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 !

Surfactants Monthly – October 2018

Surfactants Monthly Review – October 2018

Mob Rule

October was a great month. I spent a week in India with some of the most committed, enthusiastic and, yes, passionate people in the world. I talked about love to them but clearly I was preaching to the choir. These folks exude love for what they do. Of course, I was at the 2ndIndian Surfactants Conference, co-produced by me and ICIS. The love (I’m not kidding!) in the air in Mumbai during the event was palpable. This was a large group of people who work every day to perfect their craft because they love it. That’s why I always love being there. Now on to Singapore, for the 2018 finale. Maybe I’ll see you there?

More love later in the month, shone like a rainforest-fragrant rainbow over the town of  Naugatuck (CT). P2 Science started production at our brand new green chemistry plant using elegant, patented technology, developed in partnership with Desmet Ballestra of Italy. First product off the line, also a world first, BioNonanal™. A fragrance aldehyde with 100% fresh natural, beautiful renewable carbon, at last – gorgeous!

[caption id="attachment_1312" align="aligncenter" width="1024"]Beautifully Natural[/caption] [caption id="attachment_1292" align="aligncenter" width="1024"]Naturally Beautiful[/caption]

* See footnote

The quarter started with stable to firm pricing sentiment around fatty alcohols, according to ICIS. While feedstock palm kernel oil (PKO) values have faced downwards pressure in recent weeks, supply concerns in the fatty alcohols market are supported upwards momentum for Q4 contracts.

[caption id="attachment_1294" align="aligncenter" width="376"]A Familiar Pattern[/caption]

Supply issues at Shell in Stanlow (about 90 KMT/yr capacity) are causing a spike in demand for other plants in the region, leading to a shortage of material.
At least one player said they were now seeing additional buying interest that they could not fulfill.
There is robust demand noted in the European market for October, with healthy buying interest bolstered by current supply issues.
EO turnarounds that are ongoing in the European market have had no effect on the fatty alcohols market, with previously built up stocks said to be sufficient to fulfil demand from the surfactants industry.
There is no easing of supply constraints anticipated before the end of the year, though the ongoing ethylene oxide (EO) turnarounds are not likely to have a major effect on fatty alcohol demand.

[caption id="attachment_1295" align="aligncenter" width="964"]In Happier Times[/caption]

Over in the world of EO, ICIS reports that US ethylene oxide contract prices for September rose by 7% on the back of a 17% increase in the September contract settlement for feedstock ethylene.
September EO contracts were assessed on Friday at 56.0-65.5 cents/lb ($1,235-1,444/tonne) FOB (free on board), an increase of 4.0 cents/lb from August.
US September ethylene contracts were assessed at a 5 cent/lb increase.
Peak downstream demand into ethanolamines and polyethylene terephthalate (PET) is expected to start winding down this month due to seasonal trends.

The immensely talented Melissa Hurley reported that European ethylene oxide (EO) supply was expected to be limited in October amid.
 Several turnarounds took place during October, which limited supply outside contracted volumes as most European suppliers shut down during the month (see image below).
October is the month where the majority of EO production was offline but stocks were built up in advance.

[caption id="attachment_1297" align="aligncenter" width="460"]Outages Mount[/caption]

As a result, loss of volumes were prepared for well in advance and most sources expected the situation to be manageable.

Animal spirits, however, continue to animate (as only animal spirits can) the European EO scene, as evidenced by news of BASF and INEOS investing in capacity in Europe.
INEOS will spend €200m on its oxides business in Europe, including €150m at its first site in Antwerp, on EO storage and distribution and debottlenecking and increased EO production.
A sixth alcoxylation 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.
 The company is spending €50m in upgrading EO production at Lavera in the south of France to support demand for the material in Europe.
Additionally, BASF said that it was looking at a significant capacity expansion of its EO and derivatives complex at Antwerp in Belgium.
 The project includes capacity expansions of EO and several downstream derivatives, such as surfactants, according to the company.

[caption id="attachment_1298" align="aligncenter" width="1024"]Who's the king of EO?[/caption]

In the midst of this EU EO euphporia, Sasol Performance Chemicals declared force majeure on supply of ethylene oxide (EO) and EO derivatives EO based surfactants, ethanolamines and ethylene glycols until further notice, according to a letter sent to a customer, seen by ICIS.
 The declaration is understood to be a result of ongoing upstream ethylene production issues and a resulting cut back of ethylene supply to Sasol with immediate effect.


The problem was in Marl, Germany Marl, Germany where Sasol has a 215 KMT/yr EO plant. Due to ethylene production issues upstream from Sasol's major ethylene suppliers, there have been ethylene supply cut backs to Sasol with immediate effect. As such, Sasol has reduced its EO production rate significantly with has impacted their EO supplies to the market and EO derivatives.

