Surfactants Monthly Review – July 2015

Friday, August 7th, 2015

Here’s the news and some opinion from July. The summer is boiling over here with a focus on two big surfactant events coming up and these are of course, our fourth surfactant conference in Europe, September 157h – 18th in Berlin and our very first Middle Eastern Surfactant Summit in Doha, October 19 – 21. If you were’nt paying attention last month you missed Stepan restructuring the North American surfactant supply chain, Univar acquiring Chemical Associates, BASF launching an algal oil based betaine and more – all summarized for you below. Thanks again to ICIS News for much of the newsfeed and many of the links, some of which require a subscription, which I recommend, but in no way benefit from.

Kicking off, as we often do, with ethylene oxide (EO) news; according to ICIS pricing, US EO contract prices for June fell by 1.0% because of a decline in the June contract price for feedstock ethylene. June EO contract prices were assessed at 56.00-65.50 cents/lb ($1,235-1,444/tonne) FOB, down 0.6 cents/lb from 56.60-66.10 cents/lb FOB in May. The June ethylene contract fell by 2.2% to 33.75 cents/lb DEL (delivered) from 34.50 cents/lb DEL for May, hitting its lowest price since the August 2009 contract settlement at 32.50 cents/lb DEL.  The June over May decline was attributed to cheaper prices for feedstock propane and butane, which have been the favoured feedstock over ethane for several months.

ICIS did a nice LAB profile in the magazine in early July. Among the tidbits, which you may not appreciate if you are not directly in the business of LAB or LAS: Asia has 12 LAB plants (8 of them in China and India), with 45% of global production.  Prices have been dropping substantially along with crude oil and are down about 25% year on year.  Right now the market is looking forward to the third quarter 2015 startup of the Thai Oil / Mitsui 100,000 tonne/year LAB plant at Sri Racha, Thailand.

I don’t usually pay a whole lot of attention to the plasticizer market, but just follow this story with me. It’s quite interesting.  In response the the phasing out of di-octyl phthalate, Perstorp, the Swedish company, is starting up a150,000 tonnes/year oxo-alcohols plant which will in turn supply Perstorp’s plasticizer dipropyl heptyl phthalate (DPHP). This new oxo-alcohols plant will produce 2-propyl heptanol (2-PH) and n-valeric acid. Apparently they will have surplus 2-PH over what they need to support the downstream plasticizer plant. (With me so far?). Now 2-PH is a C10 alkyl chain alcohol and Perstorp says they have identified – yes – surfactants as a target market for 2-PH. Apparently, detergent range alcohols have suffered from price volatility and 2-PH could offer a less volatile alternative.  Europe will be the key target market.

Speakging of volatile markets, BASF lifted its force majeure on EO and monoethylene glycol (MEG) supplies in Europe on 1 July. The company announced force majeure in May, following technical problems that lead to a shutdown at the EO plant in Ludwigshafen.

On 10th July, INEOS Lavera commenced re-starting  its EO plant which has capacity of 250,000 tonne/year of EO, 53,000 tonnes/year of ethanolamines, 15,000 tonne/year of EG and 160,000 tonnes/year of glycol ethers. Operations at Lavera, were suspended on 17 May following a fire which impacted on the power and utilities supply and led to force majeure declarations on olefins and other derivatives at the site. EO has been on force majeure since 5 June. The  INEOS Antwerp EO plant also restarted around the same time.

Joining the crowd, Sasol also lifted force majeures on ethylene oxide (EO) and its derivatives in Europe around the same time. Sasol’s force majeure declarations came into effect on EO and certain EO derivatives in the second half of May, because of upstream ethylene output problems from its third party supplier, BP Refining & Petrochemicals (BPRP), and resulting force majeures on its olefins.

In Asia EO news, Taiwan’s Oriental Union Chemical Corp (OUCC) resumed trial operations at its new ethylene oxide (EO)/ethylene glycol (EG) plant in Yangzhou, China on 14 July. The facility, which can produce 500,000 tonnes/year of EG and 400,000 tonnes/year of EO, started trial operations in late June/early July but pipe leakage issues halted operations shortly after.  The company is currently operating the plant at 70% of capacity.

