3rd ICIS Asian Surfactants Conference
As we do periodically, I am happy to bring you a summary of what I think were the key points from the 3rd ICIS Asian Surfactants Conference in Singapore, November 14th and 15th. As you know, for the full benefit of these events, you just have to be there and I encourage you to join us at future surfactant conferences in Asia, Europe and the USA.
In my opening remarks, we discussed the global surfactant supply chain and how different companies pursue strategies which depend on the specific part of the value chain that they occupy. We studied the latest update of the surfactant vertical integration grid and located a number of company groupings focused on very different sections of the business. We also discussed some recent company investments that highlighted their approach to vertical integration.
Next up, Sarah Yarger Kienzle, managing partner of Linden Tree Partners gave a global updated of the surfactant market. One fascinating piece of data (for me) centered on the per capita consumption of surfactants for different regions of the world. The mature market consumption is dropping on a per capita basis, while emerging market are growing. The North American per capita consumption still leads the world, 60% of the number two Western European market.
A highly interesting talk from VVF came next. S. Harihasumbramanian gave an in-dept study the different technologies and markets for soap bars and surfactant based cleaners and ended up delivering a robust defense of the value and environmentally friendliness of soaps. Quite a unique and thought provoking perspective.
First-time speaker and long-time attendees, Exxon Mobil Chemical came up next with an in-depth look at their line of Exxal detergent range, petrochemical surfactants. An often overlooked class of compounds; it was interesting to see the focus being put by Exxon on the surfactant value chain.
The “sleeper” paper of the whole series came up next. After reading in the Wall Street Journal, about the mapping of the oil palm genome, I was determined to talk to one of the researchers to get an idea of what this work meant for the surfactant industry. Dr. Rajindra Singh of the MPOB gave an outstanding explanation of this 10 year program and its likely impact on our industry. If you missed this one, we are considering having a review of this work also at the World surfactant conference.
A perennially popular subject at our conference is EO (ethylene oxide). EO is the basis of most nonionics and a large portion of anionic surfactants. Michelle Yang of Tecnon Orbichem took us deep into the World and Chinese markets for EO and EOD’s (EO derivatives). In one of the most in-depth market surveys we have seen at one of these conferences. More than one reference was made to an oncoming tidal wave of EO – both in China and North America.
After lunch, Galder Cristobal of Solvay Novecare, really opened up the eyes of many of the attendees by providing an in-depth look into the world of enhanced oil recovery. Some interesting data on the high-throughput screening of four thousand formulations at a time really engaged the audience.
A surprising highlight of our entire series of conferences (at least for me) came during Reckitt Benckiser’s presentation, delivered by Samrat Sehgal, head of supply chain in India. As part of the Q&A, we were treated to a live case-study relating to surfactant importation strategy as one of Reckitt’s suppliers posed a real-time problem and Samrat addressed it as he would in a meeting with a supplier. As we like to say these conferences are “bigger on the inside” and you just have to be there in order to get the full benefit.
Once again, Icilio Adami of Desmet Ballestra delivered an outstanding paper with an incredible amount of information relating to the markets and technology relating to sulfonation. One day, Icilio may write a book. Until then, you have to come to our conferences.
Starting up the second day, I was very pleased to partner with our friends from ICIS Pricing to deliver a paper covering pricing of key surfactants and feedstocks in the Asia Pacific Region overlaid with a deep dive into the current economics of sulfonation and fatty alcohol manufacture in the region. I hope the audience enjoyed it as much as I did delivering it.
Novozymes returned to our speaker’s roster and as a sponsor again with the paper, entitled “Surfactants and Enzymes, Friends or Foes”. It was an informative and provactive look at the growing role of enzymes alongside surfactants in many application areas.
Martha Tilaar Group, a first time speaker and new name for our attendees, outlined their strategy for growth in the region. In fact, the presence of a Martha Tilaar shop in the mall next to the hotel provided an interesting back-drop to the proceedings.
Rounding out the entire proceedings was an outstanding paper from Dean Lao of Chemrez Technologies. Dean covered the Philippines as an oleochemicals investment opportunity and offered a robust analysis of the advantages of coconut as a crop. He also analysed the recent effects of the Typhoon on the Philipines coconut industry.
Overall; an enjoyable and informative conference which cements its place on the calendar as a can’t miss surfactant gathering for Asia. Thanks again for reading and I look forward to seeing you at the 4th ICIS World Surfactants Conference in New York, May 15th and 16th, 2014.
Surfactants Quarterly Review Q3 – 2013
As we do on a quarterly basis, I have summarized key news from the surfactants market, aided substantially by the news team at ICIS. A number of links in the article point to ICIS articles (most need a subscription). As always, your inputs and critiques are welcome. For more up to the minute surfactant information and networking, I will see you at the 3rd ICIS Asian Surfactants Conference in Singapore, November 14th and 15th.
Early in the Quarter, in July; Kao Indonesia Chemicals announced completed construction of its new yen (Y) 4bn ($40m) plus surfactants plant in Karawang, Indonesia. The new plant with an undisclosed capacity is expected to start operation in August 2013. The plant will produce surfactants and industrial chemicals and help lift Kao Indonesia Chemicals’ surfactants capacity, which includes facilities located in Tambun, Indonesia, 1.5 times, Kao said. All of the Tambun facilities will eventually be transferred to the Karawang site by the end of December 2014. With this relatively small but still significant investment, Kao underlines its commitment to a vertically integrated strategy in consumer goods and their key ingredients.
Also in July, Stepan named Scott Beamer as chief financial officer. Beamer succeeds James Hurlbutt, who is retiring after 31 years with Stepan. Beamer is joining Stepan after spending 16 years at PPG Industries, where he was assistant corporate controller. Welcome to the industry, Scott, and to one of its leading players.
As the 3rd Quarter got underway, fatty alcohol prices edged upward . Mid-cut alcohols were assessed at 83.50-96.00 cents/lb ($1,841-2,116/MT, €1,436-1,650/MT) for the Q3 contracts, rising 0.50-1.00 cents/lb over the previous range. In other alcohol news, the US fatty alcohol market was mulling potential effects of issues involving the Roundtable on Sustainable Palm Oil (RSPO). RSPO was formally established in 2004 in response to growing global demand for vegetable oils and concerns about increasing expansions of palm oil plantations and the potential impact of these upon forests, wildlife and communities. Its RSPO Certification System was adopted and launched in 2007, with the first certification issued in 2008. “RSPO is an ongoing consideration for US buyers trying to understand if initiatives will affect price structures,” a large detergent-range alcohol buyer said. “Sustainability issues derived from RSPO may need to be taken into account,” a seller commented. US fatty alcohol buyers engaged in industrial applications are discussing potential premiums on vegetable, or natural, based alcohols that could develop because of additional costs involved in participating in the RSPO initiatives. Fatty alcohol buyers with end-uses in cosmetics and personal care sectors are weighing the possible benefits being certified by the RSPO versus the potential costs, as consumers of these products can differ widely from those in the industrial surfactant models. Darrel Weber, the head of the RSPO was a featured speaker at the 3rd ICIS World Surfactant Conference in NY in May.
In other alcohol news: Pilipinas Kao Inc (PKI) noted in mid September that it is running its fatty alcohol plant at Jasaan at around 70% of capacity, following the completion of an expansion project at the unit. The plant has been shut since June this year for the expansion project which increased its capacity by 40,000 MTs/year to 150,000 MTs/year, according to sources. The company in a statement on 13 September said that it has completed the construction of the expansion project, which was aimed at meeting the “growing demand for fatty alcohols centering on the Asian region”. The plant operations will be fine-tuned before its production rate is ramped up to full capacity, said a source close to the company.