I was very pleased to read about the ICIS Innovation Awards mid-month, and one of the winners in particular. Many entries detailed benefits arising from, for example, the use of renewable feedstocks, greater recyclability and/or reduced carbon footprint. 
The four category winners and the overall winner certainly demonstrate how innovation can be a key driver in moving towards a more sustainable future and a circular economy. 
Between them, the winning innovations enable more effective recycling of tyres (Lehigh Technologies), the use of lignin as a chemical feedstock (Stora Enso), zero-carbon recovery of iron from process waste (Electrochem Technologies & Materials), and more environmentally friendly production of surfactants (Galaxy Surfactants).
 The Best Process Innovation category was won by India’s Galaxy Surfactants, for a novel catalytic route to amino acid surfactants. These mild anionic surfactants find uses in personal care products such as skin care and hair care, providing cleansing as well as sensory benefits. Traditionally they are produced in a two-step synthesis – preparing a fatty acid chloride by halogenating a fatty acid in the presence of a catalyst, and then condensing this fatty acid chloride with an amino acid under typical Schotten Baumann conditions. 
The problem comes when trying to isolate the fatty acid chloride from the catalyst reaction mixture. Also, the dimethyl formamide (DM) catalyst is a toxic material – it is rated as a CMR in Annexe VI of the ECHA CLP regulations.
Galaxy’s brainwave was to catalyse the step 1 reaction by using an amino acid surfactant as the catalyst in a semi-heterogeneous process, so that it is not necessary to isolate the catalyst before moving on to step 2. 
The advantages are several: the process uses a completely degradable and non-toxic catalyst; the separation issues (distillation/crystallisation/phase separation) are eliminated – reducing batch time and giving a significant saving on energy and waste disposal; the overall process is “green”, with the closed loop process causing no emissions to the environment; and the odour of the product is improved (due to elimination of DMF).
Galaxy estimates the market for the main N-acyl amino acid surfactants is around 113,000 tonnes/year and growing rapidly. Between 2013 and mid-2018, some 15,000 consumer products containing this type of surfactant have been launched on to the global market. 
The innovation has recently been recognised by major personal care products 
Unilever with one of its “Partner to win” awards, citing Galaxy’s innovation for its “Green catalysis & sustainability”.
Godefroy Motte commented that he really liked the process for its “green” environmental aspects and its commercial potential in the personal care sector, “although the market size for these types of specialty surfactant is not huge.” He also liked the confidence of Galaxy and the way is has been able to work with Unilever as a Partner to Win – “clearly a challenging task”.
 I have to add that for love of their craft and love of the surfactants industry, Galaxy is hard to beat. I personally love those guys.

[caption id="attachment_1299" align="aligncenter" width="600"]In Love with Surfactants[/caption]

Clariant is a key player in surfactants and they confirmed Ernesto Occhiello as new CEO after the shareholders approved the move at the Swiss specialties firm’s Extraordinary General Meeting (EGM) on 16 October. Occhiello was previously the executive vice president of SABIC’s specialties division. SABIC recently received antitrust approval to purchase a 24.99% stake in Clariant. Clariant’s current CEO Hariolf Kottmann is to become chairman of the firm’s restructured board of directors, a move also approved by shareholders.
Regular readers know that since a failed marriage to Huntsman, Clariant has hooked up with a rich middle-eastern suitor. Right now, at 24.99% ownership they are said by friends to be taking things a day at a time and are in no rush to get hitched permanently. Having said that the tabloids are abuzz about the type of surfactants business love-child the global couple could create together.

[caption id="attachment_1300" align="aligncenter" width="301"]Going Steady[/caption]

In an interesting snippet, ICIS notes that Brenntag is to distribute Kaneka surfactant in US.German chemicals distributor Brenntag is expanding its personal care portfolio in the US by distributing Kaneka’s Surfactin line of surfactants in the country. The Kaneka line includes a biodegradable surfactant,along with two pre-blend gels used for gelling oil and emulsification. Further evidence that bio-surfactants are making their way into the mainstream. Let’s kep an eye on this one.

Finally Croda announced right at the end of the month, the official launch and certification of its ECO range of biobased surfactants. The 100% biobased and renewable range is designed to meet the increasing demand for sustainable, high-performance ingredient options, and is the certified to meet the criteria of the USDA BioPreferred program. The range includes Brij, Glycerox and Tween products. The ECO range is the result of a significant investment made by Croda in its Atlas Point manufacturing site, located in New Castle, Delaware, to construct an ethylene oxide plant using naturally derived feedstocks. We've reported on the plant extensively on the blog. Just use the search function and you'll get some archive articles.

End of news: Start of opinion. Word of the month? Mob. I had briefly considered “consulate” but was  advised that it is a little too early to make light commentary on the “bizarre byzantine brawl”, details of which continue to drip water-torture-like from the tightly throttled Turkish news spigot.  So mob it is, whether it’s a swirl (collective noun) of millennial snowflakes shouting down non-compliant views on your neighborhood ivy-league campus or the disaffected fans of a losing football team. The most accurate definition of the word is probably “A group of two or more people with whom you disagree politically”, hence the mob’s appearance every four years in the US and whenever a supreme court justice is nominated for confirmation. Of course, mobs come in all shapes and sizes. They could fly into a country in private Gulfstream jets and .. oh no, wait, we’ll discuss that next month.

Growing up in the UK in the 70’s and 80’s, mobs were very much a part of the social and then cultural scene especially as Margaret Thatcher sought to reassemble the British economy. It became somewhat glamorous to indulge in a bit of riotous behavior while baiting the stoic (mostly) British Bobby. Songs of the period included this classic by the Clash.

And this lesser known paen to un-civil disobedience by my homeboys (from South Shields), The Angelic Upstarts.

Yes, things could be and were a little rough back then but it was still one of the easiest and safest times and places in which to protest the ruling powers in a very confrontational manner. Try that in some other parts of the world and you may find yourself provoking a rather cutting response – I mean literally – and then you’re disposed of in an Istanb…. anyway, that’s a topic for next month..

It’s the occasional power of a relatively small mob that can be quite startling. Watch what happens when a quiet Sunday afternoon in a beautiful section of Budapest is suddenly disturbed….

Now, that’s my kinda mob! I’ll be singing this one with the choir this Christmas. It’s by Zoltan Kodaly and it’s called Esti Dal (Evening Song). This is how it reads in English:

Evening darkness overtook me near the woods;
I have put my cloak under my head
I have put my hands together
To pray to the Lord, like this:

Oh, my Lord, give me a place to sleep,
I am weary with wandering,
With walking around and hiding,
With living on foreign land.

