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Oleochemicals 2011

Oleochemicals 2011

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Published by Doris de Guzman
Overview of the oleochemical industry published on ICIS Chemical Business January 24, 2011
Overview of the oleochemical industry published on ICIS Chemical Business January 24, 2011

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Published by: Doris de Guzman on Aug 15, 2012
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www.icis.com28
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ICIS Chemical Business
 
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January 24-February 6, 2011
FEATURESOLEOCHEMICALS
Many attribute the demand turnaround tothe broad global economic recovery. Demandfor most chemical products last year was sub-stantially ahead of 2009, particularly in theautomotive sector and even in residential con-struction, says Neil Burns, managing partnerfor US-based consultancy Neil A. Burns.“Oleochemicals was no exception with de-mand being pulled through the value chain by the detergents, personal care, industrial,food and fuels market,” he notes.Demand was also fueled by low inventorylevels early last year, says Klaus Nottinger,managing director of Germany-based OleoCon-sult. Some consumers even re
lled beyondtheir usual orders because of lower prices inearly 2010. “It is fair to believe that all oleo-chemical companies returned to pro
tabilityin 2010. Higher capacity usage resulted in a better cost position for producers while con-
P       h      o       t      o       l       i       b      r      a      r      y
DORIS DE GUZMAN
NEW YORK 
2010 saw a healthy oleochemicals market, butrising feedstock costs pose a challenge for 2011
Oleochemicalsbounce back 
tinuous price increases for fatty alcohols, fattyacids and glycerin, as well as their derivativesallowed margin improvements, in some casesto record highs,” adds Nottinger.
CHANGING EUROPEAN LANDSCAPE
With a raft of acquisitions and consolidationacross the European oleochemical sector, 2010was a good year for the region because of in-creasing demand coming from Eastern Europe,as well as decreased supply competition.UK-based producer Croda permanently shutdown its Bromborough plant, in the UK, in De-cember 2009. The plant had capacity to produce55,000 tonnes/year of fatty acid, 17,000 tonnes/year of re
ned glycerin and 24,000 tonnes/yearof esters. The closure came when European de-mand was strongly picking up, notes TimothyRush, vice president and general manager of US- based Oleon Americas, a subsidiary of Belgium-
T
he oleochemical market, even glycerin,saw a signi
cant improvement lastyear in terms of demand and operatingrates compared with the 2009 slump.The fatty acids sector, often seen as an indica-tor for the economy, saw improved worldwidedemand, while fatty alcohols, which were pre-dicted to be oversupplied because of huge Asiancapacity rises in the past few years, was any-thing but in 2010, notes Norman Ellard, directorof Singapore-based consulting and trading com-pany Rohen. “Likely estimates of average capac-ity utilization would be 85% in fatty acids andcloser to 90% for fatty alcohols, not includingsome unplanned shutdowns in the industry,”says Ellard. “Market growth was healthy, driven by rapidly increasing demand in the large grow-ing economies of China and India.”
 
www.icis.comJanuary 24-February 6, 2011
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ICIS Chemical Business
 
