Oleochemicals Report 2018

www.lmc.co.uk
Where is the value addition?
Brochure
Synthetics retain their advantage, despite El Niño recovery
Brent crude and crude palm oil prices

1,100
1,000 Brent crude oil prices have rebounded to
900
their highest level since 2014. In parallel,
800
the El Niño recovery has weakened crude
US$ per tonne

700
600
palm oil (CPO) prices, narrowing the gap
500
400 between CPO and Brent crude.
300
200
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 H1
2018
Yet, US ethylene prices are at record lows,
Brent Crude Indonesian Crude Palm Oil
while palm kernel oil (PKO) trades at a
large price premium to ethylene – for the
Palm kernel oil price premiums over ethylene third consecutive year.

1,800 750
1,600 600 Price premium (US$/tonne)
1,400 450
1,200 300 How are these upstream prices
US$/tonne

1,000 150
800 0
underpinning the production and
600 -150 consumption of natural oleochemicals?
400 -300
200 -450
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 H1
2018
PKO Price Premium over Ethylene US Ethylene PKO

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Against this backdrop, LMC’s 2018 Oleochemicals Report asks:
• Where does the value lie along the oleochemical value chain?

• Will strengthening production growth in coconut oil (CNO) weaken PKO prices?

• Is continued competition from synthetic fatty alcohols limiting natural fatty alcohol profitability?

• Where are the best growth prospects for fatty acid demand? Which are the derivatives to watch?

• Given some fatty acid end-use applications are enjoying above average growth, when will there
be the market incentive to expand capacity?

• Could sustained low ethylene prices entice US petrochemical players to produce fatty alcohols?

2
How quickly will fatty acid demand catch up with supply?
Projected growth in fatty acid end-use markets

Animal feed
Global GDP growth
Rubber compounding
Emulsion polymerization
to 2030
Agrochemicals
Synthetic lubricants
Plastic films - slip agents
Construction release agents
Asphalt additives
Plastics - processing aids
Detergents
Processing aids
Cleaning products
Personal care
Coatings
Water treatment
Surfactants
Additive/ingredient
Oilfield chemicals
Other pharmaceutical
Nutrition & health foods
Medical nutrition
0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0%
Projected market growth rate (CAGR, 5-7 Years)

As end-use markets experience strong growth, how long

before there is the incentive to expand fatty acid production?

3
Combining LMC’s expertise in raw 
materials, biodiesel and glycerine 
with analysis of fatty acids, 
fatty alcohols and their downstream 
chemical derivatives, LMC’s 
Oleochemicals Report 2018 is widely 
regarded as the industry benchmark
The Report Content
Oleochemicals 2018 – report scope and coverage

The Main Report presents LMC’s industry analysis, split into seven sections:

1. Raw materials: supply, demand, sustainability and price

2. Fatty acid marketplace: capacities, demand, supply and trade

3. Fatty alcohol marketplace: capacities, demand, supply and trade

4. Prices and forecasts: fatty acids, fatty alcohols and glycerine

5. Production costs: fatty acids and fatty alcohols

6. Profitability: by key offtake product and location

7. Surfactant economics: from plantation to surfactant

6
1: Raw materials: supply, demand, sustainability and price 
We examine the core factors underpinning feedstock supply, demand and prices, namely: palm stearin,
tallow, PKO, CNO and ethylene.
Coconut tree replanting is higher than expected and LMC will assess this dynamic via fieldwork in the
Philippines. Might volume growth allow CNO to reclaim its competitive status vs. PKO? Or will new
end-use demands out-bid fatty alcohol producers?

We evaluate: Oleochemical feedstock prices

• Sustainability in the palm sector 1,800

US$/tonne (basis CIF NW Europe except Tallow &

1,600
• PKO/CNO prices relative to Brent crude
and ethylene 1,400

• Feedstock price forecasts @ $60, $80 and 1,200

Ethylene)
$100/bbl crude oil 1,000

• The prospects of the palm industry’s return to 800

normal output after El Niño and… 600

• …whether palm oil supply growth is actually 400

slowing. If so, why? How will this evolution 200

affect oleochemical production? Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18
Coconut Oil Palm Kernel Oil
Palm Stearin US Bleached Fancy Tallow
Brent Crude Oil US Ethylene (Spot)

7
2: Fatty acid marketplace: capacities, demand, supply and trade 
We present key metrics for the fatty acid sector including:

• Supply and demand volume analysis and forecasts (2005-2030)

• Trade volumes with forecasts (plus import tariff tables)

• Producer capacities and capacity utilisation rates

Analysis is provided on a global and regional level as well as by major producing/consuming country.