May the Lord give me a good night,
May he send me a holy angel,
May he encourage our hearts' dreams,
May he give us a good night.

Are you seeing what I’m seeing here? Our wanderer asks for shelter and safety after wandering far and wide with no place to call home. But there’s more. Second from last line; may he encourage our heart’s dreams. Safety and security are necessary, but not enough. We need our hearts’ dreams to be encouraged. Without these dreams, the song is about just any other forest animal looking for a warm dry spot. It’s only Man that has dreams of the heart and asks for them to be encouraged. How incredibly insightful and packed into a 3-minute Hungarian folk song.

At the risk of reading too much into the song (which I love doing by the way), you’ll notice that this particular line is the one where our wanderer starts to ask for blessings on “us” and not just himself; may he encourage our heart’s dreams. This means what? I’m not sure. If it’s just your dream for you, it doesn’t quite work? Maybe. Maybe it’s the mob that needs its dreams encouraged? Maybe the mob is a group of people that, in the heat of their momentary demands, has forgotten their hearts’ dreams and forgotten to ask for their encouragement. They’re just forest animals looking for whatever it is they want. Something to think about.

I was going to end up by saying that we seek to encourage your hearts’ dreams at our conferences. But that’s too trite and presumptuous. I guess I would just ask you to bring your hearts’ dreams to our events and let’s see what we can do together, for each other. If you bring your hearts’ dreams to your work, and seek encouragement for all those of our dreams, great things will happen. I’ve seen it all over the world, Mumbai, Naugatuck, Singapore, South Shields.

All the best,

Neil

*Footnote : The first photograph is the often-observed haze over a pineforest. This natural phenomenon is the result of ozone in the atmosphere reacting with terpenes rising above the forest. The resulting haze is also fragrant due to the formation of aldehydes. This is the natural process that has been intensified and industrialized by P2. And yes, the second photograph is Kate Bush from 1978 (if you’re still at a loss, I’m sending you to google from here). Am I in fact trying to draw a comparison between the beauty and elegance of what P2 is doing at this new plant and the natural beauty of Ms Bush? Yes, I suppose I am. If you have been reading my blog for a while, you'll know that I need only a flimsy excuse to feature certain musical artists...

Surfactants Monthly – November 2018

Surfactants Monthly Review – November 2018

The Road More or Less Traveled

November kicked off, for me, with a week in Singapore at our 8th Asian Surfactants conference, followed by a week in KL. I learned a lot about palm plantations, downstream integration, Asian consumer trends and about Petronas (they of the towers and petrochemicals fame). More than that, I won’t say here, because, as you’re doubtless tired of hearing me say, “you gotta be there”. Your next opportunity to “be there” comes up in May in NYC for the 9th flagship / mothershipsurfactants conference. The course, the seminar, the awards. the conference. It’s all there. May 14th – 17th next year.

[caption id="attachment_1319" align="aligncenter" width="500"]Mothership Landing[/caption]

As always, pretty much all of the news in this blog comes courtesy of the ICIS News team. For the full news experience, you really need to subscribe, like I do. The opinion, of course, and all the video selections are mine alone. BTW, I have a habit of inserting my own comments into the news stories. I try to highlight these in italics but not 100% consistently. So if it sounds somewhat chatty or even a little sarcastic, that’s me, not ICIS.

EO (Ethylene Oxide) is a topic of perennial interest at our events. At the beginning of November, ICIS reported EO November contracts decreased slightly following the downward ethylene contract settlement. The European ethylene contract reference price for November was agreed at €1,135/tonne, down by €10/tonne from October. EO contract prices decreased by €8/tonne at both ends of the range, bringing prices to €1331-1459/tonne free delivered (FD) northwest Europe (NWE). This settlement finally reversed the pricing gains posted last month by ICIS. EO supply remained, as many have experienced, limited amid the heavy turnaround period, which reached its peak in October. Adding to the current planned turnarounds, there were unplanned issues in Marl, Germany.

Right at the end of the month, ICIS reported that the European ethylene oxide (EO) December contracts dropped significantly, following the triple-digit decline in the upstream ethylene contract price for December. The European ethylene contract reference price for December has been agreed at €1,025/tonne, down by €110/tonne from November. December EO contract prices fell by €90/tonne at both ends of the range, bringing prices to €1,241-1,369/tonne FD (free delivered) NWE (northwest Europe).

According to ICIS, EO supply remains tight and demand is still good, which supports pricing increases on adder discussions for next year's contracts. There were several planned turnarounds in October leading into November, along with some unplanned issues in Germany and Poland. EO contract fee talks for 2019 continue, with varying degrees of increases being discussed due to demand growth expectations and some concern surrounding the heavy cracker turnaround period next year. BASF, INEOS and Clariant have all announced capacity expansions recently. There is a focus on the good demand for purified EO which is highlighted by the most recent news of Clariant announcing capacity expansion plans for purified EO this week

More EU EO Action: ICIS reports that Clariant will expand the capacity of its ethylene oxide (EO) unit in Gendorf, Germany An increase of high purified ethylene oxide (HPEO) is expected to be available from 2020, the company said in a statement. Details on plant capacity increase and investments were not disclosed.It will be a “sizeable expansion” (so.. 40 , 60 KMT/yr ?), Clariant executive committee member Christian Kohlpaintner said. Clariant has a 240,000 tonne/year EO unit in Gendorf, according to ICIS data.

Back in the US, similar drama in the EO market, as reported by ICIS’s Tarun Raiza: US EO production in the second quarter had been constrained by tight supply amid turnarounds undertaken separately by multiple producers. Production increased in the third quarter as the turnarounds wrapped up. Third-quarter demand was healthy for EO into downstream monoethylene glycol (MEG) during the peak bottle resin season and into downstream ethanolamines during the peak surfactants season. Tarun went on to report ..

