factory.com/scripts/pages/en/newsevents/F3_Factory_final_report_to_EC.pdf) and I must say it looks pretty cool. Still at the bench/pilot scale but process intensification is an exciting frontier in the world of surfactants and certainly in tune with the current focus on “mass customization”; a link about which I will be speaking more at the upcoming 4th ICIS Asian Surfactants Conference. In the meantime, if anyone has opinions or thoughts on the P&G work, please get in touch.
In a scenario reminiscent of early 2009, spot prices of C12 lauric acids in Asia fell by $30-50/tonne in the last week of Octover on weak sentiments over softer upstream palm kernel oil (PKO) pricing. On 22 October, C12 lauric acids prices were assessed at $1,100-1,200/tonne FOB (free on board) SE (southeast) Asia, according to ICIS data. According to data from palm oil broker, Matthes & Porton, feedstock palm kernel oil (PKO) prices were softer by around $40/tonne from previous month to $852/tonne DEL (delivered) south Malaysia on 21 October. Higher-than-expected palm oil stockpiles in Malaysia according to official data released on 10 October and weaker demand for the tropical oil amid competitive rival oil – soya bean oil – led to bearish outlook.
Finally, reminiscent of the sober assements at our 4th Surfactants conference in Europe, in a very significant interview, Patrick Jany, Clariant’s CFO noted that Europe is likely to struggle through several more years of almost non-existent growth. Clariant announced on at the end of October, a swing to a Swiss francs (Swfr) net profit of 59m (€48.8m, $56.6m) for the third quarter of the year from a Swfr204m loss during the same period last year, buoyed by higher sales volumes and selling prices. However, like BASF, not a lot of growth or future investment is attached to Europe.
That’s it for October. Next week, I’m in Asia with a swing through Malaysia, Singapore and Japan. Highlight of the trip for me of course is the 4th ICIS Asian Surfactant Conference, with attendees from all the region’s major players and some that perhaps you have never heard of, yet. I hope to see many of you there.
Surfactants Monthly Review – September 2014
News from China, at the beginning of the month: With the current weakness in China demand that saw the regional prices of fatty alcohol ethoxylates (FAE) fall to a 10-month low, producers have started to look at the Australian and Turkish markets, which by themselves, I expect can do little to absorb unutilized capacity in China.
Continued wrangling in India as the country imposes provisional safeguard duty on fatty alcohols imports. As reported by ICIS on September 4th, India has imposed a provisional safeguard duty of 20% on some of its saturated fatty alcohols imports from southeast Asia. The duty is valid for 200 days from 28 August will apply to imports of the material from Malaysia, Indonesia and Thailand, according to the country’s Ministry of Finance, adding that this will not apply to imports from other developing countries. This is in response to a petition filed by India’s major chemical and consumer product company VVF, with the support of Godrej Industries, on 13 February. The petition sought safeguard duty on imports of all saturated fatty alcohols from C8-18, including pure-cut and blends. VVF claimed that a surge of fatty alcohols import to India over the past three to four years has caused serious damage to the domestic fatty alcohols industry, making it less competitive. I think any objective observer would agree. However, whether a “safeguard” duty is the appropriate response, is a matter for vigorous debate. An investigation into the issue was initiated on 13 February, in which comments from industry players were sought over a 30-day period. On 26 August, a public hearing attended by around 60 affected parties was held in New Delhi to address the issue, market sources said. The imposition of safeguard duty two days after the hearing was bad news for major importers of fatty alcohols in India, although some surfactant manufacturers with export markets said they could still import fatty alcohols without duty payment. One expects that Galaxy is among them.
In the first week of September, ICIS reported that Asian spot linear alkylbenzene sulphonate (LAS) prices were stable, after falling by up to $30/tonne in the previous week. It is likely that continued weak demand in the region is driving this decline.