Looking ahead in alcohols to Q4, uncertainty over fatty alcohol pricing continues to hinder fourth-quarter negotiations in Europe. A shortage of mid-cut fatty alcohols in Europe has led to increased prices of late, with some suppliers now quoting in excess of €1,400/MT ($1,867/MT) free delivered (FD) northwest Europe (NWE). Suppliers maintain that the shortage of mid-cut material will continue to dictate their pricing ideas in the coming weeks. However, buyers remain confident that the restart of fatty alcohol plants in southeast Asia could help to alleviate some of the shortage being felt in Europe, and therefore bring down prices. It is thought that participants had been awaiting the ICIS European Surfactants conference in Brussels, Belgium, mid September, where discussions over pricing were to take place, before commencing their fourth-quarter negotiations
A firm favorite of ours, Elevance, started their JV biorefinery with Wilmar in Gresik Indonesia in July making one group of chemicals available for the first time in commercial quantities. The 180,000 MT/yr biorefinery will consume palm oil to produce C10-C15 unsaturated esters, C16-C18 oleochemicals and long-chained olefins. The unsaturated esters stand out because they are difunctional, in that each molecule has both an olefin and an ester group. According to Elevance, Until now, this group of difunctional products has been available only in lab-sized quantities priced at thousands of dollars per Kg. Already, Elevance is producing these chemicals in commercial quantities and profitably selling them at dollars per kilogram. Elevance has been working with Arkema and Stepan, among others, to develop new products using the Elevance building blocks. Companies are thus developing surfactants with better solvency and cold-temperature cleaning, as well as synthetic lubricants that deliver improved stability and fuel economy, according to Elevance. Other uses for the difunctional molecules include monomers for engineered polymers, coatings, long-chained polyamides, polyurethanes and polyesters. The biorefinery’s other products, however, should also meet existing market needs. The long-chained olefins range from C10 to C20. Decene, for example, is a feedstock for polyalphaolefins. Polyalphaolefins, in turn, are a key ingredient in synthetic lubricants. Demand for synthetic lubricants is rising because of stricter emission and mileage standards for automobiles. These stricter rules require smaller and better-performing engines, and these rely on synthetic lubricants.
Likewise, C18 olefins are used to make drilling fluid.
The long-chained olefins are also feedstock for surfactants. C12 olefins can be used to make linear alkyl benzene, providing a bio-based alternative to petroleum-based C12 olefins.
Elevance chose the 2nd ICIS European Surfactant Conference in Brussels in September to highlight their start-up and the new range of products. Look elsewhere on the Neil A Burns LLC blog for an exclusive podcast interview with Andy Corr of Elevance.
Indian Linear Alkylbenzene continued to make news as Indian Oil announced the restart of its LAB plant at Vadodara in the state of Gujarat by 29 July after a month-long turnaround. The shutdown at the 120,000 MT/yr plant severely tightened supply in the Indian market, resulting in virtually no spot export availability in July. Furthermore, the plant near Chennai and Reliance Industries’ 60,000 MT/year plant at Vadodara caused inventory levels of LAB in India to decline to around 5,000 MT in July, down from 8,000 MT in June. The TPL plant restarted on 13th July after a two-month long shutdown but the Reliance unit had yet to restart as of the end of July. India has an installed LAB capacity of 530,000 MT/yr. Indian consumption of LAB totalled 500,000 MT/yr in 2012.
In other LAB news, Iran restricted exports of LAB to ensure supply to the domestic market, in late July. With its imports falling following the sharp depreciation of the rial against the US dollar, Iran needs to ensure domestic production will meet growing domestic consumption. No official ban was implemented, but permission to export these materials is granted by the government on a case-by-case basis, Iranian industry sources said.
The country has an installed LAB capacity of 130,000 MT/yr, with current operating rates at 80-85%, while domestic consumption is around 100,000 MT/yr.
As usual, Stepan (NYSE: SCL) reported solid progress in sales and earnings for the second quarter of 2013. Net income rose by 6% year on year to $22.7m (€17.3m) as sales volumes increased by 4% while selling prices fell by 3%. Stepan’s sales for the three months ended 30 June were $474m, compared with $470m in the 2012 second quarter. Overall gross profit was $73.7m, up slightly from $73.4m in the 2012 second quarter. Second-quarter gross profit in Stepan’s surfactants business fell by 7% to $48.3m. Stepan cited lower North American sales of functional surfactants to the oil field market, reduced profits from biodiesel sales, and lower North American consumer products earnings because of the consumption of higher-cost raw material inventories, in explaining the decline in surfactants gross profit. Furthermore, higher raw material cost inventory built to support Stepan’s Singapore surfactants plant start-up, and the subsequent decline in commodity prices, hurt surfactants margins, it said.
Another solid performer in surfactants and specialty ingredients, Croda reported-quarter operating profit from continuing operations rose by 4.4% year on year to £71.1m ($109.4m, €82.7m) on the back of “improving trends in key markets”. The UK-based specialty chemicals company said gains were reported across each of the company’s three reporting segments – consumer care, performance technologies and industrial chemicals – and sales rose by 2.3% during the period compared to the second quarter of 2012, to £279.6m.
With demand also growing for surfactants in the CIS at than 6%/year, a letter of intent was signed in July between SIBUR and Solvay to establish a surfactants joint venture called RusPav, located in Dzerzhinsk. SIBUR will contribute its raw materials, production and logistics capabilities to the joint venture. RusPav will be located near SIBUR’s petrochemicals operations, 400km east of Moscow, and is tentatively expected to be operational in 2016.
In August, the ACI (American Cleaning Institute) released an important environmental report. “The major disposal route of alcohol ethoxylates [or ethoxylated alcohols] is down-the-drain through sewage systems and municipal wastewater treatment plants into receiving surface waters,” said Kathleen Stanton, director of technical and regulatory affairs for the ACI.
“Because these are down-the-drain disposal routes for the detergents, the fate and effects of the residuals in treated sewage effluent is of interest to industry and regulators alike,” Stanton added. The study concentrated on ethoxylated surfactants with the goal to determine the environmental impact of the fatty alcohol backbone of the detergent. Natural (vegetable-oil based) and synthetic (natural gas/ethylene-based) fatty alcohols were both tested during in the scope of the study.
Another of our firm favorites, Solazyme continued to make news in the second quarter. Solazyme and Sasol finalised commercial terms for the multi-year supply of algal oil in the production of downstream derivatives such as behenyl alcohol, the companies announced. Solazyme is developing the erucic acid-rich algal oil at its Orindiuva facility in Sao Paolo, Brazil, as well as its Clinton site in Iowa, US. Sasol Olefins and Surfactants will use the algal oil for the production of C22 derivatives that are used in industries such as paper, water treatment, personal care, lubricants, oil and gas, as well as paints, inks, coatings and adhesives. Additionally, the companies signed a letter of intent to expand to broad collaboration, including joint manufacturing and marketing of multiple tailored oils. “This agreement with Solazyme is testament to their tailored oil technology platform and the fit for high-performance sustainable oils in our value chain,” said Fleetwood Grobler, managing director at Sasol O&S. “We see a good potential to link Solazyme’s tailored oil platform with our synthetic and natural alcohols portfolio, which will allow us to meet the growing demand that we see in a number of our key markets.”
The LAB and LAS markets in Asia continued to be active. On 14 August, LAB prices increased by an average of $10-30/MT (€8-23/MT) from two weeks prior to $1,850-1,870/MT CFR SE Asia; $1,820-1,850/MT CFR India; and $1,800-1,830/MT FOB Middle East, according to ICIS data. LAS prices, on the other hand, have been holding steady at $1,560-1,580/MT CFR SE Asia and $1,550-1,570/MT FOB India over the past two weeks, according to ICIS.
Market players expect LAS prices to eventually track rising LAB prices. Supply is expected to remain tight in the coming weeks as shortage of feedstock normal-paraffin (n-paraffin) is expected to restrict LAB supply, which in turn will curtail LAS production, market sources said. LAS demand is being revived with the emergence of “one-dose” detergent, which is a combination of washing liquid and softener. The popularity of liquid detergents over powders in the laundry sector had slightly dented demand for LAS in recent months. The proportion of LAS used in liquid detergents is lower compared with washing powders. However, in other applications such as floor cleaners and dish washing liquids, LAS continues to be widely used.
An emerging key player in the surfactant industry, China’s Sanjiang Chemical reported H1 net profit up 78% for 2013 to yuan (CNY) 402m ($66m), because of higher production and sales of ethylene oxide (EO). Its revenue in the first six months of 2013 gained 82.7% year on year to CNY2bn, approximately 86% of which were generated from EO sales, the company said in a statement to the Hong Kong Stock Exchange. The utilisation rate of its ethylene oxide (EO) facilities were at 112% in the first half of this year, compared with 108% in the same period of 2012, it added. In the January-June period, the company produced and sold 176,375 MT of EO, an increase of around 80% year on year. This increase is mainly because its new 100,000 MT/year EO unit started commercial operations on 14 February. The company said it expects total EO production for 2013 to increase to around 370,000 MT from last year’s 216,728 MT. The Zhejiang-based company mainly produces EO and surfactants at 330,000 MT/year and 218,000 MT/year capacity, respectively.