US ethylene oxide (EO) contract prices for October fell by 3.3% on the back of a 7.4% decrease in the October contract settlement for feedstock ethylene. October EO contracts were assessed early November at 54.0-63.5 cents/lb ($1,190-1,400/tonne) FOB (free on board), a decrease of 2.0 cents/lb from September. US October ethylene contracts were assessed at a 2.5 cent/lb decrease.

I like Helm a lot and have done a bit of business with them over the years. So I was pleased to see a nice article penned by Will Beacham this month. I won’t give you whole thing, but here’s a few snippets.:

Germany’s Helm … occupies an unusual middle ground in the value chain where it becomes the sales and marketing arm and even equity shareholder for the chemical producer partners it represents. ….According to chairman Hans-Christian Sievers: “In chemicals and fertilisers we have chosen to integrate ourselves backwards towards the producer. In chemicals we are possibly strong in 50 products but we aim to be a significant market player – we want to have producer status so our aim is to have annual volume equivalent to a modern worldscale plant.”

The group is growing its position especially in glycols, propylene and methanol…..Helm typically partners with companies which have technology or access to gas and with start-ups which sometimes need a minority shareholder to facilitate financing. Helm is also growing in ethylene glycols, where it has a contract with Sasol at Lake Charles to market its entire 250,000 tonne/year EG production once Sasol’s new cracker starts up.

Says Helm “..we don’t have an official date but it will be around the turn of the year. Sasol is mainly going into ethane cracking for ethylene and polyethylene (PE), ethylene oxide (EO) and downstream products like ethanolamines. Glycol is a byproduct so they place that in our hands because we are the expert company for glycol marketing.” Capacity of mono ethylene glycol (MEG), diethylene glycol (DEG) and triethylene glycol (TEG) is growing to 1m tonnes/year over the next two years – the equivalent of 2-2.5 worldscale plants.

[caption id="attachment_1320" align="aligncenter" width="1024"]Looking Sharp at Helm's Helm[/caption]

Capital Discipline has not beena a quality for which the chemical industry has been renowned. The “new Dow” will not build a new cracker in its “Wave 2” of planned expansions, in line with its renewed focus on capital discipline, its CEO said on recently.

“Wave 2 will not have a new cracker. We will be adding capacity at existing sites, including debottlenecking ethylene. For example, in Terneuzen [the Netherlands] and Freeport [Texas, US], we have room to expand,” said Jim Fitterling, CEO of Dow, at a media briefing with ICIS at its investor day in New York.

..Dow also plans silicones, polyurethanes, and ethylene oxide (EO) derivatives investments in the next three years, which could add another $200m-400m in annual EBITDA.

This includes debottnecking in siloxanes over the next 18-24 months, as well as an EO derivatives expansion over the next 24-36 months, said Fitterling.

On its investor day slides, Dow lists upcoming expansions in alkoxylates and glycol ethers, siloxane resin and silicones, polyurethane (PU) systems and Sabine ethylene copolymers.

One major theme for the new Dow was capital discipline. It plans capital expenditures (capex) to be at or below depreciation and amortisation (D&A). Compared to the “Old Dow” from 2014-2016 where annual capex was around $4bn, the new Dow plans annual capex of around $2.8bn comprising incremental growth capex, and maintenance, regulatory and turnaround capex. One can imagine the scene when a "new Dow" VP approaches the board for investment in his pet project....

Actually the investor day slides are very informative and worth a read here: http://s21.q4cdn.com/813101928/files/doc_events/2018/11/07/Dow-Investor-Day-2018-Presentations.pdf

This one captures the essence of the surfactant strategy (event thought it is not labeled as such); “Upgrade Ethyelene and Propylene by investing and higher return, differentiated products”

[caption id="attachment_1323" align="aligncenter" width="1024"]Dow Surfactants Strategy[/caption]

Some Quarterly earnings news: The winner of our US newcomer award at the NY conference last May, Brazilian specialty chemicals producer Oxiteno’s Q3 operating income rose sharply from the same time in 2017, mostly because sales rose faster than costs (yup that’ll do it). The following table summarises Oxiteno’s Q3 performance. Figures are in millions of reais.

Q3 2018

Q3 2017

Change (%)

Operating income

                                   130.6

                                     35.1

272.1

Sales                               1,368.4                               1,030.0

32.9

Costs                               1,037.7                                   824.7

25.8

Gross profit                                   330.7                                   205.3

61.1

Oxiteno’s Q3 earnings before interest, taxes, depreciation and amortisation (EBITDA) was real (R)173m ($46m) compared with R74m in Q3 2017. This was driven by higher exchange rates amid the 25% depreciation in the real against the US dollar and higher unit margins in US dollar terms.The results considered a R7m impairment at Oxiteno Andina on the adverse political and economic scenario at Venezuela. During the quarter, Oxiteno also started up its new US alkoxylation plant in Pasadena, Texas. The plant has a capacity of 170,000 tonnes/year and produces a wide range of nonionic surfactants and specialty alkoxylates.

In November, Oxiteno had the official plant opening event for the new plant in Pasadena. I was unable to be there due to the aforementioned commitment in Singapore. However, ICIS did a nice job reporting on it so let’s see what they have to say: The project marked one of the biggest investments that a Brazilian company has made in the US, It began taking steps to reach this goal more than a decade ago when Oxiteno opened its first commercial office in the US (I remember that ) In 2012, it bought a site in Pasadena that now is home to its new alkoxylation plant. This site also had an existing unit, which Oxiteno refurbished to produce specialty blends for agrochemical producers and amine oxides. This refurbished plant has a nameplate capacity of 30,000 tonnes/year, and it resumed production in 2013. In 2017, it opened a commercial office in Houston.