Meanwhile in the European EO market, the contract price dropped €45/tonne in line with an ethylene decrease .According to ICIS, unverified production problems at a European plant have resulted in customers having to seek material from other sellers, market participants said. This, coupled with imminent shutdowns, has led to a shortage of availability, particularly into the ethoxylates sector. There is a three-week shutdown scheduled at BASF’s 345,000 tonne/year EO and 25,000 tonne/year ethylene glycol (EG) unit in Ludwigshafen, Germany, that will start from the last week of September. Clariant has a planned turnaround at its Gendorf facility in Germany, from 20 September until 6 October. The plant has a nameplate capacity of 240,000 tonnes/year of EO equivalents. Polski Koncern Naftowy Orlen SA (PKN) is scheduled to close for maintenance in Plock, Poland, from 9-30 September at its 115,000 tonne/year EO and 84,000 tonne/year EG plants.
Sasol has made news in our blog a lot this past year. The company announced full year financial results on Monday 8 September. Along with that, CEO David Constable emphasized that the shift in strategy in the past three years has been away from coal processing (into liquids and chemicals) towards GTL (gas to liquids). The company has been quick to secure a stronger production foothold in the US where it can take advantage of abundant natural gas and natural gas liquids (NGLs) feedstock. The investment decision on its 1.5m tonne/year cracker in Louisiana is expected this year.
Sasol plans to build three 400,000 tonne/year plus polyethylene units, two in Louisiana, one in Texas – a joint venture with INEOS. Sasol management has moved decisively away from coal to liquids (CTL) investments Indonesia, China and India towards gas-based projects in Southern Africa and in North America. Upstream, it has continued to invest in gas exploration and in gas infrastructure in southern Africa. The potential gas-based investments in Louisiana are significant. The initial projects are in chemicals – principally the ethane cracker and polyethylene units. But GTL could follow, as could a mooted GTL plant in Canada.
Homing in on surfactants; the group’s olefins and surfactants (O&S) businesses produced 49% higher operating profits. As discussed at our recent ICIS European Surfactants Conference, Sasol’s US business continues to benefit from low US ethane prices. However, the European operations are still under margin pressure on the back of softer demand coupled with high petrochemical feedstock prices, according to Sasol’s CFO.
Big news of the month included Eastman’s announcement of a planned $2.8bn acquisition of global amines producer Taminco. Mark Costa, CEO of Eastman, talked about purchasing synergies with ICIS’ Joe Chang, particularly in EO, Methanol and Ammonia. Costa then hinted at an investment in EO production in Texas as Eastman is long ethylene at its Longview, TX, site, where it has 1.4bn lb (635,000 tonnes/year) of capacity. According to Costa, Eastman has “ deep knowledge on how to build and run EO facilities, so there are options we would consider – building a plant or participating in an expansion,” Eastman and Taminco are both consumers of EO – Eastman for polyester specialty polymers and coatings and Taminco for amines. Eastman completed an EO capacity expansion at its Longview site in the second quarter of 2013. Eastman’s EO capacity at Longview is 105,000 tonnes/year, according to ICIS.
In continuing downbeat news from formerly high-flying Brazil, Oxiteno reported that Q2 domestic specialty chemicals sales fell by 3% year on year because the company’s customers had begun destocking, in response to the slowdown in the nation’s economy.
In intriguing news from Slovakia, Energochemica is to invest more than €100m in constructing a bio-refinery in eastern Slovakia for the production of ethanol, ethylene and ethylene oxide. The plant is to be located in an industrial park in Strazske, near the border with Ukraine, added Energochemica, a company established in the Czech Republic in 2011 and listed on the Prague Stock Exchange in 2012. Let’s see how this product finds a niche in light of stiff cost competition in this value chain from US Ethane.
And finally, kudos to my alma mater, Pilot Chemical who earlier in the month, hosted USA Luge 2014 bronze medalist Erin Hamlin at its headquarters in Cincinnati. (from 9/12/14 Cincinnati.com) Hamlin was the first U.S. Olympic medalist in singles luge and the first female in U.S. luge history to stand on the Olympic podium. Pilot is a luge team sponsor. “Being a USA Luge sponsor has helped Pilot Chemical foster community engagement and given our employees the opportunity to support a fellow ice-cold winner to express our national pride,” said Pam Butcher, Pilot’s COO. Anyone who knows Pilot Chemical’s technology will appreciate the reference by Pam. The article is worth checking out. I like it a lot. (Link Here)
I will see many of you next week in Montreux and after that, of course, at the ICIS Asian Surfactants Conference in Singapore, November 13 – 14th which I co-produce and chair.