Elsewhere in Asian, Germany’s Evonik completed its expansion project at the Indonesia plant in August. “With this investment, Evonik is increasing its capacity for surfactants and esters used in hair care, skincare, and industrial applications,” the company said in a statement. The investment is aimed at “serving personal and household care industries in southeast Asia, Australia and New Zealand”, it said. Further details of the expansion project and capacity details of the plant were not disclosed in the statement.
In a move with some relevance to surfactants, Innospec acquired US Chemsil Silicones, and distributor Chemtec in August. Chemsil, which develops and markets silicone-based formulations to the personal care industry, will become part of Innospec’s performance chemicals business, which develops and markets surfactants and emollients. Chemtec, which distributes personal care ingredients primarily to the US west coast, will continue to operate as a key distributor in that market. The acquisition was funded through the negotiation of an increase to the Innospec’s existing revolving credit facility agreement of $150m (€114m). The amendment allows the company to request a further amount of up to $50m to be committed by various lenders.
Sasol’s FY 2013 Olefins & surfactants operating profits rose by 12% year on year to R3.58bn with the US operations benefitting from the low ethane price but operations in Europe squeezed by soft demand and high petrochemical feedstock prices. The segment’s operating profit was 23% higher if the prior year’s gain from the sale of operations in Witten, Germany, is excluded, Sasol said. The company is adding 48,000 MTs/year of ethylene capacity in an ethylene purification unit in Sasolburg, South Africa. The unit is to be officially opened later this month, the CEO said. Orders for long lead-time equipment have been placed for the ethane cracker planned for Louisiana and environmental permit applications have been made.
In news reported directly from the 2nd ICIS European Surfactants Conference, John Hodgkinson, business manager, EG, EO and derivatives at Technon OrbiChem, predicted that ethoxylate demand would grow by 1.7% over the next five years. “The [ethoxylate] forecast is 1.7% growth to 2018, which is fairly good for a mature market. For ethanolamines it is about 1.6%, with e-series glycols ethers around 0.7%,” he said. “This is good news for major EO producers, since they are also ethoxylate producers. But the problem in Europe is available capacity and consumption. A good year for ethoxylates and ethanolamines will bring tightness to the [EO] market,” Hodgkinson added.
In other news from ICIS European Surfactants, Martin Harrington of IP Specialties, pointed to the boom in cheap oil and gas in North America while.
With US natural gas production now equivalent to almost half of Saudi Arabia’s, Harrington said that “palm kernel oil is not the only game in town.” “This is cheaper energy for countries that frack, and will reduce the dependence on the Middle East,” he said. Bio-based feedstocks such as sugar, as well as US natural gas are attracting the attention of the industry as alternative feedstocks, owing to the cheaper costs. Harrington, the president of IP Specialties North America operations, also looked at new alternatives to oleochemicals, such as fermentation with E.coli, metathesis and micro algae cell disruption. “The oleochemical landscape is now very different to what it was in the 1980’s,” Harrington said. “Success in sourcing surfactant feedstocks will hinge on an organisation’s ability to be flexible to the alternative feedstocks, as well as an understanding of the feedstock and its by-product implications.”
|Current prices (August 2013, courtesy of IP Specialties)|
|Palm kernel oil (CIF R’dam)||$865/ton|
|US Nat Gas as LNG||$175/ton|
Yet more insights from the same conference: An expanding population and strong economic growth in Turkey means that demand for surfactants for the fabric cleaning sector will continue to grow, said Gulhan Eglimez, global category marketing manager at Turkey-based company Hayat Chemicals, said, “Turkish domestic demand is strong and exports are growing. Particularly to countries like Iraq.” “We have 75 million people living in Turkey and quite a young population, with an average age of 28. We have 19 million average households and 15 million housewives,” she added. According to Egilmez, Turkish GDP growth in the first quarter of 2013 was 9.5 %. In relation to the end user markets and their buying habits, Eglimez said that the number one priority in Turkey was price. She added that while the trend in northwest Europe was more towards liquid detergents, the Turkish market still favoured powder.
To round out the quarter and with news of great significance for the North American surfactants market, Switzerland-based Clariant said late September, it has opened the new global headquarters for its Oil and Mining Services business unit in the Woodlands, TX. The campus, housed in Black Forest Technology Park, broke ground a year ago, and at the time the company said plans included two 32,000-square-foot office buildings at 2730 and 2750 Technology Forest Blvd. The new campus will allow Clariant Oil and Mining Services to double its workforce in the area by 2015, the company said at the time. It will house 100 offices and serve the Oil Services, Refinery Services and Mining Solutions business units, Clariant said Thursday. It will also include two technical centers, one for Oil and Refinery Services and the other for Mining. Clariant’s U.S. headquarters is in Charlotte, N.C
Thanks again for reading and I look forward to seeing you at the 3rd ICIS Asian Surfactants Conference in Singapore, November 14th and 15th.
Surfactants Quarterly Review Q2 – 2013
As we usually do on a quarterly basis, I have summarized key news from the surfactants market, aided substantially by the news team at ICIS. A number of links in the article point to ICIS articles (most need a subscription). As always, your inputs and critiques are welcome. For more up to the minute surfactant information and networking, I will see you at the 2nd ICIS European Surfactants Conference in Brussels, September 12th and 13th.
The first quarter ended with some concerns about EO supply, notably in Europe where a heavy slate of planned EO plant turnarounds was scheduled for the second and third quarters of 2013. In Europe, there has been a general trend in recent years towards market consolidation in EO, involving capacity losses, acquisitions and a focus on captive demand rather than merchant demand, for economic reasons. However, in October 2012 a source at Shell Chemicals said that the company was considering whether to expand EO production capacity at its Moerdijk site in the Netherlands. The proposed expansion would include an increase in high-purity EO production capacity, the source said. Shell’s Moerdijk facility currently has a nameplate EO equivalent (EOE) capacity of 305 KMT/yr. Aside from Shell’s proposed expansion at Moerdijk, no new capacity is planned in Europe. The gap between ethylene prices in Europe and the US means that producers of ethylene derivatives are struggling to maintain competitiveness.
In April, Solvay, underlined its commitment to surfactants with two new capacity addition announcements. First the company announced that it will build a specialty surfactant plant at an industrial park in Genthin, near Berlin in Germany. The unit is scheduled to be operational by the first quarter of 2014.
Second, Solvay noted investment in a large-scale alkoxylation facility in Singapore to serve the fast-growing Asian market in home and personal care, coatings, industrial, agrochemicals and oil & gas. Expected to start operations by 2015, the plant will be connected to Shell’s new high purity ethylene oxide (HPEO) unit in the integrated petrochemical hub of Jurong Island.
The Shell Singapore new production facilities were announced in April also, including a high-purity ethylene oxide (HPEO) purification column and two world-scale ethoxylation units. The company is also proceeding with upgrading works at its polyols production facility as announced in February and expects the projects to be completed next year. The new production units will add to Shell’s existing HPEO capacity, which is currently at 65 KMT/yr and alcohol ethoxylates capacity of 40 KMT/yr. The HPEO purification column being built will have an initial capacity of 140 KMT/yr , while the two ethoxylation units will have a combined capacity of 140 KMT/yr.
According to Shell’s EVP Graham van’t Hoff, “The demand for alcohol ethoxylates in Asia is expected to increase at approximately 6-7% annually over the next five years. The key driver for this is the move by consumers from laundry powder and soap bars to liquid detergent and liquid soaps, especially in major markets like China, India and Southeast Asia,” Feedstock for the new HPEO plant will come from Shell’s EO/monoethylene glycol (MEG) plant on Jurong Island that is integrated with the company’s ethylene cracker through to its refinery in nearby Bukom Island.
In a move with tangential importances for surfactants, Clariant signed a deal in April, with Ecolab to acquire several of the cleaning services firm’s deep-water assets in the Gulf of Mexico for an undisclosed fee. Ecolab had to divest the assets as a prerequisite by the US Department of Justice (DOJ) for the approval of its acquisition of US specialty chemicals producer Champion Technologies. The assets include Champion Technologies’ oil and gas production chemicals.
Also in April, it was announced that BASF’s new chemicals production site at Dahej, India, is on track to begin production in early 2014. The cost of the project – on the west coast of India in Gujarat and being developed by local subsidiary BASF India – is estimated at around Indian rupees (Rs) 10bn, ($183.12m). The project, which broke ground a year ago, represents BASF’s largest single investment in India. The care chemicals facility at the new Dahej site will produce surfactants largely for home and personal care. These surfactants will also add value to formulation technology applications including agrochemicals, textiles and emulsion polymerisation. With BASF’s global growth strategy for its care chemicals business, the Dahej site adds to BASF’s production footprint in one of the fastest growing emerging markets.