To further serve customers, Oxitento opened a new R&D laboratory at the University of Southern Mississippi (USM) in the US. The laboratory started in mid-September 2016. This year, after 2.5 years of construction, Oxiteno started up the two reactors at its new plant in Pasadena, Texas. It has a nameplate capacity of 170,000 tonnes/year, and most of its products will be sold in the US. The work still is not over for Oxiteno. The company is still qualifying its products from the refurbished plant for some agrochemical uses, Parolin said. This long qualifying process is preventing Oxiteno from running the refurbished plant at nameplate capacity.

After Solvay’s bulking up, it becomes increasingly difficult to tease out of there, the surfactants business results. However as ICIS reported last month, Solvay’s underlying third-quarter net profit rose 29% year on year to €297m on the back of stronger performance and surface chemicals earnings. Here’s how it looked.

€mQ3 2018Q3 2017Change (%)Sales2,5912,464

5.2

Profit297229

29

EBIT405372

9

As noted by ICIS - Double-digit earnings before interest and taxes (EBIT) growth for advanced formulations operations, covering surfactants and amines, and performance chemicals, encompassing soda ash, peroxides, solvents, basic polymers.

Mid-month, ICIS’s detergent alcohol expert, Judith Taylor, provided her periodic prognosis for the US market. US C12-15 mid-cut fatty alcohol supply is steady and expected to remain so during the fourth quarter. In the US, synthetic alcohols have been routinely sold out for a number of quarters, according to market participants. The synthetic alcohols are again in a sold out position for the fourth quarter 2018, with no discussions heard about spot business. Attention remains on events at the Stanlow refinery in the UK, where an outage remains in place. No comments or details concerning any alcohol production at this facility have emerged, and companies concerned with the facility have not given clarification. ICIS assessed fourth-quarter C12-15 alcohols at a rollover from the third quarter, holding the 80-89 cents/lb ($1,764-1,962/tonne) range, with minor fluctuations at a few accounts. Several large buyers had fourth-quarter volumes slightly lower than the 80 cents/lb low end of the spread, but 80-81 cents/lb was prevalent.

November typically sees the APLA meeting and we got some nuggets reported from there, among which:

Mexico's president elect has consistently stressed the need to boost oil production and energy investment in the country, and this could lead to any number of projects required to increase ethane supplies, the head of Grupo Idesa said. Right now, as we have noted in this blog,Mexico does not produce enough ethane to keep all of its crackers running at full capacity, the consequence of the nation's long decline in oil production. Mexico gets most of its ethane from the associated gas produced at the country's oil wells. For EO, Idesa relies on ethylene from Pemex's crackers, and these have not been running at full capacity because of the shortage in ethane. The country has several options to make more ethane available to its crackers, Uriegas said. Mexico is already receiving waterborne imports of ethane from the US, and the country could increase its capacity to handle more shipments, he said. Pemex could increase production of wet gas, which has large amounts of ethane. Pemex's natural-gas processing plants could be upgraded to extract more ethane. Many of these plants were designed to extract a maximum of 70% of the ethane from raw gas. Uriegas said recovery rates could be increased to at least 90% with more investments. Increasing energy investments in general has been a priority of Mexico's new president, Andres Manuel Lopez Obrador (AMLO), both during his campaign and after his victory. Less than a month after the election, AMLO proposed a multi-billion-dollar plan to increase crude output, rehabilitate all six of Mexico's refineries and build a new one in Tabasco state. More government involvement and investment in the means of production… what could possibly go wrong (Venezuela) ? Well, c'mon , let’s see how it works out (Soviet Union). Perhaps this time it will be different (70's Britain)…..

I’ve been following Vantage for a while now and the are already a solid surfactants player particulary via their specialty alkoxylates business out of the Chicago plant. . ICIS reports that they recnetly agreed to buy LEUNA-Tenside from private-equity firms VR Equitypartner and BIP Investment Partners. Financial terms were not disclosed. However, Moody's Investors Service said that $88m worth of add-ons to existing loans will finance the proposed acquisition and pay for transaction fees and expenses. So let’s say $88M, which honestly seems high to me for EV. LEUNA-Tenside said it was founded in 1995 as part of the management buyout of a business division of the former Leuna Werke. The site is old though. There’s a pretty interesting history here https://www.leuna-tenside.de/historie/?lang=en. If they can integrate it well, this will be a very strong addition to a valuable Vantage surfactants business. If not, more treats in the lucky bag at least.

[caption id="attachment_1324" align="aligncenter" width="683"]Gotta Integrate[/caption]

In recent month, readers have starting sending me their own news, so here we go. First up from Eastman: They announced early November the successful start-up of the methyldiisopropanolamine (MDIPA) unit in Nanjing, China. This is a new product for Eastman that will primarily be sold into the home care industry. In addition, Eastman has decided to expand its alkyl alkanolamine capacity in Nanjing by building a world scale unit primarily to produce Dimethylaminoethanol (DMAE/DMEA) which is used to make intermediates for the water treatment and energy markets. The project is underway and will be finished in the second half of 2020.

Next from the International Council on Clean Transportation (ICCT) comes a brief publication that seems to criticise soybean oil as a biodiesel feedstock while favoring certain sources of palm oil. Coming on the heels of the recent New York Times Aritcle excoirating certain Indonesian palm plantation practices, this ICCT reprot makes interesting reading. I don't know the ICCT. I am familiar with the NYT.

This one was great to read. Inolex announced (finally) that they are getting out of the old Phildelpbia site. The expansion, which is set for completion by the second half of 2019, will replace the company’s current US production and warehouse operations with a new flagship plant in Charlotte, North Carolina.