Surfactants Monthly Review – August 2014
Thanks again to ICIS who provided most of the newsfeed for this review. As usual, some links below require an ICIS subscription; some of the information and opinion here was provided by my attending and chairing the 3rd ICIS European Surfactant Conference which finished today (Friday September 5th) in Berlin. An outstanding event which I am happy to co-produce with the ICIS conference team. A special mention and thanks to all the attendees at the Surfactant Business Essentials Training Course which I taught in Berlin on Sept 2nd. Some of their comments and questions provided some of the food for thought also for this review.
Straight in with more activity in EO as Russia’s SIBUR-Neftekhim has completed work to increase ethylene oxide (EO) capacity at its Ethylene Oxide and Glycol Plant in Dzerzhinsk to 300,000 tonnes/year from 264,000 tonnes/year. Based in Nizhny Novgorod region, central Russia, SIBUR-Neftekhim is controlled by the country’s major petrochemical holding SIBUR.
Meanwhile China EO producers saw a much needed price increase by yuan (CNY) 200/tonne to CNY10,800/tonne, the first increase since January. Pressured by rising feedstock prices, EO prices were pushed to nudge higher despite a long supply and weak demand. Prices of ethylene rose by $10/tonne during the week ended 1 August to $1,560-1,570/tonne CFR NE (northeast) Asia, compared with $1,500-1,520/tonne CFR NE Asia four weeks ago, ICIS data showed.
Despite generally stronger EO, fatty alcohol ethoxylates (FAE) prices dropped to their lowest levels since the first week of December 2013 on Wednesday in China. Spot prices of FAE-7 and FAE-9 were at $1,620-1,640/tonne CIF China, the lowest since the week ending 4 December 2013, when prices were assessed at $1,600-1,700/tonne CIF China. The spot prices during this week ended 20 August also marked a $20/tonne decline from the week before, according to ICIS. The driver of such decreases is of course in part the fatty alcohol market, but also a generally long capacity situation in the EO value chain in the region as a couple of announcements demonstrates:
First, Indonesia’s PT Polychem announced that it ramped up the run rates at its fatty alcohol ethoxylates (FAE) unit at Merak, Indonesia to 65-70%. Apparently, the unit was running at 60-65% in end-May. Both levels of course are very unsatisfactory when trying to make a reasonable return on a plant investment. PT Polychem’s surfactant plant produces 60,000 tonnes of surfactants, including FAE, every month.
Second, In Taiwan, the Oriental Union Chemical Corp (OUCC) is operating its fatty alcohol ethoxylates (FAE) unit in Nanjing, China, at 60% capacity, according to a company source. OUCC can produce 60,000 tonnes of surfactants per year, including alcohol ethoxylates.
Is Europe becoming a fatty alcohol dumping ground? In Europe, fatty alcohol prices continued their downward trend with softening feedstock prices. One buyer commented it had secured some spot mid-cut alcohols for €1,250/tonne FD NWE from an Asian supplier. With Chinese demand for fatty alcohols remaining weak, participants expect further pressure to be placed onto European prices with greater volumes anticipated to be made available to Europe from Asia in the coming weeks.
Meanwhile in Asia, Southeast Asia prices for mid-cut fatty alcohols were assessed lower at $1,430-1,480/tonne FOB SE Asia mid-month, a drop of $70-100/tonne from a week prior. Palm kernel oil (PKO) prices dipped more than $60/tonne overnight, at $931/tonne DEL (delivered) south Malaysia, on 12 August weighed down by higher vegetable oil stockpiles in Malaysia and the US according to the official data by regulator of the Malaysian Palm Oil Board (MPOB) and the US Department of Agriculture (USDA).
Not coincidentally, the struggle over fatty alcohol pricing in India continues as, according the the Hindu Business Line newspaper, the Indian Finance Ministry has imposed provisional safeguard duty of twenty per cent on certain saturated fatty alcohols. Mumbai-based VVF(India) Ltd had filed the petition seeking safeguard duty on certain saturated fatty alcohol imports. The Finance Ministry has also specified that the provisional safeguard duty–valid for 200 days– will not apply for imports from developing countries other than Malaysia, Thailand and Indonesia. Godrej Industries, another domestic producer of saturated fatty alcohols, had supported the petition.