To support our demand forecasts, we have developed a new fatty acid demand forecast model unique
to each key derivative. Using these models, we present global demand forecast volumes by key
derivative.

We conclude by assessing the strategic implications of this analysis and ask: which derivative end-use
market offers the most promising growth opportunities?

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3: Fatty alcohol marketplace: capacities, demand, supply & trade
We present key metrics for the fatty alcohol sector including:

• Supply and demand volume analysis and forecasts (2005-2030)

• Producer capacities and capacity utilisation rates

• Application markets, trade and policies

Analysis is provided on a global and regional level as well as by major producing/consuming country
and with datasets split by synthetic and natural.

Forecasts of fatty alcohol demand and application are further disaggregated by chain length:

• Natural C12-14

• Natural C16-18

• Synthetic C12-15

• Synthetic C4-10 (including C9)

This sector’s strategic outlook to 2030 is evaluated, including the ongoing strong competition between
natural and synthetic. We ask:

• Are Shell and Sasol expansions on track? How will end-use markets react to new supply?
What are the implications if further new-build US crackers were to include fatty alcohol production?
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4: Prices and forecasts: fatty acids, fatty alcohols and glycerine
Although raw material and crude oil price linkages are well established, oleochemical price
relationships are less clear-cut. We analyse the correlations and the dynamics underpinning them.

For example, glycerine prices rocketed in 2017/18. Are high prices based solely on developments in
China’s petro-based epichlorohydrin industry? Or are there other influences to account for?

Oleochemical prices We present price forecasts to 2030 @ $60, $80

300
and $100/bbl crude oil for:

250 • C8-10 fatty acids

SE Asia FOB (US$ per tonne)

• C12-14 fatty alcohols

200

• C16-18 fatty alcohols

150
• Commercial stearic acid
100
• Crude and refined glycerine
50
Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18
TP Stearic Acid C12-14 Fatty Alcohols C16-18 Fatty Alcohols
C8 Fatty Acid C10 Fatty Acid C8-10 Fatty Acid Cut
Refined Glycerine

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5: Production costs: fatty acids and fatty alcohols
Production costs are estimated for fatty acids and natural fatty alcohols (via fatty acid intermediate) for
plants sized at: 50,000 mtpa, 100,000 mtpa and 200,000 mtpa.
For each key producing country, the major feedstock consumed is analysed:
• Fatty acids: palm stearin in Asia;
tallow in the US and Germany
• Fatty alcohols: PKO and CNO in the Natural gas prices in selected countries
Philippines, US and Germany
12

Production costs are presented for 2014-2018 on 11

a per tonne of fatty acid / fatty alcohol basis. 10
Costs are disaggregated into: 9

• Labour 8

US$/mmbtu
7
• Energy
6

• Feedstock 5

• Chemicals 4

3
• Depreciation 2
2012 2013 2014 2015 2016 2017
Malaysia Indonesia China US Germany

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6: Profitability: by key offtake product and location
We calculate the full costs of accessing major demand markets (EU, US, China and India), taking into
account logistics plus import tariffs.

By combining logistics costs with our production cost estimates, we evaluate profitability by location.

Examples of how we apply this analysis include:

C12-14 fatty alcohol profitability, i.e. revenue
• The profitability for SE Asian fatty acid minus cash cost (blue) or full cost (red)
600
producers selling stearic acid in China,

Profitability (US$ per tonne 12-14 alcohol)

US and EU – how do they compete 500

against local producers? 400

300
• Indonesian, Malaysian, US, EU, Indian
200
and Chinese fatty alcohol profitability by
feedstock – which optimises margins? 100

-100
PKO CNO PKO PKO PKO PKO CNO CNO PKO
China Germany Germany India Indonesia Malaysia Philippines US US

Cash Cost Full Cost

Where in the world will producers most benefit from access to raw materials and/or markets?

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7: Surfactant economics: from plantation to surfactant
Unique to LMC’s 2018 Oleochemicals Report, we examine surfactant economics by asking:
at each stage of the surfactant value chain, how has profitability evolved over the past 5 years?