So – here starts the blog's opinion section: Since the first paragraph, I know you've been thinking about the mothership. This (below), of course, is what comes to mind right? It’s Houston 1976 on the P-Funk Earth Tour. I’m taking you right into the song at 8:22 where Glen Goins sees the mothership coming; whereupon it lands and out comes George Clinton in the persona of Dr. Funkenstein. Could there ever have been a more magnificently over the top moment in the history of live music? I encourage you to rewind and watch the whole 15 minutes.

Here’s what’s interesting to me. Back then I really admired and loved this music. Everything about it, the sound, the album covers, the clothing, the appearances on the telly. But I could never quite bring myself to go to a live show. I was very comfortable and at – home in the 70’s at concerts by Iron Maiden, UFO, Rush, Rainbow et al, but could never quite cross the real or imagined divide to go see what was clearly something of incredible artistic merit, like a Parliament show. It was a road less traveled, by me and my peer group at least. Maybe it should have been more traveled. Ah well, while we didn’t see the mothership, at least we saw the bomber….

Both roads, Motorhead and Parliament, were well traveled, but depending on who your were, one was less traveled. I suspect that there were not many Parliament fans at that Motorhead show in Nottingham we saw above. This idea has relevance for our business and I'll write some more about this idea next month. The road less travelled and the well worn path. Which is better? Which is even appropriate or feasible, for you and your business?  A classic debate within many manufacturers goes something like this: "Why don't we go downtstream into consumer products, you know shampoo and detergents - that's where all the value is captured?" The standard rejoinder is "Yeah but it's harder than it looks. It's whole different ballgame. You need a whole different infrastructure and skill-set. It's all about advertising and your social media strategy. None of use are even on Instagram!" Meanwhile at the consumer goods company the discussion sometimes turns to backward integration. "We need to control our own supply chain. Lower costs, greater flexibility, squeeze the competitors out (oops no - not that, as it would be anti-competitive). The road less traveled is not just a vertical integration one. Why did GE get into insurance? What about Amazon and computer services. Some of the greatest blunders and some of the greatest successes have come from a consideration of the road more or less traveled. At the very moment Croda wanted to ditch those old, capital intensive fatty acid plants, KLK couuld not wait to pick them up. Something to think about.

But back to Parliament. You’re going to love this next video. From that same Houston show, can there be a better named song than “Cosmic Slop”? Ok yeah probably. But take a listen and note carefully the following details: 0.08 – that guitar (Oh man, did Eddy Van Halen ever carve out an opening riff so luscious), 0:20 – that hat, 1:32 – you’ve been so mesmerized by the guitar, rewind and get the bassline, 1:50 – that diaper (diaper? – I’ve no idea, sorry), 4:14 – that guitar and brass section riff, 4:33 – that guitar solo worthy of Richie Blackmore, 5:28 try and ignore the diaper and check out that rhythm section emerging to the foreground.

Anyway, coming around to a conclusion. I cannot promise you that the mothership will land in Jersey City on May 16th. In fact I’ll go one further and set your mind at ease by promising that there will not be a mothership landing reenactment at our conference. I will promise you though, that with the quality and quantity of surfactants information and insight , we will literally tear the roof off the Grand Hyatt.

Surfactants Monthly Review – December 2018

Surfactants Monthly Review – December 2018

Merry Christmas and a Happy New Year to our readers. This blog is one of a two part publication. Below you will find strictly the news from December. No long diversions into cultural or musical history or reminiscences of fondly remembered times. That is all contained in our end of year piece, published separately. Below you will find just the news. So if you only read our blog for the music, you can stop right here and look out for our companion piece, “The Road More Travelled”

First up in personnel notes: Oxiteno named Carlos Brasil the chief operating officer of Mexico, the Andes and the Caribbean, as noted by ICIS. A solid move by Oxiteno. I knew Carlos when he was in procurement at Oxiteno in Brazil. First class manager His promotion comes as Oxiteno has started up a new alkoxylation plant in the US.

EO continues its decline in pricing as ICIS notes that US ethylene oxide contract prices for November fell by 2.7% on the back of a 6.4% decrease in the November contract settlement for feedstock ethylene.mNovember EO contracts were assessed at 52.4-61.9 cents/lb ($1,155-1,365/tonne) FOB (free on board), a decrease of 1.6 cents/lb from October. US November ethylene contracts were assessed at a 2 cent/lb decrease. ICIS goes on to opine that US EO supply is likely long in December as demand into downstream polyethylene terephthalate (PET) and surfactants is soft at this time of year.

[caption id="attachment_1340" align="aligncenter" width="1024"]An Interesting Few Decades[/caption]

Big news in LAB: ADNOC and Cepsa have awarded Spain’s Tecnicas Reunidas the front-end engineering and design (FEED) contract for their linear alkyl benzene (LAB) facility in Ruwais, UAE ICIS reports. The contract, which is the first awarded in the $45bn Ruwais Derivatives Park that was announced in May of this year, is for a 225,000 tonne/year normal paraffins plant and the LAB facility, expected to have a capacity of 150,000 tonnes/year.

“The LAB plant will be a key component of ADNOC’s plans to develop a new, large-scale, manufacturing ecosystem in Ruwais through the creation of the Ruwais Derivatives Park,” said ADNOC refining and petrochemicals business unit manager Abdulla Ateya Al Messabi. Cepsa and ADNOC signed an agreement to develop the LAB plant at the complex in May, following a memorandum of understanding that was signed in November 2017. Cepsa’s head of chemicals Jose Manuel Martinez confirmed to ICIS in November 2017 that the partnership expected to invest approximately $600m in the plant.