For me, the biggest news of the month was announced by Stepan on the 9th of July. Stepan announced that they have signed a long-term agreement to supply Sun Products with anionic surfactants for in North America. OK, so far, so what? So, here’s the big deal: As part of the deal, Stepan will buy the surfactant production assets at Sun’s Pasadena, Texas site. They may or may not deploy those assets. Bottom line, Sun is out of the surfactant manufacturing business and Stepan is going to supply all (or the vast majority) of their needs. Sun did a make vs buy analysis and buy won out – to Stepan’s benefit. Stepan gets to put that Sun volume through its existing plants. I don’t think the capacity of the Sun surfactant plant is public knowledge but  I can say that Sun is a huge volume laundry detergent manufacturer and this is a big enough deal to merit a press release from Stepan. It’s big.  Here’s the back-story: In May of last year, Quinn Stepan spoke at my 4th ICIS Surfactants conference in New York. He highlighted, we believe for the first time in a public forum, the challenges the company faced from reduced surfactant demand in laundry due to formulation trends such as enzyme use and unit dose.  Then, in its first quarter earnings call this year, the company noted that it was working on addressing its capacity overhang in sulfonation. It wasn’t clear if that meant filling or shuttering capacity. Well this deal with Sun provides the answer – it’s filling! Now, attendees at my surfactant courses will know that I consistently talk about how the North American surfactant market has consolidated over the past 25 years and one of the major architects of this has been Stepan. Well, they did it again and I cannot think of one market participant that saw this make vs buy capacity takeout coming. The Sun plant is about 20 years old at most, which in surfactant plant years, not that old. Major kudos to Quinn Stepan for teeing up the problem at our conference, explaining what the options were in April and then hitting it out of the park in July.

On their second-quarter earnings call, Stepan  was understandably keen to talk about the Sun deal. CFO Scott Beamer pointed out that capacity utilization was set to increase markedly. Beamer also noted an earlier similar long-term deal in Brazil under which Stepan will supply Procter & Gamble with surfactants after Stepan acquired a sulphonation plant in Bahia from P&G, allowing it to overcome previous capacity constraints to better participate in Brazil’s surfactants market. Stepan has an existing Brazil plant at Vespasiano, near Belo Horizonte.

In earnings news, Stepan’s second-quarter net income fell 31% year over year to $16.9m as sales fell 10% to $452.4m while corporate expenses rose.  Sales in all of its three core segments – surfactants, polymers, and specialty products because of the negative impact of foreign currency translations on a strengthening US dollar and lower selling prices because of lower raw material costs.   Surfactant and polymer sales each fell 10% year over year, to $299.7m and $133.6m, respectively. However, surfactant sales volumes rose 1% and polymer sales volumes rose 3%. Specialty products sales fell 14% to $19.1m. Surfactant operating income was $24.2 million, up 26%, and polymers operating income was $23.4m up 27%. Specialty products operating income was down 57% to $1.5m. While total segment operating income increased $8.0m or 19% from the prior-year quarter, corporate expenses, including deferred compensation, increased to $20.6m, from $4.3m.

In news that many had been expecting, Univar announced mid-July that it acquired the assets of oleochemicals supplier Chemical Associates. Chemical Associates was one of the few remaining independent oleo specialists in  the distribution field in the US.

In other distributor news, Azelis has started to distribute Weylchem products in Europe, including,  specialty surfactants according the company. We conclude this means SAS (secondary alkane sulphonate), to our knowledge the sole surfactant in the Weylchem portfolio. Other products include  oxygen-based bleaching agents for detergents and biocides, tetra acetyl ethylene diamine (TAED), and specialty surfactants products.

As reported by ICIS, the 3rd quarter price outlook for fatty alcohols looked generally soft in Europe, following PKO. Mid July, prices were quoted as low as €1,330/tonne free delivered (FD) northwest Europe (NWE) but have previously been quoted as low as €1,270/tonne FD NWE. US detergent range alcohol third-quarter headed decisively down, as supply exceeded demand by a wide margin. The ICIS assessment for third quarter mid-cuts was at 70-79 cents/lb ($1,543-1,742/tonne) on bulk delivered basis for truck and rail, falling 8-9 cents/lb from the second-quarter assessment.

New product news from BASF. They co-operated with our friends, Solazyme, to develop an algal oil based betaine based on Solazyme’s novel sugar based oils – converted to triglyceride by microalgae.

Finally, in people news: Pam Butcher retired as president and COO of Pilot Chemical and will join the board. The company is looking for a replacement. By the way, I don’t think I mentioned this, but Jim Hohman, formerly of Omnova joined Pilot’s board earlier this year.