The surfactant value chain For CPO/PKO, we examine costs and prices for:
140 a) Plantation
120 b) Crushing
100 c) Refining
d) Oleochemicals
Value Addition

80

60 e) Ethoxylation
40 f) Surfactants
20 This analysis quantifies where value addition
0
occurs in surfactant production derived from
natural fatty alcohols.
Plantation

Crushing

Refining

Fatty acids

Fatty alcohols

Ethoxylation

Surfactants

We map company structures and unpick their

strategies – to what degree do companies
participate in the value chain? Why?

We examine how oleochemical stakeholders can leverage LMC’s analytical

insight to optimise profitability along the length of the value chain.

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Executive Summary: conclusions, opportunities and risks 
The Executive Summary draws together the analysis to present the key conclusions influencing
the industry over the coming decade.
It identifies the significant drivers, opportunities and risks shaping oleochemical markets over the
short, medium and long term on both a global and a regional basis.

The Report’s conclusions provide a firm basis for determining

stakeholder strategy and investment along the oleochemical value chain.

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Supporting data and information 
Appendix 1: Global trade data
Regional fatty acid and fatty alcohol imports, exports and net exports by tariff code,
e.g. fractionated fatty acids and industrial fatty alcohols.

Appendix 2: Capacities and data for key oleochemical producers

Major fatty acid and fatty alcohol producer capacity data, including notable smaller players.
Up and downstream capabilities and strategies are highlighted and commented on.

Appendix 3: LMC’s analytical methodologies

We outline the research methods underpinning LMC’s globally-respected data and forecasts of
supply, demand, trade and price.

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Deliverables, Fees & Timing
In addition to the Main Report & Appendices, you will receive:
Presentation (remote or at your office)
• To build on the Report’s research and conclusions, a senior LMC expert will present the 2018
Oleochemicals Report – focusing on aspects of the Report most relevant to your business.

Presentation Slide Deck

• Each section of the Report is outlined in a slide deck designed to facilitate your company’s
discussions.

Executive Summary
• Key findings and conclusions are summarised in a concise stand-alone document.

Selected Key Data

• Key datasets are provided in Excel to clarify the Report content and enable your own data
manipulation.

Access to LMC Industry Experts

• Reasonable access to our experts for questions on the Report content and findings.

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The Oleochemicals Report 2018: fees and timing  
Fees
• For a 1-year subscription – 1 Annual Report – the fee is US$25,000, payable in full upon
subscription
• For a 3-year subscription – 3 consecutive Annual Reports – we offer a discounted fee of
US$18,500 per year, payable annually

Payment can be made in Euros, Singapore dollars or Sterling at the prevailing exchange rate at the time of purchase.

If the face-to-face presentation is delivered somewhere other than LMC’s offices, travel expenses will be charged at cost, but
without additional consulting fee.

When will the next Report be available?

The 2018 Report will be available September 2018

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LMC's oleochemcial clients include: 
Agropalma Eastman Chemical Company Itochu Shell Chemicals
AkzoNobel Surface Chemistry Emery Oleochemicals KLK Sime Darby
Alicorp Evonik Marico Singapore EDB
Arizona Chemicals ExxonMobil Chemical Marubeni SK Chemicals
BASF Evyap McKinsey Sinarmas Cepsa
BP Biofuels EOC Einkauf Mitsubishi Solvay
Cargill Fedepalma Mitsui Stepan Company
CEPSA Felda Global Ventures Holdings Oleon Total Petrochemicals
Chevron Technology Ventures Global Green Chemicals Oqema Toyota Tsusho
Clariant Godrej Industries Oxiteno Unilever
Coca-Cola Golden Agri-Resources Procter & Gamble Vantage Oleochemicals
Credit Suisse Henkel PTT Global Chemical Vinythai
Desmet Ballestra Ingevity Reckitt Benckiser Vopak
The Dow Chemical Company Intrexon SABIC VVF
DuPont Tate & Lyle BioProducts IOI Sasol Wilmar

For further information please contact:

Richard Truscott (Global) +44 1865 797621

rtruscott@lmc.co.uk
Irma Darwis (South East Asia) +6010 221 8337
irma@lmc-kl.com
Andrea Kavaler (The Americas) +1 212 586-2427
akavaler@lmc-ny.com
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info@lmc.co.uk info@lmc-ny.com info@lmc-kl.com