[caption id="attachment_1341" align="aligncenter" width="744"]Big LAB[/caption]

Something we only tangentially addressed during the year is the state of the river Rhine in Germany. The UK’s Daily Express referred to a “Christmas Cruise Crisis” but the consequences have been more dire than that. The supply chain for chemicals in Europe depends heavily on the Rhine and other major European rivers.

[caption id="attachment_1342" align="aligncenter" width="590"]A Shallow View[/caption]

At the end of November, BASF closed its toluene di-isocyanate plant in Ludwigshafen due to lack of raw materials. Evonik Industries cut production at all six of its chemical facilities in Germany that depend on shipping via the Rhine. Transport by train or truck could not fully replace the river, the firm said. River levels in Worms, Germany, home of an Evonik plant some 20 km downstream of Ludwigshafen, were down to just 10 cm during November. German newspaper, Handelsblatt noted that 40 percent of deliveries to BASF in Ludwigshafen normally come via water, between five and 10 large freighters a day. Many of these are now unable to deliver. BASF says it has investigated many possible solutions, considering pipelines as well as road and rail transport, but it can only find alternative delivery for around one-third of the missing river-freighted raw materials. To shift entirely to road transport would mean conjuring up 1,600 large trucks every day. Not happening.

The actual data out there is not that comprehensive but the charts below show how the summer of 2018 established a low point of the last 9 years in Rhine river levels

[caption id="attachment_1343" align="aligncenter" width="868"]Lower Than Usual[/caption]

And finally, Clariant, notwithstanding international approbation of the Saudi regime, announced that it would enter into an MOU around alkoxylation with Saudi Kayan. As defined by the MoU, both parties have agreed to evaluate the formation of a joint venture with the aim of establishing a manufacturing facility for alkoxylates. This facility is planned to combine Clariant’s alkoxylates production technology with Saudi Kayan’s raw materials and would therefore be based within Saudi Kayan’s Petrochemical Company complex in Jubail Industrial City, Saudi Arabia.

[caption id="attachment_1345" align="aligncenter" width="660"]Won't be a sec' luv. Just popping in here to file the MOU paperwork..[/caption]

That’s it for a slow news month. Next year, I really do look forward to a great 2019 with a solid series of outstanding surfactants conferences starting with the flagship / mothership event in May in NYC, then Europe in September, India October and Asia November.

By the way, if you would like to apply to be a judge at the 3rd Surfactants Awards, drop me a line. neil [at] neilaburns.com

Have a Surfactants Filled and Merry Christmas

[caption id="attachment_1346" align="aligncenter" width="1024"]Never lose their appeal[/caption]

All the best,

Neil

2018 – End of Year Review

Year End Review – 2018

The Road More or Less Traveled

If you are looking for the December Surfactants Review, this is not it. Follow this link. Here we have my year end musings. You won't learn much if anything about surfactants but you will enjoy some good music and maybe learn some things you did not know about P&G and the world of advertising.

Aah yes, the road less traveled. It’s definitely the way to go for the original thinker, the leader, the visionary. All great business and personal accomplishment has been found down that less traveled road, bravely trodden with fortitude and determination. True? I’m not sure about that. In fact I tend not to believe it without overwhelming evidence. I remember telling one of my protégés early on when discussing a rather unusual career aspiration that “There’s a good reason that particular road is less traveled”. As a sometime hiker and skier I can tell you there’s usually a great reason why certain routes are less traveled. There’s obviously a reason behind every road’s degree of travel and it’s probably worth thinking about those reasons first before making a commitment.

It was a 1916 poem by Robert Frost that got this whole “road less traveled” malarkey started. Here’s a great animated reading that appeared in the Atlantic Magazine.

Look, Frost himself warned against misinterpretation of the poem. The roads mentioned are really “about the same” and the whole poem was meant as a gentle tease for an indecisive friend of Frost’s. Unfortunately for the last 100 years, countless pop-psychologists and graduation speakers have used it to mislead hapless youths into thinking that the unusual and unconventional choice is the always the right one. Baloney, in my humble view. It’s usually the wrong one and that’s assuming you have the perspicacity to figure which road is in fact the more or less traveled one. I would say that if you are going to take the road less traveled, there’d better be a really really good and clear reason. And sometimes there is.

In our 2017 end of year review, we gave some substantial attention to P&G. They had rough year, ultimately (and wisely I think) acceding to activist investor, Nelson Peltz’s demands for a seat on their board. It was a great story, chock full of logic, analysis, strategy, emotion and personality , as all good business tales are. And it’s not over of course. Success is not final. Failure is not fatal (as WC said) so I wanted to continue where we left off and see what else we can learn, in 2018, from one of the largest users of surfactants in the world.

P&G had a rough start to 2018  as moronic teenagers voluntarily ate and even huffed their Tide Pods https://www.wsj.com/articles/p-g-grapples-with-how-to-stop-a-tide-pods-meme-1516449600. I am not putting any youtube clips here, because they are dumb. Suffice to say that Darwin is proven right on a daily basis on that platform it seems.