That’s it for now. See you in Berlin and Qatar.

Surfactants Monthly – April & May 2015 and World Surfactants Conference Notes

Sunday, May 31st, 2015

Surfactants Monthly – April and May 2015 and

Notes from the 5th World Surfactants Conference in Jersey City

Apologies to regular readers who noticed we have been off-line for a month. We’ve been working on the newsletter and on adding an additional conference to our series with one in Doha Qatar, October 19 – 12. This is our first Middle Eastern Surfactant Summit.  We also concluded our 5th Annual World Surfactants Conference in NYC in May. Registration is already open, at an attractive discount, for the 2016 conference . If you use the code RUG43588, as  return delegate from 2015, you can get a $450 discount until June 5th.

Here’s what’s been happening since our last entry. As always many links here are courtesy of my conference JV partner, ICIS and some links do require a subscription.

The beginning of April saw Shell lifting the force majeure (FM) on ethylene oxide (EO) out of Moerdijk, the Netherlands.  The Anglo-Dutch petrochemical producer first shut down its EO plant and declared FM due to a damaged heat exchanger last September, 2014. An FM on upstream ethylene and propylene supplies from the site followed, on the back of operational issues caused by a steam leak.

Meanwhile, Shell’s plan to expand its high-purity ethylene oxide and ethoxylates production capacity in Singapore is current progressing, following the completion of a debottlenecking project at its cracker on Bukom Island. Shell is building a high-purity ethylene oxide (HPEO) purification column with an initial capacity of 140,000 tonne/year and two world-scale ethoxylation units with a combined capacity of 140,000 tonnes/year on Jurong Island in Singapore. The company has noted that it has completed the expansion project at its cracker on Bukom Island in Singapore which has boosted its ethylene production by more than 20%. The ethylene cracker was opened in March 2010 and had 800,000 tonnes/year of capacity prior to the debottlenecking project that was announced in November 2012. The cracker complex is part of the Shell Eastern Petrochemicals Complex (SEPC) project – Shell Chemicals’ largest investment to date, according to the company. SEPC is integrated with the Shell Pulau Bukom Manufacturing Site and its 750,000 tonnes/year MEG plant on the nearby Jurong Island.

Early April saw US ethylene oxide (EO) contract prices for March fall 0.65% from the previous month following a 1.4% drop in feedstock ethylene. March EO contracts were assessed at 56.40-65.90 cents/lb ($1,243-1,453/tonne) FOB from 56.80-66.30 cents/lb FOB in February. March ethylene contracts were settled at 34.25 cents/lb, a 0.50 cent/lb decrease from the February settlement, which puts ethylene contracts at their lowest level since August 2009 when contracts were done at 32.50 cents/lb. The decline was attributed to weaker average ethylene spot prices in March compared with February amid a continued buildup of supply in Texas, according to ethylene sources.

In marked contrast, the European April ethylene oxide (EO) price rose by €45/tonne from March on Friday on the back of the rise in upstream ethylene. EO prices are now for April €1,135-1,302/tonne FD (free delivered) NWE (northwest Europe) and €1,190-1,347 FD Mediterranean.

In other EO news, Taiwan’s Oriental Union Chemical Corp (OUCC) is shutting its 40,000 tonne/year ethanolamines plant at Yizheng in Jiangsu province, China, for a scheduled maintenance starting in mid-May. Following the maintenance, OUCC is poised to commission its new 400,000 tonne/year ethylene oxide plant which is also located at the same site as the amines unit, the source added. The company shut its EO unit in Kaohsiung, Taiwan from end-December last year to early February, during which the EO plant’s capacity was expanded by 120,000 tonne/year to 380,000 tonne/year.

MTO (Methanol to Olefins) technology continues to make the news. Zhejiang Xingxing New Energy is operating its new methanol-to-olefin (MTO) plant in Zhejiang province at close to full capacity. The company started up the plant in Jiaxing on 6 or 7 April and it has started supplying propylene to domestic customers from the end of last week. The plant can produce 390,000 tonnes/year of propylene, which is sold entirely in the merchant market as the producer does not have any propylene downstream units.  Its 300,000 tonnes/year of ethylene production is consumed by Sanjiang Fine Chemicals’ ethylene oxide (EO) plants. Sanjiang has a 75% stake in the MTO project.

Downstream ethoxylate markets showed some movement as China’s spot fatty alcohol ethoxylates (FAE) prices had reversed the downtrend, as bolstered by the second quarter seasonal peak. In the week ended 15 April, prices of drummed FAE-7, 9 were assessed at $1,350-1,400/tonne CIF China, according to ICIS data.  Prices of bulk FAE-2 were assessed at $1, 450-1,500/tonne CIF China, over the same period.

By the 3rd week in April, however, China’s domestic  spot fatty alcohol ethoxylates (FAE) surged as upstream ethylene oxide (EO) supply tightened following an explosion at Jiangsu Yangzi Petrochemical’s ethylene plant that week.  In the week ended 15 April, FAE-7, 9 prices were assessed at yuan (CNY) 10,400-10,600/tonne EXWH, according to ICIS data. Prices surged to CNY10,500-11,000/tonne EXWH on Tuesday of the next week, after the explosion.

At the end of April Stepan announced first-quarter net income rising 63% year over year to $21.3m despite a 4% decline in sales to $460.5m. Slightly higher volumes and margins offset negative impacts from a stronger US dollar, the company said. In addition, results for the three months ended 31 March benefited from actions Stepan took last year to improve product mix, to reduce cost and to improve efficiency, it said. In Stepan’s surfactant segment, sales were $330.6m, down 2% from the 2014 first quarter. The translation impact of a stronger US dollar decreased sales by $21.2m, but sales volumes rose 2%. Surfactant operating income increased 84% year over year to $33.8m because of operational improvements, an improved product and end-market mix, as well as falling raw material costs. ”Underutilisation of North American anionic capacity remains an opportunity and a vulnerability which will be addressed in 2015,” was the headline quote from Quinn Stepan, CEO.

Also in the 1st Quarter, Brazil-based ethylene oxide (EO) maker Oxiteno’s first-quarter earnings before interest, taxes, depreciation and amortisation (EBITDA) reached Brazilian reais (R) 145m ($48m),up by about 33% from R109m in the prior-year period, its parent company Ultrapar reported. The increase in earnings was due to a 21% weaker real against the dollar and a decrease in feedstock costs amid lower international oil prices. Oxiteno’s quarterly sales volumes totalled 175,000 tonnes, down by 8.4% from 191,000 tonnes in the first quarter of 2014.  Speciality chemicals volumes slipped by 5.5% to 155,000 tonnes amid a slowdown in the domestic economy, while glycols volumes fell by 25% to 20,000 tonnes due to a scheduled shutdown in March at the Camacari plant in northeast Brazil, Ultrapar said.  Net sales inched up 1.6% year on year to R853m due to the weaker real.

For this blog, the best news all year came at the end of April when Croda announced that it started construction of its new surfactant plant in the US. The plant will be at the company’s existing Atlas Point facility in New Castle, Delaware, and upon completion will be the first North American plant to produce 100% sustainable non-ionic surfactants. In a statement, the company said it would be spending approximately $170m on the facility through to 2017, when the plant is expected to begin operations. The interesting aspect of this is that the plant is based on EO made from corn-based ethanol. 100% renewable EO – made on-site using Scientific Design Technology – not railed up from the Gulf Coast. A huge move for Croda and many kudos due to them from our industry.

Weakening of the Russian Rouble brought tough times for Russian producers, including Sibur. However, as reported by ICIS, Ratings agency Moody’s began a reassessment of the creditworthiness of Russian corporates at the end of the year on the back of the turbulence, but found SIBUR well-placed to deal with Russia’s weaker economic outlook.  This was borne out by the company’s full-year results, where despite a heavy fall in net income on currency headwinds, earnings before interest, taxes, depreciation and amortisation (EBITDA) and sales rose sharply. During 2014, the company completed its 330,000 tonne/year RusVinyl facility, 50%-owned by SIBUR and 50% by BASF-Solvay joint venture SolVin, developed additional ethylene capacity at its Kstovo cracker, and increased ethylene oxide and glycol production capacity.

Poland’s Boruta-Zachem continues to intrigue with plans to build a complete biorefinery at a cost of up to zloty (Zl) 100m (€24.9m), the company said on late April. The company, which currently makes dyes and pigments, is in the final phase of constructing a Zl 25m bio-surfactant plant at its production base in Bydgoszcz, northern Poland. Substances of biological origin, such as prebiotics, would be obtainable from the plant’s production line, meaning the company would be able to take the first step towards realising its biorefinery. Boruta-Zachem has signed a contract for the sale of all its planned 2015 production of 100 tonnes of bio-surfactants from rapeseed biomass to a buyer in the United Arab Emirates, the company announced last November.