Surprising news from Brazil where Oxiteno reported Q2 income lower by 13% on lower sales. Q2 operating income came in at reais (R) 180.5m ($79.2m), down 5.8% from R191.6m from the same time last year. The reason, according to the company was that, sales fell while costs rose. Second-quarter net sales were R813.4m, down nearly 1% from R821.5m. The drop was due in part to a 7% (10,000 tonne) decline in sales volumes in Brazil. In addition, however, international sales volumes fell by 10% or 6,000 tonnes. The domestic slowdown was expected as The Brazilian economy grew by just 0.2% during the first quarter, according to the most recent information available by IBGE, the state statistical agency. Since the first quarter, the outlook for the Brazilian economy has steadily deteriorated. Economists now expect Brazil’s GDP to grow by 0.86% in 2014, according to the most recent survey conducted by the nation’s central bank.
We occasionally like to look back at the Palm plantation, source of key feedstocks for our industry, especially palm kernel oil. One of the largest plantataion companies, Malaysia’s Sime Darby is exected to grow revenues by 15% with the acquisition of NBPOL (New Britain Palm Oil Ltd) in Papua New Guinea according to an article in Moody’s. Sime Darby said on 31 July that it was the preferred buyer of Kulim (Malaysia) for its 48.97% stake in NBPOL, which has 79,884 hectares of oil palm plantation as of end-2013. The deal will also boost the Malaysian crude palm oil producer’s European sales channel, Moody’s said, citing NBPOL’s production and Liverpool-based refinery are fully certified on an RSPO (Roundtable of Sustainable Palm Oil) basis.
RSPO palm oil continued to make news as the RSPO spoke at the ICIS European Surfactant Conference in Berlin and Clariant announced that it has achieved sustainable certification of its palm oil-based products plant in Gendorf, Germany. Gendorf is the first of Clariant’s plants that has achieved Roundtable on Sustainable Palm Oil (RSPO) Mass Balance supply chain certification, the company said in a statement.
From Louisiana, USA in Shale gas related news: Sasol’s multi-billion dollar expansion project at its Westlake facility cleared its final regulatory hurdle at the end of August. The Army Corps of Engineers announced it approved the final two permits to allow Sasol to build a state-of-the-art gas to liquids and ethane cracker facility. Construction is expected to start soon, but no firm date has been announced. The facility will produce a number of products, including diesel fuel and other chemical products, a number of which are expected to impact the surfactant supply chain. The project is expected to create 1,200 permanent jobs.
Finally some very significant news from Europe that is indicative of a trend discussed in much detail at the ICIS Surfactant Conference in Berlin. KLK announced mid-month that it wil acquire Tensachem from Graham Royle and the other shareholders for a total consideration of €16.2 Million. Tensachem is a Liege, Belgium based sulfonator. According to the Malaysia Edge newspaper, the deal is expected to be completed within two months. The proposed acquisition will further expand KLK’s oleochemical and surfactant business in Europe, where the group currently owns: (i) the KLK Emmerich plant in Germany, which produces a range of fatty acids, hydrogenated fatty acids and glycerine; (ii) Kolb in Switzerland, which produces non-ionic surfactants; and (iii) Standard Soap in the United Kingdom, which manufactures soap and toiletry products. KLK owns a total of 11 oleochemical plants, including in Malaysia and China, with a combined capacity of approximately 1.8 million tonnes per annum.
Some readers may remember this Liege plant as once part of Hickson Manro Ltd., later Manro which was split upon its acquisition by Stepan. However, originally, I believe it was a P&G plant. Someone can correct me if I’m wrong. I recall it being a particularly well built facility, last time I was there.
As you might expect, many of the above issues and news items were discussed in depth at our ICIS European Surfactants Conference in Berlin this week (Sept 4th and 5th). As regular readers know, a full report on the conference will not be forthcoming because, as I like to say, “you gotta be there”. I will say that the quality and quantity of material covered by the speakers was outstanding. Also the support of sponsors BASF and Unger was appreciated greatly as always. Among the companies represented were Arkema, BASF, Bayer, Buss, Ballestra, Cepsa, Chevron, KLK, Ecover, Henkel, Huntsman, Innospec, Nikko, Norchem, Sadara, Solvay, Stepan and Zschimmer & Schwarz.