In April, however, P&G blew my mind with a new media buying model. That sounds boring but it is much much more than what it seems. P&G actually formed (or should I say “sponsored the formation of” ) a new ad agency comprising employees of at least 3 competitive ad agencies – all working together physically, in a couple of office locations (New York and Cincinnati), working on their sole client, P&G’s account. The 3 competing agencies are Saatchi & Saatchi, Grey and Marina Maher. I don’t know the other two but Saatchi’s work is legendary in a love ‘em or hate ‘em kind of way. Here’s one I love from 1992:

So anyway, P&G says – “OK we are going to pick the best of the bunch and have you guys all work together to meet our advertising needs”. Cool right? But it goes much deeper than that and here’s where I think the real genius comes in. According to a Wall Street Journal article, which I now quote but the italics are my thoughts, the “…new agency model is expected to reduce the number of people working on P&G’s marketing efforts, strip away excess resources and ultimately save the company money” yeah, yeah right… but keep reading. “Currently, around 50% of P&G’s appointed (i.e regular) [ad] agency staffers are creative, while the remainder are account managers, planners, production talent and media buyers, among others (that is non-productive overhead). [P&G] wants to increase the percentage of creative roles on P&G accounts, while reducing the (martini quaffing) others.” That’s it right there! Does this interest and excite you as much as it does me? I love this for so many reasons. Here’s a couple of the key ones. First I have spent the past 7 years teaching the Surfactants Business Essentials course and often I have spent the better part of an hour with the class (and eating into their lunch-time) talking about my GM (Gross Margin %) vs SG&A (Selling, General & Administrative Cost %) chart in which we plot the financial results of a company’s business units on a GM (y axis) vs SG&A (x axis ) matrix and think about the distribution and then also think about what to do when the market makes GM change. I don’t really want to go into the whole thing here (you gotta be there, remember!) , but here’s the point. We always start with the big circle in the bottom left hand sector of the chart. That is a large revenue business with low GM (Gross Margin) and low SG&A costs. That is your LAS business with P&G. They want the product, in spec and on time and .. er… that’s it. They don’t need to be wined and dined. They don’t need tech service or formulations help (“here let me show you, P&G, how to uses this LAS in your products” – Nah we’re good. We got it from here.!). They don’t need regulatory help, handling advice, nothing. They just need the product, in spec, on time, thank you very much. Oh and cheap!; natch. We make this stuff too you know, so er don’t go charging too much. So…. As with raw materials (above the GM line) costs, so with the, much greater, SG&A (below the line) costs

Clearly P&G management has been listening to the Tom Tom Club – no? As above. So below.

Or maybe they realized just how much of their agency spend has been going directly to purchases of gin (ok and olives but still..)

Or have they taken inspiration from closer to home? Because this is kinda like P&G Chemicals right? Except the employees aren’t even part of P&G. Sorry if you guys are totally on board with this already, but I had no idea. I’ve just read it and, to me, it is an incredible breakthrough. P&G just synthesized an “in-house” ad agency from existing external parts, with a cost structure properly aligned to the needs of its business. Wow! But keep thinking. If you are a surfactant manufacturer, your mind is now churning so fast because if this works for ad agencies (IF – I said IF - It’s too early to know yet, but IF..) then why not raw materials? Forget anti-trust and all that for the moment. If P&G likes the anionics of Stepan and the amphoterics of Evonik and the cationics of Akzo and the nonionics of Shell but really wishes they would all be more like P&G Chemicals (their first love and favourite supplier), then why not? Why not put them all together like the newly created ad agency – and create essentially an outsourced P&G Chemicals Doppelganger? Yeah I know, physical assets complicates it, but think about it. Why not? I can assure you of this; if I am realizing and writing about it now, someone at P&G is already seriously working on it. (I have no specific knowledge; just speculating). With P&G Chemicals, they are already half way there, they just need more suppliers like that and that is hard to achieve without this sort of collaboration approach.

One of the effects of my mixing and mingling with the venture capital community (apart from learning to use the ABE financial metric (Anything but EBITDA)) is that you also learn their conversation patterns. One of their favourite questions of their investees is “Why do you even exist”. Actually they don’t say “even”. That’s implied. Also the question refers to your company, not you personally, although on the first couple of outings the green young entrepreneur’s instinct is to mumble something about their mam and dad, love and the back seat of an Oldsmobile.

Anyway, coming back to P&G. Such things (like the answer to the “why do you exist?” question) there are not left to chance. One can imagine the eager young, tousle-haired, first-year recruits at P&G Chemicals being drilled in their “chemicals catechism”.

Who made you?

P&G made me.

Why did P&G make you?

To know her, love her and serve her in this world and to be happy with her forever in the next.

 [Sorry if I offended anyone with this warped time-machine trip back to 2nd grade at St. Bernard of the Saponification's Catholic Academy, and I know I am stretching an analogy way too far, but you have to admit, it’s pretty darn accurate!]

It is clear then, that P&G Chemicals has a really outstanding “reason to exist” as far as P&G is concerned. But what about those other suppliers? How does their catechism read? Don’t know; let’s take a look. Stepan’ s corporate materials contain their mission and vision. One statement that I like I lot is entitled “Why Stepan?” and reads “Stepan Company prides itself on ethical chemical manufacturing, excellent customer service and dedication to our craft.” I like that a lot and that last piece about dedication to their craft really sums them up. When you buy from Stepan you get that whole package and there is no doubt they are continually refining and improving what they do – to the benefit of their customers. But there’s nothing about P&G in there!? OK how about Evonik? They have a very interesting piece on their website called “The Creative Power of Specialty Chemicals”, which I also like. In there, they state with typical Teutonic precision that “More than 36,000 employees are bound by a claim: No product is so perfect that it couldn’t be made better.” Nice. I could definitely get behind that assertion if I was a Voniker. But again, what’s in it for P&G, specifically? I could, and may, go on, but you get the picture. When it comes to suppliers, P&G certainly must and does play the field but as Joey Ramone croons in this 1979 tribute to his first girlfriend, P&G just wants their Chemicals group around.

So the road has been more traveled, I think. P&G has had its own chemicals supplier for almost 200 years (182 this year) and now they want to have their own ad agency but with a buzzy-wordy and really-actually-very-ballsy-asset-light-outsourced approach. So can this new approach now be turned back to chemicals.? