Surfactants Monthly Review – August and September 2018

Surfactants Monthly Review

August and September 2018

This month, we get two for the price of one with August and September (the blog took August off, but we still want to bring you the highlights. ). I’m also going to give you some impressions from the European Surfactants Conference in Amsterdam. Note, I didn’t say I was going to write a summary of what happened because, you know, “you gotta be there”. My impressions will be my opinions about some things I saw and heard chairing the event. Next up on the conference circuit, by the way, is our second event in India in Mumbai next week. I look forward to seeing many of you there. Finally, many of you know we have been partnering at our conferences with ExxonMobil Chemicals. They have been encouraging the industry to take a fresh look at their Exxal alcohols as a surfactants backbone. The pleasure of working with them in this capacity has not been solely financial as I am keen to bring a range of options and perspectives to our attendees. And Exxon certainly helps do that. It’s not just all-natural all the time at our conferences. I have in the middle of this month’s blog a short interview with Exxon. While we haven’t been paid specifically for the feature, we do enjoy the fruits of the broader partnership, so I’m going to label it as a “commercial message”. You should still read it though..

The EO and ethoxylates market continues to see interesting times. Early in August it was reported by ICIS. US ethylene oxide (EO) contract prices for July rose by 1.8% on the back of a 4.7% increase in the July contract settlement for feedstock ethylene.
 July EO contracts were assessed on at 51.2-60.7 cents/lb ($1,129-1,338/tonne) FOB (free on board), an increase of 1.0 cent/lb from June.
US July ethylene contractswere assessed at a 1.25 cent/lb increase.
 Downstream demand is expected to remain steady this month due to seasonality in polyethylene terephthalate (PET).

The following month, US ethylene oxide (EO) contract prices for August rose by 1.4%, tracking a 3.6% increase in the August contract settlement for feedstock ethylene.
 August EO contracts were assessed at 52.0-61.5 cents/lb (1,146-1,356/tonne) FOB an increase of 0.8 cent/lb from July.
 US August ethylene contracts settled at a 1 cent/lb increase from the prior month.
Downstream demand may increase Septemver, with a Formosa monoethylene glycol (MEG) unit in Texas expected to restart in early September.

The beginning of September saw a flurry of EO related price increases. INEOS Oxide plans to raise off-list prices by 5 cents/lb ($110/tonne) for all grades of monoethanolamine (MEA), diethanolamine (DEA) and triethanolamine (TEA).
 The increases became effective 15 September or as contracts permit.
 Dow Chemical also separately announced US EOA price increases, effective 15 September.
US EOA demand is good during the peak surfactants season and from added use in the shale oil and gas sectors.
But supply could come under pressureas product flows from the US to Europe amid upcoming feedstock ethylene oxide (EO) turnarounds in Europe. 
Also, US EO contracts are facing upward pressure due to higher spot ethyleneprices and higher ethane
As a result, US EOA prices could move up in September, according to ICIS, although it is unclear if the entire increase will hold.
 ICIS had assessed the July EO contract price at 51.2-60.7 cents/lb FOB.

Over in European EO space, BASF is gradually increasing the capacity of its production plant for alkoxylation in Antwerp, Belgium, they told ICIS earlier in September.
The first additional capacities will be coming stream as soon as the same month, the company said.
 With the expansion, the company said its surfactant production capacity would be increased by 25% globally, all centred around the Antwerp site. 
Financial details of the expansion project were not disclosed.

More EO related investment in Europe was reported by ICIS noting that INEOS will spend €200m on its oxidesbusiness in Europe, including €150m at its first site in Antwerp, on ethylene oxide (EO) storage and distribution and debottlenecking and increased EO production. The announcement coincides with the 20th anniversary of the establishment of the company with the management buyout in 1998 of the EO business from Inspec at the Zwijndrecht site in Antwerp, Belgium.
 Underground EO storage capacity at Zwijndrecht will increase seven fold, the CEO of INEOS Oxide Graham Beesley told ICIS.
 EO distribution to partner companies on the site in Antwerp will benefit from the investment and production of EO derivatives for the European market will increase, he added.
A sixth alkoxylation unit in Antwerp is due to start up at the end of 2018 alongside the 2,000-tonne expansion of EO storage capacity at the site. 
INEOS is also spending €50m upgrading EO production at Lavera in the south of France to support demand for the material Europe, the company said. 
INEOS has also reached an agreement with power company RWE AG to acquire its Inesco combined heat and power (CHP) plant at the Zwijndrecht site.