Some interesting notes on Surfachem’s business in ICSI this month: Poland, Brazil and China have been the targets for Surfachem, part of 2M Holdings. Richard Smith, Surfachem’s managing director, says investment in Poland and Brazil was driven by its sales and marketing activities; that in China was to secure the supply of raw materials for its surfactants product portfolio In Brazil, a joint venture was formed with Surfachem holding the majority stake, leveraging the skills and connections of the local partners, which were supported by Surfachem’s business model and contacts. Formed in July 2014, the venture with Vitrine Quimica supplies specialty chemicals to Brazil’s personal care, household, institutional and industrial care markets.

Another major surfactant distributor,  Brenntag’ as profiled by ICIS, has continued to expand its global footprint during the period 2013-2015 with investments in Brazil, Nigeria, India, Colombia and South Africa. In April 2014, specialty solvents distributor Gafor Distribuidora, headquartered in Sao Paulo, Brazil, was added to the Brenntag stable, boosting its critical mass in the country.  This was followed in June by the establishment of Brenntag Chemicals Nigeria in Lagos. At the time, Brenntag said Nigeria ranked number one in terms of Africa’s GPD and held great potential in its oil and gas sector, as well as serving as a regional and pan-African production centre for industries such as paint, cosmetics, food and agriculture and water treatment. The most recent purchase in February this year was the takeover of Lionheart Chemical Enterprises in Johannesburg, South Africa, a specialty distributor mainly operating in the food and beverage sector. Brenntag sees long-term growth there because of rising demand for convenience foods as well as the expansion of South African retailers into Sub-Saharan Africa.

The beginning of May saw the quarterly data from AFPM (American Fuel & Petrochemical Manufacturers) on US production of ethylene oxide (EO) showing it down slightly by 0.91% year on year. On a quarterly basis, production was down by 2.3% in Q1 from the previous quarter.

Production Q1:2014 Q4: 2014 Q1:2015 % chg YOY YTD 2014 YTD 2015 % chg
(000 lb) 1,390,227 1,409,517 1,377,511 -0.91 1,390,227 1,377,511 -0.91

Source: AFPM

Around Mid-May, spot drummed 96% linear alkyl benzene sulphonate (LAS) prices in northeast (NE) Asia rose by $20 during the week on shorter feedstock linear alkyl benzene (LAB) supply. On 13 May, export prices were assessed stable-to-firm at $1,150-1,220/tonne FOB (free on board) NE Asia, up by $20/tonne at the high end, according to ICIS data. Import prices in Southeast Asia meanwhile, were unchanged week on week at $1,160-1,220/tonne CFR (cost and freight) SE Asia. Some cargoes were sold and offered in South Asia at $1,220/tonne FOB NE Asia for May shipment. South Korean origin cargoes in the Southeast Asian market were sold at $1,220/tonne CFR SE Asia. Offers were at $1,200/tonne FOB NE Asia for May shipment.

In the spirit of a little self-promotion, I’ll include some ICIS reporting on our conference in NJ in May: Global EO demand growth expected to outpace GDP. Global ethylene oxide (EO) demand is expected to outpace gross domestic product (GDP) on average in the medium-term. “EO demand fundamentals are strong and are expected to remain so in the next four to five years,” said Neha Dhanik, energy and chemicals consultant at Nexant, during the conference. Global EO demand is predicted to grow at a compound annual growth rate (CAGR) of 4.1% in 2014-2019, Dhanik said. Global EO consumption totaled 26m tonnes in 2014, according to Nexant.

Big news from Thailand ripples down the North American surfactant supply chain. Thailand-based producer PTT Global Chemical (PTTGC) is planning to build a joint venture 1m tonne/year ethane cracker complex in the US that is expected to come on stream in 2021. The complex would be expected to produce 1m tonnes/year of ethylene; as well as 700,000 tonnes/year of high density polyethylene (HDPE); 500,000 tonnes/year monoethylene glycol (MEG); and 100,000 tonnes/year of ethylene oxide (EO) PTTGC is teaming up with Japanese trading firm Marubeni for the project, which may be built at the Belmont County of Ohio, according to the Governor’s office of the state. After site selection and completion of a feasibility study, the company will spend another year working out the project details. We expected the complex will go on stream in 2021. The new complex will use shale gas from the Marcellus formation, and the facility will be located near off-taker facilities that is aimed at boosting the project’s logistical efficiency.