A healthy discussion and debate continued throughout the conference about feedstocks and renewability as Fatty Alcohol was compared to LAB to Algae to MES to New surfactant types. The role of biotech and genetic engineering in particular was hotly debated by Ecover, CEFIC and others. We also heard from an emerging new player, Sadara, supplying EO to ethoxylators in Saudi Arabia.
That’s it for August: Looking forward to seeing many of you at our next surfactant conference in November in Singapore. If I have missed anything, or if you don’t agree with something I have written, please do get in touch.
Surfactans Monthy Review – July 2014
Our usual tip of the hat to ICIS who provided most of the newsfeed for this review. As usual, some links below require an ICIS subscription; something I do recommend but on which I receive no commission – if you care about such things.
Something else which I recommend and in which I do have a financial interest, is our next surfactant conference, which this time we are running in partnership with CEFIC affiliate, Bio-TIC in September ( in Berlin, September 3 – 5th); a 3- day event featuring our regular conference preceded by a bio-surfactant workshop, free of charge to conference attendees. Both these in turn preceded by our Surfactant Business Essentials Training Course on Sept 2nd. So if you like reading these blog updates, you can come out to Berlin and steep yourself in the industry for 4 days if you feel up to it.
The big news of the month was of course that Stepan has finally taken the plunge and sought out a site in the US Gulf Coast area. The company announced discussions about a site to make “surfactants intermediates” in Ascension Parish, Louisiana. Of course the other famous occupant of this Parish in Louisiana is Shell’s Geismar site where, among other things, ethylene oxide (EO) and various Neodol alcohols are made. Stepan is a large user of both. Stepan has been, for a while, one of the largest ethoxylators not located next door to an EO source in North America. This move, would no doubt remedy that situation. Such a move, of course, is tough to make as the payback is not necessarily as good as some other investments. However, this is something the company had to do, especially after Solvay made their ethoxylation move next to Lyondell as we reported last year. In my view, and knowing the conservative nature of the Stepan management, this investment is timed about right, certainly not too late, and will not only support growth in areas like oilfield chemicals, but also start to mitigate some of the risks associated with being a “remote” consumer of EO – which is made in TX or LA and transported to sites throughout North America.
EO news continues with China adding 1.3m tonnes of EO capacity by the end of the first quarter next year, taking the country’s total EO capacity to 3.5m tonnes. The new capacity, stemming from plant expansions and newly built ones, will be largely from the southern and eastern coastal areas. Even so, at present in China, according to ICIS “There is a supply deluge and demand is weak,” for EO. Somewhat typical of many commodity products in China today.
By the way, in an excellent analysis of the ethylene value chain in the ICIS magazine, Will Beacham listed a number EO capacity expansions due to come on-stream globally in the next few years. You’ll notice the preponderance of Chinese capacity in his table below:
|Dynamic Int’l||China||100||Q2 2014|
Q3 Fatty Alcohol prices in the USA settled in July with Mid-cut C12-15 alcohols, which includes natural and synthetic, assessed at a third-quarter contract range of 92-110 cents/lb, losing 4 cents/lb off the low end and gaining 1 cent/lb on the top of the range from the 96-109 cents/lb second quarter assessment. Buyers and sellers also said that synthetic alcohol prices are up in the third quarter, adding strength to the high end of the overall mid-cut range. In Asia, Spot C12-14 fatty alcohols prices fell at the lower-end by $20/tonne, to $1,580-1,630/tonne FOB (freight on board) SE (southeast) Asia in the week ended 9 July.
According to some southeast Asian end-users, offers from producers dropped by around $60-70/tonne from a few weeks ago to $1,600-1,650/tonne FOB SE Asia, amid softer feedstock trends and buying resistance from buyers. Feedstock palm kernel oil (PKO) prices were softer over the past two weeks, fuelling the bearish sentiment for mid-cut, C12-14 fatty alcohols.