[caption id="attachment_1282" align="aligncenter" width="1024"]Bulking Up in EO and EOD's[/caption]

Trade War Update: Words again, I did not expect to write in the blog. We are deep into it now with China as the latest round of tariffs went into effect on September 24th. ICIS has created a free landing page, where you can go to get updates on this serious drama. You should check it out. It’s free. Rather than me paraphrase a lot of material, you should just go and read it. I can tell you however, that as I peruse the list of items covered by the (10% rising to 25%) tariffs for September 24th, that is linked from the page, I notice the following: A heavy presence of those HTS 3400 series compounds which include nonionic, anionic and cationic surfactants as well as finished detergents. Shampoo is on there also and LAB and LAS. Yes we are in it. As I wrote before, I am naturally suspicious when the government seeks to penalize or favor a commercial decision. Such actions, in my view, require a high bar for justification, but are sometimes justified. Regardless of your opinion, it's here and you should keep an eye on what’s happening and think about the direct and second order effects (and third if you’re clever) on your business.

Commercial Break

Q+A with Sushant Paikray, Sales Manager, ExxonMobil

 Sushant, you are scheduled to speak at the upcoming Mumbai surfactants conference – can you give us a teaser as to what you will be covering?

The topic of my panel is a discussion about India’s socioeconomic goals.

With the world’s population approaching 9 billion people in 2040, we are challenged to improve living standards everywhere. We expect that progress will be powered by human ingenuity and the energy that helps make better lives possible.

In India, our goal is to be a part of this economic development, we fully expect more and more people to be moving into the middle class and moving from villages into cities. One area that has been a hot topic in India is to work towards improved environmental standards. With urbanization, there will be pressure on infrastructure. There have been instances of foaming observed in a few cities. A lot of this foam is generated due to waste water bypassing normal sewage treatment systems.

So what can ExxonMobil do?

We produce Exxal™ branched alcohols which can be used in detergent formulations and have properties which include faster foam collapse, and have been tested to be less toxic to aquatic life than many alternative surfactants.

What are you hoping to get out of the conference?

ExxonMobil has been active in the surfactants business for many years, but we are not complacent about it. We are always innovating and developing new technologies to help support our customers. This conference provides me with an opportunity to reconnect with my counterparts, learn about their challenges and ensure we are up-do-date with the industry challenges. It’s always useful to exchange ideas and experiences and learn how we can help make a difference.

To learn more about ExxonMobil’s surfactants, log onto www.surfactantswhycompromise.com - And if you are attending the 2nd ICIS Indian Surfactants conference in Mumbai, don’t forget to register with ExxonMobil to meet with their experts and receive a free gift at the event. http://go.exxonmobilchemical.com/conference-2018-icis

One of the second waves of biomass fermentation companies made some interesting surfactant related news last month after a period of relative silence. Renmatix's technology for extracting sugars from biomass is  providing it with another category of product that it can sell as told to ICIS News.
 That product is crystalline cellulose. What gives crystalline cellulose particularly interesting properties is the ability of the material to form Pickering emulsions. 
An emulsion is made up of two liquids that normally would not blend, such as oil and water.
 Often, surfactants are used to create emulsions of these dissimilar substances. These surfactants work by dissolving in one of the phases, typically in the water portion. 
A Pickering emulsion relies on the solid particles – in this case, crystalline cellulose – that do not dissolve in either of the phases. Instead, they work on the boundary between the two phases.
 
In cosmetics, for example relying on Pickering emulsions would allow formulators to avoid using surfactants that could irritate the skin of some users. 
(wait.. what!?). Because the surfactants are dissolved in one of the phases of the emulsions, they could pass through the skin. Because crystalline cellulose is insoluble, it cannot be absorbed.
This property of crystalline cellulose could be especially attractive to pharmaceutical companies that make topical medicines.
 Renmatix is not the first company to make crystalline cellulose, but it is the first one to make it from supercritical water on a large scale. 
The company already has a commercial-scale plant just north of Atlanta, Georgia, that relies on its Plantrose technology.

[caption id="attachment_1283" align="aligncenter" width="539"]No Bubbles no Troubles - According to Renmatix[/caption]

On the 4th of September, Oxiteno finally announced the official start-up of its alkoxylation plant in Pasadena, Texas. Listen, as someone involved in starting up a plant right now, I can tell you that it is a kind of “rolling event”. It’s not like the starter’s pistol goes off and product comes racing out of the plant and on down the highway to customer locations. Anyway, the Oxiteno plant has a capacity of 170,000 tonnes/year.
The company bought the site back in 2012 for $15m from Pasadena Property. It had previously been owned by the company Old World Industries.
The project took more than six years and represents an investment of $200m. Yup, chemical plants take time and money. They also help make modern civilization, well, modern and civilized. By the way, if you had been at our NY conference in May, you would have heard all these details and more from Oxiteno themselves.