Further EO disruptions amid a force majeure crisis in Europe. On May 19th, BASF declared force majeure on ethylene oxide (EO) and monoethylene glycol (MEG) supplies in Europe because of technical problems at its plant in Ludwigshafen, Germany. “Our European production sites for EO have experienced significant technical problems over the last days leading to a shut-down of the Ludwigshafen EO-plant on Sunday May 17, 2015,” a company spokesperson said in an email. “To remedy the situation we were forced to keep the plant down and start with the necessary repair work immediately.”
Consequently, BASF also declared force majeure on the supply of MEG in Europe, with immediate effect and until further notice. EO production at BASF’s Antwerp unit in Belgium also had to be reduced, the company said.

In further encouraging surfactant investment news, this time from China Zhejiang Zanyu, a major surfactants producer in, is pursuing acquisitions upstream to stay competitive amid an overcapacity plaguing the country’s chemical industry. On 13 May, the company announced that it will acquire a 60% stake in Chinese fatty acids producer Shuangma Chemical and its Indonesian subsidiary – PT Dua Kuda. Zhejiang Zanyu has a total production capacity of around 300,000 tonnes/year in China. As readers of our blog know well, most market players in the surfactants value chain, including producers of upstream fatty acids and fatty alcohols in southeast Asia, have been suffering from margin erosion because of weak macroeconomic conditions and an overcapacity in China. Zanyu’s main products include sodium lauryl ether sulfate (SLES) and sodium lauryl sulfate (SLS).  Shuangma Chemical currently owns a 100,000 tonne/year fatty acids plant at Rugao city in Jiangsu province. The plant has been shut since April 2014 and is pending official safety clearance before it can resume operations. Shuangma’s  facility in China can also produce around 30,000 tonne/year of refined glycerine. The company has further plans to build a new 150,000 tonne/year fatty acid plant at the site that is capable of producing C8-18 fractionated fatty acids.  PT Dua Kuda, its Indonesian subsidiary, currently owns a 250,000 tonne/year fatty acid plant in Jakarta and has around 15,000 tonne/year refined glycerine production. It is also planning to build a new 200,000 tonne/year fatty acid plant and an additional 15,000 tonne/year of refined glycerine capacity, a company source said.

That’s it for the news. It really does not seem like two months worth. So, let me wrap up with a few personal highlights from our 5th ICIS World Surfactants Conference in NYC. It was back in 2011 that we started up the Surfactants Conference Series, then an experimental partnership with ICIS, that soon turned into a formal joint venture. 2015 saw some great old friends and brand new faces pack into the largest ballroom available at the Jersey City Hyatt. We shot some video on the first day, so please be on the lookout for some clips coming soon.

Here’s what stuck in my mind from the conference:

After many years of sponsorship and attendance at my events, Sasol was finally persuaded to occupy the speakers platform. Mid-morning of the first day, Eric Stouder laid out the best, most comprehensive and objective view of a key strand  of the surfactant supply chain, that I have ever seen. It’s no secret that the management team of Sasol O&S and Eric in particular, are highly respected in the industry up and down the supply chain. I share the industry’s view in that regard. They have nurtured and grown that business during successive ownership changes. It’s also a worry of mine that big companies, when they take the stage at big events, often resort to fluffy corporate boilerplate, usually at the behest of their law departments. Eric delivered a densely packed, content rich presentation in an highly engaging manner. Delegates whose experience in the industry dwarfs my own, sought me out to compliment our choice of speaker.

This year, we continued to look outside core HI&I markets for speakers. Allen Underwood, with 40 years of experience at Helena Chemical behind him, delivered a master-class in agricultural surfactants. His knowledge, experience and superb sense of humour were well presented. Key point; the world’s 6  Billion people have many differences and one thing in common: they all have to eat. Without surfactants today, that would not be possible.

A big surprise of the conference, was John Chisolm, the CEO of Flotek. He managed to sandwich and oil & gas master-class between an opening skit involving Rush and a closing quote from Rush’s last album. It’s easy to see why John is the CEO. Nonetheless, even John acknowledged that he was following a “living legend” in the oilfield sector, Paul Berger of OCT. Paul’s talk captivated the audience with a slew of hard data regarding the oil & gas sector coupled with some credible predictions of surfactant volumes reaching 7 Million MT/yr in the near future in that sector alone. (Yes, you read that right).