US ethylene oxide (EO) contract prices for June were assessed 0.6 cents/lb ($13/tonne) higher from May on the back of a firmer June ethylene contract price, as assessed by ICIS on Thursday. June EO contract prices moved up to 67.20-76.70 cents/lb free on board (FOB) from 66.60-76.10 cents/lb FOB in May. The June contract price for US ethylene was fully settled at 47.75 cents/lb delivered (DEL), up 0.75 cents/lb from 47.00 cents/lb DEL in May, ethylene sources confirmed on Thursday.
In news with a knock-on eventual effect on surfactants, Sasol continues to focus big money and attention on GTL with the announcement of a study for a GTL project in Mozambique .
In India, duty news continues to develop and no doubt our more involved readers affected by these measures will comment. I can only report that India is reducing basic customs duty on a range of feedstock for soap and oleochemical products that would likely increase the import volumes of the raw materials and reduce the cost of local production of finished products. Under the federal budget announced by India’s Bharatiya Janata Party (BJP) led government basic customs duty (BCD) on fatty acids, crude palm stearin, RBD and other palm stearin, specified industrial grade crude oils has been reduced to zero from 7.5%. Customs duty on crude glycerine has been cut to 7.5% from existing 12.5% and BCD on crude glycerine which is used in the manufacture of soaps has been brought down to zero from 12.5%, Finance Minister, Arun Jaitley said in a statement on the India budget
Our good friends Elevance finally made public their intention to invest with Genting in a biorefinery in Sabah, Malaysia. The agreement proposes the sale of Genting Plantations‘ 25% stake in Genting Integrated Biorefinery to Elevance Revewable Sciences Singapore, a wholly-owned subsidiary of Elevance Renewable Sciences, for Malaysian ringgit (M$) 72m ($22.6m). Genting Integrated Biorefinery currently operates a 200,000 tonne/year biodiesel plant at Lahad Datu in Sabah.
The existing biodiesel plant will be transformed using Elevance’s proprietary metathesis technology, to produce 240,000 tonnes/year of renewable, high-performance olefins and specialty chemicals that can be used in multiple end-product applications, including lubricants, surfactants and detergents. The transformed metathesis biorefinery is expected to commence operation and production of these high-value palm oil derivatives by year 2017, according to Genting Plantations. As part of the collaboration agreement, Genting Integrated Biorefinery has agreed to pay Elevance license and design fees, and Elevance will provide the technology, and technical and consulting services. Elevance will also be exclusively responsible for the sale of all specialty chemicals that are produced at the biorefinery.
In other big Stepan news, the company has agreed to buy Procter & Gamble’s sulphonation plant in Bahia state in Brazil. The plant has a capacity of 30,000 tonnes/year, and the deal should close in the third or fourth quarter, pending regulatory approval. Stepan’s move will come as no surprise to attendees at our World Surfactant Conference in May in NYC, where Quinn Stepan identified Latin America as a core growth area for the company. And one, in my view, that lacks the competition inherent in the other markets like Asia and Europe, where Stepan manufactures. The company also owns a plant in Vespasiano, Minas Gerais.
Toward the end of the month, Stepan also announced that second-quarter net income jumped 7% year on year to $24.35m on the back of polyols volume growth and acquisitions, despite weaker profits for its surfactants and specialties businesses. Net sales for the quarter increased by 6% year on year to $504.1m as a result of higher prices for its surfactants division and polymers volume growth, the company added. Volumes were down year on year for surfactants and specialty products. Polymers division gross profit jumped 26% year on year to $25.2m, as an 18% annual jump in polyols volumes on the back of home insulation demand in Europe and North America contributed $2.6m additional profit compared to the second quarter of 2013. Earnings from the polyester resins business it acquired from Bayer for $64m in mid-2013 also contributed $1.7m to the profit figure. Surfactants division gross profit dropped 15% year on year during the quarter to $40.8m, primarily on the back of a decline in North American volumes, and higher maintenance and depreciation expenses. Agricultural sales in the region were depressed due to the carryover impact from the harsh North American winter, which also weighed on Stepan’s first-quarter results.