[caption id="attachment_1284" align="aligncenter" width="1024"]Feels Good to be Up and Running[/caption]

Regular readers know CEPSA as a major force in LAB and derivatives and now more recently as a force in detergent range alcohols via its partnership with Sinar-Mas. It’s also, of course, the occupier one of the coolest HQ buildings in our industry, Torre Cepsa.

[caption id="attachment_1285" align="aligncenter" width="1000"]Yes - This is the CEPSA Building[/caption]

Earlier this month, ICIS learned that Mubadala plans to list 25% of Cepsa on Spanish stock exchange before the end of the year. Cepsa is one of the largest Spanish oil players, operating two refineries in the country.
 Within petrochemicals, Cepsa has operations in Spain, Germany, China, Indonesia, Canada, Nigeria and Brazil. According to analysis compiled by Bloomberg, the minimum 25% of free float on the stock exchange could fetch up to €3bn, which would make it one of the largest crude oil initial public offering (IPOs) in a decade.
 That price tag would value Cepsa at around €10bn, which would hand Mubadala significant gains from the €7.5bn the company was valued at in 2011, according to the same analysis. By the way, there’s no great real estate play here. Torre Cepsa, is owned by  Armancio Ortega, Europe's richest man. A clue to how he got that way: The torre was bought by Caja Madrid in 2007 for €815 Million. Ortega bought it in 2016 for €90 Million.

ICIS and particularly the immensely talented Yuanlin Koh, having been documenting the LAB market in Asia. Her latest article is a masterpiece and I excerpt some pieces. This month she sees an upcoming surge in linear alkylbenzene (LAB) supply that will most likely apply downward pressure in global markets over the next few years.
Two new production facilities are being planned in the GCC region: at Farabi Petrochemical in Saudi Arabia, and at ADNOC in Abu Dhabi, UAE. Very little other new capacity is currently expected in other areas of the globe.
But the scale of the new plants – with combined capacities equivalent to 8% of current global demand – will pressure global markets when they start operations, forcing prices and margins lower as the producers compete to penetrate and dominate the last few emerging markets in a largely mature product sector. 
Farabi’s investment in Yanbu will see it expand its LAB production by around 120,000 tonnes/year when the plant comes onstream in 2020. Farabi currently operates one LAB plant in Saudi Arabia’s Jubail Industrial City, with a nameplate capacity of 140,000 tonnes/year.
The second new facility, for which plans were announced in November last year, is being developed jointly by ADNOC and Spain’s Cepsa, wholly owned by Abu Dhabi’s Mubadala Investment Company. It will have a capacity of 150,000 tonnes/year when it starts up in Ruwais, at an as-yet undisclosed date, making it the largest LAB plant ever built.
The project, which includes a feedstock paraffin unit as well as the LAB plant using Detal-Plus technology (Winner of the 2018 technology innovation award at the ICIS Surfactants Conference) from CEPSA and UOP, will be integrated with ADNOC’s nearby refinery complex at Ruwais. Investment cost is pegged at USD 600 million by Cepsa. The two companies expect to target the Indian Ocean basin and Asia as the main markets for the LAB output. The Indian Ocean basin’s LAB market is expected to grow at a CAGR of 5% between 2016 and 2030, according to latest market research by Colin A Houston & Associates.
 The Asia Pacific region is the largest and fastest growing market for LAB, with high demand from the industrial and household cleaning products sector. With strong transportation links, Abu Dhabi’s strategic location allows easy access to serve these growth markets, says ADNOC.
 Growth for LAB is largely limited to regions like southeast Asia, South Asia, Africa and Latin America, but additional volumes targeting these would likely cause any price increases to be difficult.
 Overcapacity is already one of the biggest issues in the LAB market. India’s Reliance Industries said at the our 7th ICIS Asian Surfactants Conference in November 2017 that about 3,766,000 tonnes/year of LAB capacity are installed around the world, compared to 3,400,000 tonnes/year of global demand.” Cepsa puts global operating rates today at around 80-85%.
Expectations of tighter supply going forward and into 2019 for crude oil and recent strong benzene feedstock costs are not helping matters. Brent broke through the $75/bbl mark on 24 August after remaining range-bound at $70-75/bbl for most of August, ICIS data showed, while strong US benzene prices paved the way for Asia benzene prices (see chart below).

LAB suppliers in Asia and the Middle East expect prices to remain stable-to-firm in the near term on higher production costs. However, buyers are resisting the higher offers, especially in Southeast Asia, where consumers are looking to buy cargoes at the prices they had previously bought. This has created a wide buy-sell gap at the present moment.