Other highlights included brand new speakers from Clorox, L’Oreal and RILA (the Retail Industry Leaders Association). Three dynamic and thoughtful ladies, Nancy Falk, Beyza Kapu and Jess Dankert, each provided their own unique insights from the far end of the value chain to enable our attendees to configure their strategies.

Another very important speaker for me was Yubo Li of Jiahua Chemicals, a leading independent surfactant producer in China. As Yubo pointed out, everyone likes to talk about China, but few have operated there. Yubo’s perspective on the market and his company were unique and valuable. I certainly look forward to a continuing collaboration with Jiahua in our conference series.

Henkel of course, dominates any discussion of surfactants applications and not just in Europe. Thomas Mueller-Kirschbaum has been on my speaker’s wish-list since our first conference. His participation in NY was a carefully constructed and passionately delivered guide to how suppliers can grow with companies like Henkel. Something they don’t teach you in school or most likely in most sales calls.

Among the other incredibly informative sessions were those on Global Strategy by Solvay’s Laurent Thomas, EO by Nexant’s Neha Danik, Fatty Alcohols by IP Specialities’ Martin Herrington, Brasil by Lubrizol’s Ricardo Pedro, Coatings by Omnova’s Richard Flecksteiner, South Africa by Frost & Sullivan’s Avril Harvey, Logistics by Transplace’s Warren Hopmeyer and M&A by Cary Street Partners’ David Duke.

Finally, we tried something different to encourage feedback from delegates. For each feedback form completed, Neil A Burns LLC made a donation to the Saint Vincent de Paul Society, Freehold NJ chapter. We are pleased to note that $680 was raised as a result of this effort.

If you were not at our NY event, that’s OK. Europe is coming up in September (17 – 18th) in Berlin and of course, the Middle East in Doha, October 19 – 21st , finishing up with Asia again in Singapore, November 19 – 20th. I look forward to seeing you at one or more of these.

Surfactants Monthly Review – March 2015

Wednesday, April 8th, 2015

Surfactant Monthly Review – March 2015

Dear Reader,

As previewed recently, we are now working on a quarterly business and economics newsletter that will cover the surfactant value chain. My aim is to have a sample newsletter available for qualified readers to read and comment on by mid-May. The sample will be a full newsletter with complete content, except some pricing data may be redacted depending on the source.  Subscriptions and sponsorships will be available then, going forward from July.  Our newsletter will aim to provide a summary of published news and data plus information and analysis not publicly available on the surfactants and feedstocks markets. It will be modeled on many of the leading business information sources that we admire and will expand on the themes that we develop in our conferences throughout the year. More details will be provided regarding subscription. In the meantime, please let me know if you would like to receive the sample (neil{at}neilaburns.com). As  noted above, a “qualified reader” is employed by or owns a surfactant manufacturer, user, distributor, feedstock supplier or technology provider. I am sorry, but consultants or advisors (be they self-employed or members of multi-national corporations) are not going to be eligible to receive the sample. I hope you understand.

March was cold here in the Northeast US, but very interesting in the surfactant world:

For starters, Akzo (yes, Akzo, a storied name that we do not mention much these days in the blog) started building a new ethoxylation plant in China. The Ningbo facility will boost the existing Akzo site’s capacity by 18KMT/yr. The new facility brings the company’s overall investment at its Ningbo site to more than €400m, according to the company.

The POC (Palm and Lauric Oil Conference) in KL yielded some interesting information and opinions as usual. First up from ICIS reporting, Harald Sauthoff of BASF observes that cheaper synthetic fatty alcohols arising from weak crude oil market, are pressurizing natural fatty alcohols market, despite high feedstock prices of crude palm kernel oil. Now as we all know and Harald correctly stresses, switching is not a straightforward process, particularly for end products marked as “natural-based” in Europe or destined for the personal care market. Nonetheless, slower economic growth projection, and uncertainties due to volatility of palm kernel oil (PKO) costs might lead price sensitive buyers to consider switching to synthetic fatty alcohols in their formulations if crude prices remain low.