In the sort of news that one would not expect from (say) Shell in Geismar, China’s Dynamic (Nanjing) Chemical Industry has postponed the start-up of its new 100,000 tonne/year ethylene oxide (EO) unit in Nanjing to late September from August,. Dynamic is postponing the start-up of its new EO unit in accordance with a government’s directive that petrochemical plants must halt or reduce operations in the lead up to the Youth Olympic Games that will take place in Nanjing on 16-28 August, the source said. The company’s current EO unit has a capacity of 60,000 tonnes/year.
In a further sign of the China slow-down / supply glut, Teck Guan has moved forward its scheduled catalyst change at its 100K tonne /yr fatty alcohol plant from end-July to mid-July because of lacklustre performance in the downstream surfactant sector. The shutdown is expected to counter-balance the current slower uptakes in mid-cut C12-14 fatty alcohol in the Chinese domestic market, according to some local producers. Over the past few months, high domestic inventories and costly feedstock palm kernel oil (PKO) have resulted in weak demand in the Chinese fatty alcohol market, according to ICIS.
Finally, our other favorite new technology company, Solazyme, announced a deal with AkzoNobel which includes joint product development and principal terms of a multi-year supply agreement for algal oil. The parties expect that the algal oil under the joint development agreement would be able to replace both petroleum and palm oil-derived chemicals. The agreement is for a supply of up to 10,000 tonnes/year of algal oil for surfactant production. Product development is expected to begin immediately. Both companies are anticipating entering into a definitive supply deal as they near the completion of the product-development process.
That’s it for July: Looking forward to seeing many of you at our next surfactant conference in September in Berlin.
Surfactants Monthy Review – June 2014
Welcome again to our monthly surfactant news update. As usual, most items are sourced courtesy of my friends at ICIS and some of the links may require a subscription. Nonetheless, the responsibility for any errors or omissions is entirely mine. Also the opinions expressed are entirely my own. I hope you enjoy reading. For the latest information, analysis and unequalled networking around the surfactant value chain, please attend our 3-day surfactant event in Berlin, September 3 – 5th. We have partnered with the BIO-TIC group of CEFIC who are running a biosurfactants conference alongside our 3rd European Surfactants Conference. I hope to see many of you there.
The month got underway with the welcome announcement that Lonza appointed our old friend, Sven Abend as a member of its executive committee, effective from 1 July this year. Sven, currently the CEO of Swiss nonionic surfactants and process chemicals maker Kolb, will have primary responsibility for corporate strategy, business development as well as consumer care and industrial solutions. Much success to Sven in this new position.
The round of Summer surfactant maintenance shutdowns continued with Taiwan’s Oriental Union Chemical Corp (OUCC) shutting its fatty alcohol ethoxylates (FAE) unit at Nanjing in China for planned maintenance around June 1. The turnaround was expected to last for about three weeks. The FAE unit produces 60,000 tonnes of surfactants, including alcohol ethoxylates, every month.
Elsehwere in the EO value chain, the European June ethylene oxide (EO) contract price moved up by around €8/tonne from May, following an increase in the value of upstream ethylene. EO prices are now at €1,303-1,470/tonne FD (free delivered) NWE (northwest Europe), and €1,358-1,515/tonne FD Mediterranean, according to ICIS calculations.
Meanwhile Force majeure (FM) remaind in place on EO out of the Shell. Both the 305,000 tonne/year EO and 160,000 tonne/year ethylene glycol (EG) units are down now as planned for maintenance until the second half of June. Toward the end of the month Shell reported that it is in the process of restarting its ethylene oxide (EO) and ethylene glycol (EG) site in Moerdijk, The Netherlands, after planned maintenance, but EO remains on force majeure (FM)
In other Shell surfactant related news, Shell Chemicals continues project planning regarding building a new linear alpha olefins (LAO) and a new crude ethylene oxide (EO) unit in Geismar, Lousiana. The 350,000 tonnes/year LAO plant would be Shell’s fourth alpha olefins unit in Geismar. Current LAO capacity is 920,000 tonnes/year at the Geismar facility, according to ICIS Plants and Projects database.