[caption id="attachment_1286" align="aligncenter" width="303"]LAB Spreads[/caption]

Confirmed deals were done at squeezed margins, with most LAB buyers turning the product into linear alkylbenzene sulfonate (LAS. 
One reason why LAB buyers refused to accept the price hikes was that their downstream LAS consumers could not absorb the higher costs. 
Another reason was that these LAB buyers/LAS producers were aggressively selling lower in the markets in order to keep/gain market share, market participants said.
 On the other hand, according to TATA Strategic Management Group, large volume surfactants like LAB will see a huge demand in Asia with its growing economy.
Talking to ICIS in mid-November, Cepsa CEO Jose Manuel Martinez said he did not fear overcapacities for LAB and said that Abu Dhabi’s LAB production would be mostly exported to South and East Asia, where demand for the product is forecast to continue growing in coming decades.
“LAB demand growth globally allows for a new plant every two years. Having said that, our LAB production is mainly located in the Atlantic Basin – we have plants in Spain, Canada and Brazil – but the real growth in coming decades will be in the Indian subcontinent and Southeast Asia,” he added. “Abu Dhabi is a perfect platform to grow in this part of the world and the plant has to be big.”
South Asia, particularly India, is a key market for LAB and LAS. The country is seen as a generally under-supplied market and imports are needed to supplement production by the four main Indian domestic producers. Market sources say that some 200,000 tonnes/year of imports are needed to meet India’s demand.

The introduction of anti-dumping duties on LAB imports from Qatar, Iran and China in April 2017 has had little impact on the Indian import market so far, according to the market.
A reduction in the goods and service tax (GST) applicable on detergents lent a stronger outlook to LAB demand in the near-term, as the Indian government slashed GST rates from the highest 28% slab to 18

China is also a key growth region but is believed to be sufficiently supplied. With recent stricter environmental regulations, many Chinese producers are concentrating on the more lucrative domestic market.
As a result, supply may become tighter in other Asian markets that depend on LAB imports. This is where the new GCC may come into play.
In southeast Asia, LAB demand is largely supplied from Thai Oil and Japan’s Mitsui & Co’s 100,000 tonnes/year Labix plant. With other major Asian producers also supplying to the region, demand is considered more or less covered.
With new competition incoming, market players on both sides predict that supply will outpace demand in the near future. Who will grab the biggest market share is the big question – according to Yuanlin.

Wow! Superb analysis. If you would like to hear more like this and to meet Yuanlin, you really should be at my conference in India, October 11 – 12th. She will be there.

As noted above, we had a superb time in Amsterdam with 16 straight hours of surfactant content. Here are some things that struck me.

First – The Bio-based Europe Pilot Plant is an incredible and incredibly well funded resource for the bio-surfactants world. This group has played a role in many of the biosurfactant breakthroughs in recent years. They have 70 professionals on staff and are a non-profit, affiliated with the University of Ghent. Well worth a look.

Also take a look at the Cosmos 2020 project, developing crambe oil as a source of alkyl hydrophobes for the surfactant value chain. They’re financed by the EU developing some interesting additional legs to our surfactant supply stool (currently balancing on just two legs, petro and oleo).

If you wonder how close the tariff war may get to shooting war and what are the aims of the parties involved and did Donald Trump really steal Christmas with the results latest round of tariffs you cannot beat the exclusive analysis delivered by Rhian O’Connor of ICIS (you see – you really gotta be there!)

I usually write these blogs while listening to music on Sunday afternoon. Today, we’re dipping into the prodigious Iron Maiden canon of work on youtube. What impresses me about the group I first saw in concert in 1980 is that they consistently bring an incredible amount of physical energy to their work.

The Wall Street Journal has also extolled their genius in marketing and branding (who could fail to recognize the inimitable Eddie) . From the Journal article [italics and comments in [] are mine]: “ Iron Maiden’s 42-year history as a band [is] another example of creative durability. Iron Maiden has never relied on hit singles or frequent radio play, since its songs often run to 10 minutes, with solos from each of its three guitarists. Instead, the band has toured almost nonstop [physical energy], building close connections with thousands of fans who now buy almost anything it puts out, from albums to beer [Honestly Trooper, as well being a high energy song, is a fine English style ale, brewed by Robinsons, that I drink periodically. It’s no cruddy suds with a band label on it.] to belt buckles. Its core of hard-core fans, ….. has allowed Iron Maiden to endure through fads, technological shifts, and the fact that their music was never mainstream [True – they were, if anything distinguished by being unfashionable before and after it was cool].

[caption id="attachment_1287" align="aligncenter" width="480"]Good Beer and Great Branding[/caption]

Branding, marketing savvy, physical energy …. nothing wrong with that.

See you in Mumbai and Singapore !