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29
FEATURESOLEOCHEMICALS
traditionally non-oleochemical companies intothe
elds of oleochemical derivatives.”Burns agrees, noting palm plantation com-panies as major drivers for continued consoli-dation in 2011. “The more progressive com-panies are looking not only to increase scaleof operations in plantations but are also look-ing to capture more of the downstream valuein oleochemicals and derivatives,” he says.Emery Oleochemicals not only intends to in-vest in downstream operations but also plans toexpand its fatty acids capacity to provide valuechain integration either by building its ownplant or through acquisition within the next
veyears. Emery currently has around 1m tonnes/year of total oleochemical capacity. The compa-ny is also building a 15,000–25,000 tonne/yearplant that will produce specialty oleochemicalsin Telok Panglima Garang, Malaysia.“Major players are growing with vertical inte-gration, where Asia will continue to be the majorgrowth area for oleochemicals – both basics anddownstream. For Emery Oleochemicals, 2011will be another exciting year. We see many op-portunities,” says CEO Kongkrapan Intarajang.He notes that Emery Oleochemicals’ busi-ness recovered to prerecession levels in 2010,predominantly driven by brisk downstreamdemand for higher-value products.“Our higher-value products supply the per-sonal care, automotive and construction indus-tries, which were doing exceptionally well.Capacity utilization from top ASEAN [Associa-tion of Southeast Asian Nations] producers[was] above 95%, whereas the European andUS oleochemical industries operated around[the] mid-70% [range],” adds Intarajang.The challenges the company faced last yearwere volatility of feedstock costs, mixed mar-ket sentiment projections, and the comeback of the biodiesel industry. “The oleochemical in-dustry will likely see similar challenges, andour ability to stay very close to our customersand business partners will allow Emery to ridethrough these uncertainties,” says Intarajang.
BUMPY RIDE FOR THE US
US industry players and observers agree thatthe market will be bumpy in 2011 as producerscope with feedstock price volatility and uncer-tainty in glycerin, mostly because of the rein-stated $1/gal biodiesel tax credit extensionsigned by President Barack Obama in December.The expiration of the federal tax credit inDecember 2009 drove several biodiesel plantclosures in the US, which signi
cantly re-duced supply of biodiesel coproduct glycerin.Bio-crude glycerin from the biodiesel processtypically contains methanol, while glycerinfrom oleochemical production, often referredto as splitter crude, is of a higher purity withno methanol residues.Ready glycerin supply last year was soakedup by improving demand amid a recovering USeconomy, driving tight crude and re
ned glyc-erin supply/demand fundamentals in Q4. If US biodiesel production rises with the reinstatedtax credit, another oversupplied glycerin situa-tion could emerge, prompting similar price vol-atility as that seen in 2008–2010.“The decline of biodiesel created major con-cerns for us as we buy and sell byproducts fromthat industry and we had to shift emphasis moretoward oleochemicals,” says one US oleochemi-cal trader. “The biggest challenge the industryfaces for 2011 is raw-material cost and availabil-ity. If biodiesel returns, even more pressure will be placed on a limited and seasonal supply of fats and oils, further pressuring price and creat-ing supply and price unpredictability.”Major US oleochemical player VantageOleochemicals agrees that the rising prices forfats and oils, and competition with the global biodiesel industry for raw materials, will bethe major challenge in 2011.“As a consequence of government man-dates and subsidies around the globe, our in-dustry and our customers will have to paymore for their basic raw materials. Unless thefull cost is passed on to end-consumers, the based oleochemical producer Oleon.“Tallow was also much cheaper than palmstearine so imports from Asia were also ulti-mately reduced. On top of these factors, de-mand in Asia picked up, which reduced im-ports to Europe. This led to a stressedsupply-demand situation,” says Rush.Last year, Croda also sold its 150,000 tonne/year fatty acids and glycerin production facil-ity in Emmerich, Germany, to Malaysian palmplantation owner and oleochemical producerKuala Lumpur Kepong (KLK).With former power players Croda and Ger-many-based Cognis divesting most of theiroleochemical assets, Oleon now claims to bethe largest oleochemical company in Europe,with a total capacity of 500,000 tonnes/year of fatty acids, esters and dimers production. Cog-nis itself was acquired by German chemicalcompany BASF last year. Cognis sold most of its global base oleochemicals business in2008, which is now known as Emery Oleo-chemicals, with headquarters in Malaysia.“We do not expect any major further con-solidation in Europe as there are only about25 other small family-owned companies leftnext to Oleon, KLK, Emery and Croda. Wedon’t expect them to sell, as they are now ben-e
ting from the strong recovery after survivingthe big global economic crisis,” notes Oleon’sRush. He adds that Oleon bene
ted most fromthe recovery last year, being positioned as astable big local player in Europe.Oleon is looking to expand globally and isinvestigating further investments in Asia. Thecompany is currently producing esters at itsexpanding 18,000 tonne/year Malaysianplant, which will nearly double in capacity byfourth quarter (Q4) of 2011.
ASIAN EXPANSION SPREE CONTINUES
For many Asian oleochemical players, especial-ly those vertically integrated with palm planta-tion owners, expansion through acquisitions orcapacity increases is a major goal for 2011.Aside from KLK’s acquisition of Croda’sEmmerich plant, Singapore-based Wilmar In-ternational acquired Malaysian oleochemicalplayer Natural Oleochemicals (NatOleo) lastyear. The acquisition positions Wilmar as adominant Asian oleochemical producer, witha market share of 35% in Asian fatty acidsproduction capacity, according to a reportfrom Malaysian investment
rm CIMB Group.NatOleo has total fatty acids and glycerin ca-pacity of 393,000 tonnes/year.“Low interest rates and low pro
tability in2009 made 2010 an attractive year for acquisi-tions and consolidations,” says Nottinger. “For2011, I would expect less activity as highermultiples on higher pro
ts will probably makedeals less attractive. Nevertheless, I would ex-pect further downstream acquisitions by oleo-chemical feedstock companies and the entry of 
gg
“Capacity utilization fromtop ASEAN producers [was]above 95%
KONGKRAPAN INTARAJANG
CEO, Emery Oleochemicals
Country/regionEstimated capacity addition2011–2015 (’000 tonnes/year)
Africa/Mid East
200
China
300
India
200
Indonesia
450
Malaysia
350
TOTAL 1,500
SOURCE: Neil A. BurnsNOTES: Includes debottlenecking and expansions
ESTIMATED OLEOCHEMICAL ANDDETERGENT ALCOHOL CAPACITY ADDITIONS
Country/regionFatty acid,’000 tonnes/yearDetergent alcohol’000 tonnes/year
China
1,300480
Europe
1,250720
India
325125
Indonesia
1,000290
Malaysia
2,250460
Others
710200
Rest of Asia
200497
USA
1,000635
TOTAL 8,035 3,407
SOURCE: Neil A. Burns NOTES: Includes synthetic alcoholcapacity. Excludes “mothballed” capacity 
GLOBAL FATTY ACID/DETERGENT ALCOHOLCAPACITY (OPERATING BASIS – 2010)

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