Toward the end of April, Stepan announced Q1 net profit down 14.7% at $19.0m on weak construction demand which hit its polymers chemicals businesses. Sales were down 1.9% at $457m with polymer segment sales volumes down 7% and weaker surfactant margins. Surfactant sales were down 2.1% at $340m while volumes were 5% higher with growth coming from consumer products. Higher margin functional surfactants used in agriculture saw volumes rise by 26% year-on-year. Surfactant segment gross profit was down 4% at $51.6m. The company expects better surfactants margins as the year progresses and improved polymer volumes in the second quarter.
May saw an interesting joint announcement from our friends, Solazyme, and AkzoNobel regarding use of algal oils for surfactants and coatings The companies entered into an agreement to begin joint product development of tailored algal oils in the second half of 2013 and to commercially sell near-term product supply in 2014. Commercial supply of algal oil will come from Solazyme’s joint venture with US agribusiness Bunge, a 100 KMT/yr renewable oils plant in Brazil that is expected to start up in the fourth quarter of 2014. Solazyme and Bunge plan to expand capacity to 300 KMT/yr by 2016.
Prospects in the alcohol market continued to dim, or brighten, depending on whether you are a seller or buyer of fatty alcohols, respectively. According to an ICIS article, reporting findings from our friends at Colin Houston Associates (CAHA), supplies of detergent range alcohols are expected grow at twice the rate of demand from through 2015, forcing the existing industry footprint to adjust. Consumption of higher alcohols increased by 4.5% per year from 2005-2012 because of new supplies reaching markets after large additions of oleo-based alcohol capacity from 2005-2010. In addition, according to CAHA, purified ethylene oxide [PEO] capacity expansions are not keeping up with the new oleo-alcohol capacity, hindering the growth of ethoxylated products in the short term. While surplus alcohols are being exported to Western markets currently, trade barriers and new technologies could disrupt the trend, CAHA said. A wave of new detergent alcohols capacity will come on line in the next 18 months, expanding the 2.5m MT detergent alcohols market by another 1m MT – and potentially more. More than 60% of the new capacity will be located in Malaysia and Indonesia.
In further fatty alcohols news and underscoring the CAHA analysis, Wilmar’s fatty alcohols plant in Rotterdam was slated to face only minimal delays and will be up and running by the end of the third quarter. The 120 KMT/yr plant is owned by Wilmar and is in Huntsman’s 85 hectare chemical site in Rozenburg in Rotterdam. The plant will supply natural alcohols to US surfactant producer Huntsman, as well as the European merchant market.
In more fatty alcohol news toward the end of the quarter, A slightly firmer US market perspective in the mid-cut C12-14 to C12-16 alcohols has some buyers talking a Q3 rollover and several sellers aiming for a price increase. Buyer perspectives in late May focused on ease in securing material. However, the slightly firmer market has led several sellers to push for an increase in prices heading into the third quarter. One supplier said it was definitely seeking to raise prices because mid-cut alcohol inventories in Asia are snug after various production units had Q1 and Q2 downtime.
In news from the outer, higher growth, edges of the EU, Polish surfactants producer PCC Exol intends to build sales in Turkey and throughout the Middle East and Africa (MEA) through a newly-established Istanbul-based subsidiary, the company said in May. The subsidiary, PCC Exol Chemical Industry and Commerce, will target Turkish and MEA buyers of surfactants, such as the detergent, textile, paint, adhesive and varnish industries, it added. PCC Exol, headquartered in Brzeg Dolny, southwestern Poland, and owned by Germany’s PCC chemicals, energy and logistics group, has plants which can produce 40 KMT/yr of anionic surfactants and 60 KMT/yr of non-ionic surfactants. The company is looking to move into major production of high-margin amphoteric surfactants production, with an eye to supplying output to makers of quality personal care products.
No review of surfactants in the second quarter would be complete wtithout some report from the 3rd ICIS World Surfactants Conference. Keynote presenter, Solvay Novecare vice president John Foley said that knowing your customer and your customers customer was key to the strategic growth of Solvay Novecare’s business. “Our strategy starts with the customer – it’s about the connection and intimacy with our customer,” he said. “We can’t ask them what business they are in, because it means we don’t know and we’re by then too late.” Talking about “economic transformation”, Foley expects to see Solvay Novecare to grow at multiples of GDP, which he said will come from new opportunities and making sure the company’s technology will be well positioned.
Understanding complex value chains stands as one of the main challenges for chemical producers, a principal at Berger Strategy Consultants, said at the conference. Gillian Morris gave the example of a large commodity producer struggling with a low margin, low volume and low price product.
“The product was a pain and the company tried to exit the business by rising its price by 25% in one quarter and the customer came back. So the next quarter it raised its prices again by another 25% – so that’s a 50% increase in six months. “In the next quarter they moved up again by 20% and then the customer started to ask questions because their customers wanted to know what was going on in the market…. This company had no clue why the product was of such value to the customer.”
In trademark, hard hitting style, Doug Rightler riveted the conference with news such as that China is building 10 ethylene oxide (EO) plants in this year alone. “EO must be used in concrete production in China – we are seeing a massive investment caused by the Chinese government saying you must use this,” said Doug. “Forecasting for the next 30 years, the numbers for this market are momentous,” he said. “The Chinese are putting in 10 [EO] plants just this year. In Europe and the US, it takes five years. But the big uncertainty is EG [ethylene glycol]. China could grow so much, it could end up flooding its own market,” he said. Globally, EO demand is related to GDP growth, he said. “China has still got a long way to go [in terms of growth], also India. Not to mention the African continent – the market hasn’t even kicked off there.”
While Rightler spoke about China being a fast-growing region of purified EO, he was concerned that no investments were being made for pure EO in the US.
“Pure EO producers are running at 90% of capacity and it [the EO market] will get tighter and tighter. EO prices in the US are rising regardless of the price of ethylene,” he said. Prices are rising even though the US has become the most cost-competitive region in terms feedstock since the evolution of shale gas, he said. “The Middle East is running out of cheap ethane, and they won’t be coming here [the US] anymore. China is where everything it’s at – the rest of the world has stopped.”
Rounding out the quarter, Kao Indonesia Chemicals announced that it has completed construction of its new yen (Y) 4bn ($40m) plus surfactants plant in Karawang, Indonesia. The new plant with an undisclosed capacity is expected to start operation in August 2013, the firm said in a statement. The plant will produce surfactants and industrial chemicals and help lift Kao Indonesia Chemicals’ surfactants capacity, which includes facilities located in Tambun, Indonesia, 1.5 times, Kao said, without disclosing current capacity. All of the Tambun facilities will eventually be transferred to the Karawang site by the end of December 2014, Kao said.
Don’t forget, the highlight of the surfactant calendar next quarter is the 2nd ICIS European Surfactants Conference in Brussels, September 12th and 13th!
New York 2013, May 16th & 17th
ICIS and Neil A Burns LLC co-produced the 3rd ICIS World Surfactants Conference in New York, May 16th and 17th. It was the 7th conference in this global series and by far the biggest and most impactful yet.
Once again, I was privileged to chair the conference and to give some opening remarks to set the tone for the following two days. My remarks emphasized the much more challenging nature of business today vs 30 years ago in our industry. I also explored how you can shock-proof your business so that it even benefits from supply chain stress and disruption. To illustrate my points, I used videos from Monty Python, Kelly Clarkson and Dr. Who – as noted below. To really understand how these really do all tie together and make sense, I recommend you come to one of conferences later in the year in either Brussels (Sept 12th and 13th) or Singapore (November 14th and 15th).
Back to the conference: As billed, it comprised three summits in one, based around three themes of critical importance to the surfactants industry:
The Economics Summit:
First up in this section, Gillian Morris of Roland Berger gave a global chemical and economic outlook to 2030 in which she analyzed the near term future for the 2 Trillion Euro global chemical industry. Of particular concern is the downward trend in economic profit since the early 90’s (economic profit being Return on Invested Capital less the Weighted Average Cost of Capital). According to Gillian, some companies just don’t know how much their products are worth to customers and therefore under-price and under-realise the appropriate gross margin.