Shells’s current EO facility has a capacity of 420,000 tonnes/year, according to ICIS Plants & Projects. Neither the front-end engineering and design (FEED) nor a final investment decision on either project has been made. Shell also may investigate debottlenecking its US crackers in the near future to further take advantage of the country’s low-cost natural gas liquid (NGL) feedstocks. Shell has two crackers in Norco, Louisiana with a combined capacity of 1.6m tonnes/year and two crackers in Deer Park, Texas with a combined capacity of 835,000 tonnes/year.
Back in Asia, the glut of EO and ethoxylates continued to have an effect on the market as Indonesia’s PT Polychem reduced the run rates at its fatty alcohol ethoxylates (FAE) unit at Merak, Indonesia to 60-65%. The reduction took place in end-May because of weak economics. PT Polychem’s surfactant plant produces 60,000 tonnes of surfactants, including FAE, every month. Prices of FAE-7 and FAE-9 grades have dropped by $50/tonne to $1,630-1,750/tonne CIF China over the past two weeks to 4 June, according to ICIS data.
Asian trade data reported in ICIS backed up the capacity surplus. ICIS reported that Fatty alcohol ethoxylates’ May trading volumes in Asia declined by 30% from April on weak demand for downstream cleaning products. Demand for downstream cleaning products such as shampoo, shower foam and detergents, has been subdued in the key China market in the first half of 2014 amid an economic slowdown. China’s purchasing managers index (PMI) for May registered a five-month high reading of 50.8, up from 50.4 in April, but still barely higher than the 50 threshold, which indicates expansion. The FAE market outlook remains bearish, despite the stronger reading.
The Asian EO slowdown was reflected in a report from Eurostat that EU ethylene oxide (EO) exports to the rest of the world decreased 22% year on year in April, while imports were up 4%.
The big surfactant news of the month related to severe storms that incapacitated the railway system around Germany. “It is not possible to move any railtank cars (RTCs) by rail these days… all our customers affected. We can’t ship any material out,” said one EO producer affected by the damage caused. A lot of customers have been impacted and are facing shutdowns, another source said. The problems are not exclusive to EO, as companies including Sasol, Henkel, INEOS, Tanatex, Oxea and Evonik have reportedly been affected in the area. However, EO was already tight due to a force majeure at Shell’s site in the Netherlands and a series of maintenance shutdowns.
Over the LAS, India’s Fogla Group is reportedly on track to start up its new 40,000 tonne/year 96% purity linear alkylbenzene sulphonate (LAS) plant in Kolkata by the end of this June. Output from the new unit will be available for export from early July. Fogla Group currently has 125,000 tonnes/year of LAS capacity through its units in Kolkata and Mumbai.
Also in India, New India Detergents is on track to begin operations at its new 36,000 tonne/year linear alkylbenzene sulphonate (LAS) plant in Kandla, Gujarat, by the end of June. The company is expecting to export 90% purity LAS to southeast Asia from early July. The firm has three other plants in India; each plant has 36,000 tonnes/year LAS capacity.
It was good to read that our friends, PCC Rokita raised €24m in an IPO
Most of the proceeds will be invested in polyols production. Apart from polyols and PU systems, PCC Rokita produces chlorobenzene, chlor-alkali, surfactants, phosphorous derivatives and napthalene derivatives.
On the 25th June, Wilmar Europe announced that it has completed the acquisition of Huntsman’s European commodity surfactants business for an undisclosed sum. The sale, first announced in April, includes an ethoxylation facility in Lavera, France, and also a multi-year arrangement for Wilmar to buy sulphated surfactant products from Huntsman’s facilities in St. Mihiel, France and Castiglione delle Stiviere, Italy.
In October last year, Huntsman announced plans to boost its yearly earnings before interest, tax, depreciation and amortisation (EBITDA) by $20m by exiting a number of commodity surfactant product lines in Europe and to focus on developing its remaining differentiated surfactants businesses. It is also planning to cease production at its commodity surfactants facility in Patrica, Italy, by October this year.
As you can see there is a lot going on in even this short monthly update. To meet old friends and new to discuss these trends and more, I encourage you to joint me at our 3rd European Surfactants Conference in Berlin, September 3 – 5th. We have partnered also with CEFIC around their Bio-Surfactant event, free to attendees of our conference. I hope to see you there.