Speaking of the POC; we don’t claim to he palm oil experts here at the blog. We leave that to the folks like Dorab Mistry, James Fry and organizations like the MPOB who live and breathe this stuff on a daily basis. So we will merely report here (and you decide) some of the output from these palm experts: One data point from POC caught our eye. That is  CPKO’s premium to CPO usually does not exceed M$1,000/tonne, but it currently stands at nearly M$2,000/tonne. Something has to give if you believe (as we do)  in reversion to the mean. My gut says CPKO comes down because the tail does not wag the dog for long.

Sticking with the canine metaphor, in the spirit of “dog bites man”, ICIS reported that “Recent fluctuations in the upstream palm kernel oil price (PKO) are creating uncertainty in the European fatty alcohols market”, and those high PKO prices (relative to palm oil) are not expected to continue however, and most informed players (i.e. those not long or short on relevant inventory) expect PKO prices, and therefore alcohol prices to revert downward to the mean.

In the meantime, LAB, LAS, EO and ethoxylate prices started to trend up this month in Asia, primarily as a result of firming (hard to say recovering) demand. Accordingly, Jin Tung announced the restart, in Q2 of its Nanjing based LAB plant (120KMT/yr capacity) which had been idled due to weak demand. At about the same time, Reliance made a similar statement about its 120 KMT/yr LAB plant in Petalganga, India.

In Europe, things continue to be interesting in the EO value chain. Ineos’ ethylene oxide (EO), ethylene glycol (EG) and glycol ethers plants in Antwerp will be down for three or four weeks in June for the annual catalyst change and maintenance. This coincides with a planned outage at BASF’s Ludwigshafen site in Germany, according to industry participants. It will follow the scheduled restart of its Lavera plant, which is due in the middle of March. The French site has been down since January. The Lavera site has capacity to produce 250,000 tonne/year of EO, 53,000 tonnes/year of ethanolamines and 15,000 tonne/year of EG. INEOS Oxide in Antwerp can produce 420,000 tonnes/year of EO and 290,000 tonnes/year of EG.

Big news from Solvay as they continue their relentless march into specialty surfactants. On March 12th, they announced that they had agreed to acquire the new joint venture alkoxylation facility of Emery Oleochemicals and ERCA Group in the Netherlands for an undisclosed fee. As readers know, the plant is supplied with EO by pipeline from Shell next-door. This is one of those rare occasions where both seller and buyer can be congratulated, so congrats and Kudos to Messrs, Seccomandi and Butsraen.

Some interesting financial press speculation about Clariant this month had them as a takeover target for Evonik. Financially, a digestible meal for Evonik, Clariant also represents some good additions to the surfactant portfolio, particularly in ethoxylation.  When asked about speculation that Clariant may be taken over, Clariant CEO Hariolf Kottmann, speaking in an interview with Swiss business daily Finanz und Wirtschaft on 20 March, said: “I would be disappointed if we were not on the wish list of various other firms.” That really is an outstanding answer and I do mean that. Without confirming or denying anything, Kottman says “yes we are a valuable company and of course we are coveted by our competitors”. That’s (one of the reasons) why he’s the CEO! Keep watching. The M&A market is heating up.

I look forward to seeing many of our regular readers next month in NYC at the 5th annual ICIS World Surfactant Conference. I may as well let you know now that we will not kick off the opening remarks with a Monty Python video, but with something slightly (not completely) different. We will have the same high quality content for the two-day event along with some big new sponsors and an attendee list with some interesting new names on it. See you then.

Neil

Surfactants Monthly Review – February 2015

Friday, March 6th, 2015

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
‘000 lb 1,480,140 1,409,517 -4.8 5,564,128 5,578,260 0.25

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.

Company Location

Capacity

(KMT/yr)

BASF Ludwigshafen, Germany 125
BASF/Dow Antwerp, Belgium 300
Dow Chemical Stade, Germany 630
Elllba Moerdijk ,NL 250
Ineos Cologne, Germany 210
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
Repsol Tarragona, Spain 200
Repsol Puertollano, Spain 70
Shell Chemical Moerdijk, NL 210
TOTAL 2,925

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 Review – January 2015

Saturday, February 7th, 2015

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

Friday, January 2nd, 2015

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.

prices.

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.

Neil

Surfactants Monthly Review – November 2014

Tuesday, December 2nd, 2014

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 – Singapore 2014

Monday, November 24th, 2014

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.

Neil

Surfactants Monthly Review – October 2014

Friday, October 31st, 2014

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

Wednesday, October 1st, 2014

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.