Returning for a second engagement with the conference, Doug Rightler gave a data packed and stimulating review of the EO and Derivatives Industry. According to Doug, China today determines directly or indirectly, the value of most of the chemicals on the planet. China today has 10 EO projects underway. Going forward, the US will be a prime location for manufacturing EOD’s but someone first has to bite the bullet and increase purified EO capacity, which is the current bottleneck.
A brand name in and of himself, Joel Houston of Colin Houston Assoc. reviewed the markets for LAB and detergent alcohols. Houston echoed the sentiment of Rightler regarding shortage of purified EO. He also predicted substantially increased vertical integration in the detergent alcohol value chain, much like in LAB.
Darrel Webber, leader of the RSPO – Roundtable on Sustainable Palm Oil, highlighted the human face of the palm oil industry by pointing out the millions of small-holders for whom palm oil is the only route out of poverty. Right now, about 15% of palm oil production is RSPO certified.
Nikola Matic of Kline gave highlights of their most recent analysis of the specialty surfactants used in the personal care market. Interestingly anti-aging products is the single largest segment of the personal care market and the largest influencer of ingredient development. Kline makes the case for consolidated and still rapidly consolidating specialty surfactant market. BASF, Rhodia, Clariant, Evonik and Croda are the largest suppliers worldwide. Some regional champions have emerged, like Galaxy Surfactants in Southeast Asia and Guangzhou Tinci in China.
Rounding out our Economics summit, Judith Taylor of ICIS Pricing outlined some analysis of key surfactants and feedstocks which are covered on a weekly basis by ICIS. Delegates got a free trial all the key reports with relevance to surfactants, i.e. fatty acids and alcohols, ethanolamines, EO, glycerine, LAB/LABS (Asia), PO.
The Consumer Summit:
The consumer summit examined the market from the point of view of major users of surfactants as well as the consumers themselves in the supermarket aisles. Implications for surfactant makers and sellers were presented by five companies operating directly at the front lines of the consumer markets.
Mike Fevola of Johnson & Johnson struck a perfect balance between the technical and economic with an exposition of new surfactant technology developed by Mike at J&J. These are hydrophobically modified polymers and polymeric surfactants. Great to see some surfactant innovation at the front end of the supply chain.
For the first time, Natura brought their unique perspective to our conference series from Brazil. In a talk on Surfactant Requirements for Cosmetics Industry, Sergio Gallucci outlined the 12 properties of the ideal surfactants. He also outlined the unique Agro-Forestry system that they use to source their palm oil.
Another company with a radical and unique perspective, Method (now part of Ecover, the Belgian company) talked about bringing green surfactant technologies to market. Kaj Johnson talked about their partnership with Segetis on Levulinic Ketals for solvency and more generally, discussed their development philosophy which includes the question “WWMD – What Would MacGyver Do?”
Mintel brought the full firepower of their consumer database to bear in reporting on consumer trends in HI&I products. In addition to highlighting the existence of a Tardis in the London office of Mintel, Lynn Dornblaser shared some interesting insights. For example, US consumers are much more brand conscious and loyal than Europeans. Also, in Latin America, Colombia distinguishes itself with the highest growth rates across a number of categories.
Rounding out our consumer section, two speakers from the Good Housekeeping Research Instituted, outlined the results of some original research, commissioned for this conference on The Voice of the Consumer. Not surprisingly, consumers are paying more attention to personal care and other ingredients. What came as a big shock to me is that “Sulfate Free” is now a top three item of concern with the consumers surveyed (a statistically meaningful group of 652 respondents who are members of the powerful Good Housekeeping consumer panel.
The Technology Summit:
The most popular summit of prior conferences returned with a selection of papers, presenting and analyzing the new technologies that are positioned, potentially, to turn the surfactant market upside down.
Renowned analyst, Ron Cascone of Nexant gave a thought provoking assessment of New Technology vs Old. Ron argued that it is in fact economically for certain companies to make ethylene from ethanol. He also highlighted an emerging class of syngas conversion companies in particular, OPX, Lanzatech and Kiverdi (see later).
Respected consultant, Andrew Soare of Lux Research gave an analysis of the state of bio-based chemicals in the surfactant supply chain. Surprising statistic (to me). 16% of sugar crops globally are going to bio-fuels and chemicals. This is forecast to double to 32% in the next few years.
A repeat presenter, Solazyme clearly stated that this is the last ICIS conference at which they will be talking about the coming commercialization of algal oil. This is because Q4, 2013 sees the start-up of their 100 KMT/yr JV plant with Bunge with Moema in Brazil. Interesting that a key initial market for SZYM’s high oleic oils will be the d-limonene replacement market.
A new name to our conference series, Kiverdi , outlined their syngas based process for turning waste into specialty chemicals, including surfactants. CEO, Lisa Dyson captivated the audience with a description of their whole cell bio-catalysis process with planned modular deployment at sites chosen for optimal feedstock availability.
Another new name to the series, Kieran Furlong of Virent talked about their novel technology for the production of – Bio-based Aromatics. Finally, a wholly bio-based LAB is within view. A truly amazing prospect for the surfactant old-timers in the crowd.
Fermentation specialists, LS-9 – made a return visit with a new speaker, Gary Juncosa, who presented their fascinating technology for the direct production of a range of surfactant intermediates from simple modified E. Choli. Feedstocks include first and second generation sugars and crude glycerine. Initial targets include fatty alcohols and esters.
Pulling all three summit themes together, was the kick-off keynote address from John Foley of Solvay. Having recently combined with Rhodia, Solvay is now a leading global surfactant company, via its Novecare Business. Solvay’s Novecare supplies the full range of specialty surfactants across the globe and continues to grow both organically and via acquisitions. The keynote address highlighted some of the developmental challenges in building such a business. EOR and Agrochemicals received some airtime. Also the more general point of customer intimacy and service being key, but not on an “all you can eat buffet” basis. Have to be targeted and focused.
Those of you who grew up in the UK, may remember the sci-fi series, Dr. Who. He travelled through time in a time-ship, called the Tardis that looked like a telephone box from the outside but was much larger, like the Starship Enterprise, on the inside. A running theme through the entire series related to the moment when a visitor realized that the Tardis was, in fact, “bigger on the inside!”
Well, our World Surfactant Conference coming up on May 16th and 17th in NYC is just like the Tardis. It is truly much “bigger on the inside”. In fact, what looks like a regular one and a half day ICIS conference, on the outside, is really 3 distinct but complementary conferences around the 3 themes of economics, consumers and technology. Each of these three conferences, is packed with expert speakers and practicioners. The entire 3 conference event is pulled together by a keynote address from one of the most dynamic surfactant manufacturers today, Solvay.
To see the structure of this three conference event and to see the detailed agenda, please download this flyer. :Three Conferences In One – ICIS Surfactants
And for a flavour of how Dr. Who’s guests react to the enormity of the Tardis time-ship on the inside, see the video below.
Surfactants Quarterly – Q1 2013
With World Surfactants III (that is the 3rd ICIS World Surfactant Conference, in NYC) only just over a month away, I thought this would be a good point at which to review our markets over Q1 2013. In summary, we have seen the strengthening of some trends, sprinkled with a few surprises. A hat-tip is due to ICIS for a good portion of the news used in this summary, but responsibility for views, opinions and even the occasional error, rests entirely with me. As a heads-up, I have noted in this review, some exclusive conference content available at the upcoming World Surfactants III in NY, that relates to the subject matter discussed. If you would rather skim over this shameless commercial plugging, I have helpfully highlighted these comments in italics.
Q1 2013 in surfactant feedstocks started as 2012 ended, with much hand-wringing over the projected growth of fatty alcohol production capacity in Asia. 5 projects underway are expected to boost Asian production by over 500,000 MT/yr or over 30% by the end of this year. Utilization was projected to decrease along with prices and of course they did. None of this should be surprising. Fatty Alcohols are a commodity chemical and this is what commodities do; they move in capacity and pricing cycles. The schedule of Asian start-ups as reported at the beginning of the year, by ICIS is noted in the following table.
|Musim Mas||100||Medan, Indonesia|
|China Sanjiang Fine Chemicals||135||Zhapu, Zhejiang province, China|
|Kuala Lumpur Kepong||100||Klang, Malaysia|
|Pilipinas Kao||40||Jasaan, Philippines|
Of course the pricing trend in fatty alcohols has been assisted by the downward trend in PKO (Palm Kernel Oil) pricing with the Q2 fatty alcohol settlements recently announced by ICIS, confirming that we are still on the downward trend in the cycle.
Offsetting, to some extent, for surfactant manufacturers, the fatty alcohol trend, is the EO (ethylene oxide) trend, pricing for which continues to march upward on a contract and spot basis. The underlying driver for this is clearly supply and demand rather than ethylene pricing to which much EO is either explicitly or implicitly indexed. The imperative of being either on an EO pipeline or producing some very high value specialties continues to confront ethoxylators.
In other EO News; China Sanjiang Fine Chemicals (also a fatty alcohol producer – see above) announced late February, that it started commercial operations at its ethylene oxide unit, with a nameplate capacity of 100,000 MT/year, at Jiaxing in Zhejiang province, The company owns three 60,000 MT/year EO units at the same site. They also have a joint 100,000 MT/year EO unit at the same site with (Korean Co.) Lotte Chemical,. Sanjiang takes half of the plant’s output, adding 50,000 MT/year into its total nameplate capacity. Sanjiang’s total EO nameplate capacity is therefore increased to 330,000 MT/year with the new EO unit. For context, this puts the company, probably top 5, definitely top 10 in EO capacity globally. And they are a fatty alcohol producer. If you are in the surfactants business, you need to get to know this company.
Other big feedstock developments involve linear alpha olefins. Mid February, Shell Chemical announced that it is considering the addition of a fourth world-scale linear alpha olefin unit at its Geismar, Louisiana, petrochemical facility. The unit, which would complement three existing linear alpha olefin units at the Geismar facility, is intended to help meet growing global demand for products such as polyethylene (PE) co-monomers, lubricants and lubricant additives, surfactants and offshore drilling fluids. The use of LAO in the production of AOS (alpha olefin sulfonates) is well established in North America although AOS never fulfilled its initial promise of becoming a workhorse surfactant on the scale of, say, LAS or AES. Nonetheless, expanded availability of cost effective LAO is expected to drive AOS consumption, especially in HI&I (Household, Industrial & Institutional) surfactants. Of course, the proposed unit would take ethylene feedstock from Shell crackers in the US at Deer Park, Texas, and Norco, Louisiana. Such feedstock enjoys cost-advantaged status as the result of drawing upon shale-gas derived ethane, another area in which Shell has announced major investments.
Chevron Phillips another US producer of LAO’s , is studying a 20% increase in capacity at its Cedar Bayou, TX LAO plant. Chevron is another major investor in the shale gas value chain up to and include new ethylene cracker capacity.
In other LAO news, Dow has partnered with Idemitsu (an existing LAO producer) and Mitsui around an ethylene offtake agreement to support linear alpha olefin production. Idemitsu and Mitsui are exploring the creation of a JV to build a 330 KMT/yr LAO plant in the Gulf Coast area of the US. The LAO plant is expected to take ethylene from the newly expanded (by 1.5 Million MT) Dow cracker capacity. A final investment decision will be made in 2014, with LAO production starting up in 2016.
Looking further out, Japanese chemical producer Mitsubishi Chemical has made an agreement with Qatar Petroleum and Shell Chemicals to license its production technology of oxo-alcohols at a new petrochemical project in Qatar.. The Al-Karaana Petrochemicals Complex, which has yet to be built in Ras Laffan Industrial City, will also include a naphtha cracker, mono-ethylene glycol (MEG) and linear alpha-olefins plants, and will utilize feedstocks derived from natural gas.
LAB (linear alkylbenzene) continues to dominate the surfactant value chain both as a workhorse surfactant platform and as a benchmark for cost / performance against which all other feedstocks are measured. In mid- March, Indian Oil announced plans to expand its LAB plant at Vadodara in Gujarat state by 42,000 MT/year in 2015-2016. The company expects demand for LAB in India to grow at 6-7% annually in the coming years, as rural consumption of consumer products containing surfactants increases. Following the expansion, Indian Oil’s LAB capacity will increase to 162,000 MT/year. According to ICIS, India has an installed LAB capacity of 530,000 MT/year. Consumption of LAB totaled 500,000 MT/year in 2012, however, low operating rates at some Indian plants as well as exports of around 60,000 MT/year, resulted in a deficit of 140,000 MT/year, which was met by imports, ( a 40% increase over the previous year). Other LAB producers in India include Reliance Industries, Nirma and Tamil Nadu Petroproducts Ltd.
In other LAB news which came over the wire on April 3, so not strictly speaking Q1 news, but really quite intriguing for me: Qatar’s new sales and marketing firm, Muntajat, has assumed sole responsibility for marketing LAB and heavy alkyl benzene (HAB) produced by SEEF. SEEF produces the products at its complex adjacent to the Qatar Petroleum Refinery in Mesaieed.. The plant has an annual capacity of 80,000 MT/yr of normal paraffin, 100,000 MT/yr of LAB and 36,000 MT/yr of benzene. The LAB complex can also produce 3,500 tonnes/year of HAB as a by-product. HAB is often used as a sulfonation feedstock for applications in oilfield and lubricants. Muntajat was established by the Qatari government in 2012, part of a move to consolidate the marketing and distribution of the country’s chemicals. Already, Muntajat has taken over the marketing and sales of methanol, methyl tertiary butyl ether (MTBE), urea and ammonia from the country’s large, gas-based producers.
Muntajat currently handles marketing, sales and logistics for nearly 70% of Qatar’s petrochemicals and fertilizers. By the end of April, Muntajat will be handling 80% of the country’s chemicals and fertilizers output, with only polymers outstanding. Something else to note; our friend Bob Chouffot, formerly of Shell’s HODer Business is now running Muntajat’s marketing and strategy. Look for Muntajat to be an increasingly large and visible factor in the surfactant supply chain in coming years.
If the economics of feedstocks and the impact on surfactant markets is of interest to you, then World Surfactants III in NY, May 16-17th, will have some material of relevance: A paper from RSPO looks at sustainable palm oil production. Joel Houston of Colin Houston Associates will analyze the LAB and synthetic alcohol markets. Doug Rightler of EOD, Inc. returns for a comprehensive analysis of the EO value chain. ICIS Pricing delivers, for the first time, a comprehensive pricing review in all the areas that ICIS covers that impact surfactants, including the recently published LAB/LAS report. As an interesting bridge between new and old technology, Nexant will analyze and benchmark the economics of today’s workhorses with the emerging new feedstocks based on bio-renewables. To add further objective and analytical heft, Lux Research will present their “state of the union” on bio-renewables.
Further downstream, Solvay announced some organizational changes at the beginning of the year, with, of course the Novecare division (most of which came with the Rhodia acquisition) being of most relevance to the surfactant industry. Solvay now has five operating segments: Consumer Chemicals, Advanced Materials, Performance Chemicals, Functional Polymers, and Corporate Business and Services. The Consumer Chemicals segment serves the consumer products markets, and includes Aroma Performance, a producer of diphenols and derivatives, and Coatis, a Latin American producer of Phenol and Solvents. The business unit will also include Solvay’s Novecare business, which produces specialty surfactants, polymers, amines, solvents, guar and phosphorus derivatives for the agrochemicals, coatings, home & personal care, industrial manufacturing, and oil & gas industries.
In related Solvay news; the Novecare business unit, in Q1 finalized plans to increase its global derivatised guar production by 40% with the completion of expansions in the US and China.. Derivatised guar is a polymer produced from a bean grown mainly in India, from which guar gum, a polysaccharide, is extracted. It is used in various applications including agrochemicals, cosmetics, and oil and gas extraction. The expanded Vernon, TX derivatised guar facility will serve Solvay‘s customers in the North American oil and gas market, while the increased capacity at the group’s Zhangjiagang site in Jiangsu province, China, will supply its home and personal care customers to meet growing regional demand for high-end hair care products.
The keynote address at World Surfactants III will be given by Solvay Novecare and will analyze the strategic challenges and the initiatives taken in response to them, by this leading global surfactants company.
Also downstream; in a strategically unsurprising move, which may, nonetheless feature in some business school accounting case studies, Polish surfactants producer PCC Exol signed an agreement to acquire US-based specialty chemical additives developer PCC Chemax in late January.
PCC Exol will pay its parent group, Germany-based chemicals, energy and logistics group PCC, zloty (Zl) 39.4m ($12.6m, €9.4m) for 100% of the Piedmont, South Carolina-based firm. Preliminary financials showed PCC Chemax had a net profit of $1.1m on sales revenues of $26.1m in 2012. PCC Chemax, founded in 1973 as Chemax, sells products for applications including polymer additives, metalworking, metal cleaning, textile additives and corrosion protection. PCC Exol, headquartered in Brzeg Dolny, southwestern Poland, is a manufacturer of anionic (40 KMT/yr capacity), non-ionic (60 KMT/yr capacity) and amphoteric surfactants.
Stepan continued to thrive as evidenced by its Q4 2012 earnings announcement which came toward the end of February. Stepan can be considered a bellwether of the surfactant industry (particularly re North America), as it is the only publicly quoted company (NYSE: SCL) whose results are driven primarily by surfactants. Other major surfactant companies are either business units “buried” within much larger parents (e.g. BASF) or are privately owned (e.g. Pilot Chemical). In summary, for Q4, net income rose 17% year on year to $15.4m (€11.6m). The improvement in net income was largely driven by lower raw materials costs and a better product mix in surfactants, Stepan’s largest business segment, the company said.
In other Stepan news, in it’s earning call, the company noted that it is looking to further expand its surfactants production capacity in Brazil. They may either build a second plant in Brazil, or expand the existing facility at Vespasiano, near Belo Horizonte. The announcement underscores a trend of companies investing in this growing, innovative, but still quite concentrated market for surfactants and related consumer product ingredients.
Evonik (the current umbrella for some of the former Degussa, Goldschmidt and Huls businesses) continues to invest in surfactants. In March the company announced that in Jilin, north China, it is building new plants for hydrogen peroxide and organic surfactants, which should come on stream by year-end 2013. Also, like Stepan, Evonik is investing in Brazil to build plants for its amino acid Biolys and for cosmetic raw materials.
Brazil and more generally, Latin America, continues to be a topic of discussion at the World Surfactant Series. World III in May features a presentation from Natura on the topic of surfactants in the cosmetics industry. Natural is becoming quite a well known name globally, but not many people still really know the company in-depth.
Another old-line company which continues to build aggressively in surfactants, in emerging markets is AkzoNobel. In late March, Akzo announced that it will invest €65m ($84m) to increase capacity at its surface chemistry manufacturing sites in Boxing of Shandong and Ningbo of Zhejiang in China. More than half the money is being invested in the Boxing facility, which AkzoNobel acquired when it took over Boxing Oleochemicals in January 2012. A large portion of this is going toward building a multipurpose reactor to expand local production capacity for amines. In Ningbo, a new alkoxylation unit will be built. Simultaneously, Akzo announced its exit from the merchant fatty acid business in Boxing, closing down two out of three fatty acid plants at the site. This move mirrors that of many other Western firms (such as Croda, and Cognis) who have divested fatty acid assets in favor of investment in downstream value added derivatives.
Interestingly, this re-arrangement of the ownership of various pieces of the value chain was addressed in last years ICIS Conference series in a set of papers and comments that I delivered in New York, Budapest and Singapore. This analysis of vertical integration (and dis-integration) went under the title of “Attack of the 50 ft Surfactant Company” in Budapest. However the theme for 2013’s ICIS Surfactant conferences will be the response to volatility. Do today’s managers in the surfactant industry have things easier or harder than those 20 – 30 years ago? And what should we do about it? (I actually have a snappy title for this theme also, but I’m holding onto it until May.) My opening remarks at World Surfactants III in May will introduce this topic and we will develop it throughout the year in Brussels in September and Singapore in November.
Finally, in a move which may not mean much outside of Dubai, but which nonetheless caught my eye, Sasol has sold its Dubai based LAS business to a local chemicals group, Al Nahda International. The plant is small (15KMT/yr) and sales are regional. Sasol’s position in surfactants is not affected by this divestiture, in my view.
Of course developments in surfactants do not happen independently of the consumer and industrial markets for them. In the first quarter, much has happened in the laundry market for example, with the emergence of mono-dose and the revelation in the Wall Street Journal that P&G benefitted from the introduction of the extremely successful Tide Pods, arguably at the expense of the rest of the industry. Competitors complained (to journalists). Welcome to creative destruction guys; maybe you missed that class – so here’s a condensed version (courtesy of UCSB).
More generally, in the mind of the consumer and therefore in the mind of the CPG company, ingredients loom large. “What’s in there?” and “Is it good for me and my family?” are questions being asked literally millions of times per day in supermarkets and corner shops. The market has responded with an increasing focus on ingredient disclosure and, in some cases, commitments to eliminate or replace. This trend results in some interesting paradoxes where, for example, MES can be positioned as green and “better” than LAS as it based on palm oil, while at the same time it is condemned by some sectors for the very same reliance on mono-culture palm plantations.
At World Surfactants III, RSPO again may be relied upon to mount a robust defense of palm. Mintel and Good Housekeeping will represent the voice of the consumer and its impact on the formulation of products. Method, fresh from its combination with Ecover will give their take on how they manage “what’s in there”. And in a rare public speaking engagement, J&J will relate some advances in personal care products and the surfactants which comprise them.
I hope you found this review helpful. If you did, let me know and I may consider making it a regular letter. If you see room for improvement or would like to contribute your own inputs – of an editorial or reporting nature, please drop me a line.
Three Conferences in One
New York, May 16th & 17th
ICIS and Neil A Burns LLC bring you a 3 in 1 Surfactants Conference, May 16th and 17th . This event embraces three essential themes to allow delegates to participate in three “summits”, comprising 19 speakers, around the following subjects which are critical to the surfactant industry: Click Here to Register
The Economics Summit:
This summit delivers exclusive content relating to feedstocks and markets, pricing and economics and what is really driving profits and growth at various points of the surfactant value chain globally. The six companies leading the discussion with original research and analysis in this Economics Summit are:
The Consumer Summit:
The consumer summit examines the market from the point of view of major users of surfactants as well as the consumers themselves in the supermarket aisles. Implications for surfactant makers and sellers are presented by five companies operating directly at the front lines of the consumer markets.
The Technology Summit:
The most popular summit of prior conferences returns to occupy over one third of the airtime with a package of presentations and analysis that to date has not been available in any other forum. Learn today, from four practitioners and two analysts, what will turn your business inside-out tomorrow. It’s because of this summit, that your competitors hope you do not attend this conference.
Pulling all three themes together, is the keynote address from a Leading Surfactant Company. This year, Solvay takes the stand. Having recently combined with Rhodia, Solvay emerges as a leading global surfactant company, operating through its Novecare Business. Solvay’s Novecare supplies the full range of specialty surfactants across the globe and continues to grow both organically and via acquisitions. This keynote address will tee up each of the three summits in Economics, Consumers and Technology as Solvay outlines challenges and strategies in each of these areas.
2012 – The Year In Surfactants
2012 was a very eventful year in surfactants globally and 2013 looks set to see even more change and opportunity for this most essential of industries. This short reviews hits some of the highlights from last year and provides some clues to what we might expect in 2013. Thanks and acknowledgements to ICIS in particular for many of the news articles on which I draw here and also for surfactant conference proceedings which themselves broke a lot of news this year.
MES: Is this the next big thing – the next workhorse surfactant? Some companies seemed to think so and not just Sun Products Corp who has been plugging away with MES since the mid 90’s (as predecessor company, Huish). In late December 2011, Jiangsu Haiqing Biotechnology announced 100 KMT/yr of MES capacity with plans to double; all directed at the Chinese detergent market. This project comes on top of those already started or announced by Wilmar, KLK, Lion, DERSA and of course the existing business of Sun.
New Technology: Also in January, Codexis launched their fatty alcohol derived from sugar under the tradename Codexol. This comes from their pilot plant in Redwood City, CA. A demonstration plant is planned for 2013. According to Codexis, it will take about 3.7 MT of cellulosic sugar derived from 7.4 MT of biomass to produce one MT of detergent alcohol. Most fatty alcohols end up as surfactants after being sulfonated or ethoxylated.
China continued to attract investment in surfactants as the country’s demand outstripped domestic supply. Jiangsu Zhongdan, Noble Apex, Wuhan SFH Chemical Industry and Taiwan’s Ho Tung Chemical are planning to start up a non-ionic surfactant joint venture project at Taixing city in Jiangsu province in 2013. The project will consist of a first phase, 80 KMT/yr fatty alcohol plant followed by a 120 KMT/yr ethoxylation plant. Ho Tung, themselves started work on a 120 KMT/yr surfactant unit at Huizhou in Guangdong province, building company’s n-paraffin, LAB and LAS business. China’s state-owned refining company, Sinopec and BASF, in January started the $1.4bn second phase of their integrated petrochemical site in Nanjing at Jiangsu province. This phase includes increased ethylene capacity of 740 K MT/yr, up by 23% from 600 KMT/yr . The second phase of the project also includes the expansion of an existing ethylene oxide (EO) plant to 330 KMT/yr along with the construction of a new 150 KMT/yr EO purification unit. And 60 KMT/yr ethoylation plant.
Another BASF JV, with Malaysia’s Petronas, is investing in a specialty chemicals project in Johor Malaysia, including ethoxylation. In India, BASF is building a new chemicals facility in Dahej in the Gujarat province, expected to produce, among other things, ethoxylates for the Care chemicals business.
Evonik will be active in specialty chemicals with a surfactant project in China and a 25 KMT/yr oleochmicals plant in Brazil. Both projects were announced late 2011 and should be completed in 2014.
The sorting and rationalization of the oleocheimcals industry continued in January with the sale of Sasol’s Witten Germany oleochemicals plant and business to Cremer Oleo. Also toward the beginning the year, the sale of Vantage Oleochemical by HIG Capital to another private equity fund, the Jordan Company was announced. This was not expected to lead to any significant change in strategy and the later in the year, Vantage announce the acquisition of the specialty oils company, Desert Whale Jojoba.
Surfactant feedstock costs started off the year by dropping substantially in price, led by palm oil and fatty alcohols and rippling through the rest of the value chain.
Of relevance to the specialty surfactant segment, Akzo Nobel announced increased capacity for monochloroacetic acid (MCAA), which is a key intermediate for the production of betaines. Akzo said its MCAA facility at Delfzijl in the Netherlands now has a capacity over 100 KMT/yr. The company increased MCAA production capacity at its Taixing site in China to 100 KMT/yr to meet the continued strong market growth in the country and Asia-Pacific. The global MCAA market is about 650 KMT/yr.
Oilfield chemicals and surfactants in particular, most likely first hit the public radar screen in 2010 with the 2010 Deepwater Horizon oilspill and the much publicized use of Nalco’s Corexit dispersant to help clean up the mess. Corexit was a miture of fatty acid esters and ethoxylated esters. In 2012, the use of chemicals in the fracking process for the extraction of shale gas in US fields, gave a boost to the surfactant business, with Freedonia projecting a growth rate of 8+% in this sector. In further recognition of the growing importance of the oilfield chemicals business, BASF prised the HQ for its oilfiled business out of Ludwigshafen and put it closer to the customer in Houston, TX.
Ethylene Oxide (EO) a key surfactant feedstock, started the year tight in the US market and continued that way. EO manufacturers made, and continued to make, good margins. The private owners of Old World, Tom Hurvis and Riaz Wairach, finally sold the company to Thailand’s Indorama. Oxiteno, rumored also to be in the running to purchase Old World, lost out at the last hurdle and gained, as a consolation prize a small multipurpose facility in Pasadena, TX next to the main Old World glycol and EO plant. (elsewhere, Oxiteno made other small acquisitons in Uruguay (American Chemical) and Suzano, Brazil (assets from Cytec for production of esters and related products). In response to a tight market, Huntsman, in April announced a 113KMT/yr EO expansion at Port Neches, TX making a total capacity 575 KMT/yr. The company is looking to take advantage of low natural gas and natural gas liquids costs in North America, Huntsman said. Much of the EO is used internally in surfactant manufacture.
In related Huntsman news; the company decided to expand the range of chemistries it produces with Zavod Sintanolov, a member of the Russia headquartered Norchem Group. At present, all local production arising from the cooperation takes place at Norchem’s Lanitex Optima 7 manufacturing site in the St Petersburg area, Russia. Under the new arrangement the two companies will look to increase production to include Norchem’s Dzerzhinsk facility.
In September, Solvay (owner of the Rhodia, Novecare) and Russian petrochemical giant Sibur agreed to form a joint venture for the production of surfactants and oilfield process chemicals in Russia. Ruspav, the joint-held company will be based near Sibur’s petrochemical operations in Dzerzhinsk, 400km (248 miles) east of Moscow, and is expected to come onstream in 2015. Sibur will provide raw materials, particularly ethylene oxide, and production capacity to Ruspav, while Solvay will contribute its experience in the surfactants industry, as well as the customer networks of Novecare – the company’s dedicated surfactants subsidiary.
Late in in the year, Rhodia announced that it had acquired a controlling interest in India’s Sunshield Chemicals, a small ($17 Million Rev) manufacturer of surfactants and anti-oxidants. Rhodia reported the deal multiple at “below 9X EBITDA”, which seems quite high given the size of the target.
SABIC, the Saudi petrochemical giant made huge news in surfactants in June when the company shipped its first consignment of ethanolamines and ethoxylates from its plant in Jubail, making the SABIC the first to make these chemicals in the Middle East. SABIC now joins the ranks of large vertically integrated surfactant companies and is likely to continue on a global expansion track.
One of the highlights of the surfactant calendar came up in April of 2012 and that this the 2nd annual World Surfactant Conference in New York, co-produced by Neil A Burns LLC (so, yes I am biased). Some significant news was broken at the conference, including the planned entry of India’s Reliance into the surfactant market. Reliance is, of course, India’s only significant manufacturer of ethylene oxide.
Later in the year in September, I produced with ICIS the first European Surfactants Conference in Budapest. More insights there included more on the big move by SABIC into surfactants, i.e.: SABIC’s new (~100 KMT/yr) fatty alcohol plant at Al Jubail, Saudi Arabia, will come online towards the end of 2013 to supply feedstock for its ethoxylation plant as well as the increased requirements in the MENA (Middle East and North Africa) region. SABIC’s ethoxylation plant currently has a nameplate capacity of 40 KMT/yr It started operating at the beginning of April 2012 with a basic portfolio, which has since been increasing stepwise towards specialties. The plant’s capacity will be expanded in 2013 and new projects in different locations are under evaluation.
Another highlight of the European surfactant conference was the keynote address by Steve Holland, CEO of Brenntag, a huge distributor of surfactants. In October, Brenntag signed an agreement to acquire Delanta Group – a $24.3m sales specialty chemical distributor in Latin America. In July it completed the acquisition of Australia-based specialty chemical distribution company ISM/Salkat Group. Brenntag also acquired Treat-Em-Rite, a chemical distribution company in Texas, US.
In November, the third Neil A Burns LLC / ICIS Conference of the year was held in Singapore. Among the most noteworthy presentations there was one by Sterling Auxiliaries which plans to start up a facility to produce ethoxylates and methyl di-ethanolamine (MDEA) in Jubail Industrial City, Saudi Arabia, in 2015, the Sterling chairman, Vishal Goenka, said. Feedstocks ethylene oxide (EO) and propylene oxide (PO) would be procured from the Sadara facility, he said. Sadara Chemical, a joint venture between Saudi Aramco and Dow Chemical, plans to set up in 2015 a chemical complex in Jubail Industrial City which will include a world-scale cracker and several downstream units that will produce more than 3m tonnes/year of high value-added chemical products and performance plastics. The complex will use multiple feedstocks, including heavy liquids, natural gas liquids (NGLs) and ethane.
Looking forward, we will be producing three ICIS Surfactant conferences in 2013: New York, May 16th and 17th; Middle East, Mid – September and again in Singapore, November.
In Eastern Europe, Poland’s PCC Exol made surfactant news with the IPO of shares representing about 18% of the company. PCC Exol currently produces around 80 KMT/yr of anionic surfactants and 30 KMT/yr of non-ionic surfactants. A substantial amount of the proceeds raised by the IPO was slated to be invested in boosting overall surfactants capacity by around 15%, with a specific sum of Zl 5m to be invested in upgrading a production line to manufacture amphoteric surfactants.
ISU, a key player in LAB and n-paraffins, made news with investment in China with a JV LAB plant (100 KMT/yr capacity) in Taicang nar Shanghai. The Taicang plant is run by Great Orient Chemical, a joint venture formed by Isu Chemical with Indonesia’s Salim Group. Isu also operates two LAB plants with a total capacity of 180,000 KMT/yr at Ulsan in South Korea. In addition to LAB, Isu also produces branched alkyl benzene, heavy branched alkyl benzene, tertiary alkyl benzene, linear alkyl benzene sulphonate (LAS) and normal paraffin.
Elsewhere in LAB news, Egypt’s largest linear alkylbenzene (LAB) producer, Egypt LAB Co, plans to increase its LAB capacity at Alexandria, Egypt, by 40% to 140 KMT/yr by the end of 2014. Most of the additional capacity would be exported. Total LAB capacity in Egypt is currently 155KMT/yr , with 85 KMT/yr to be exported.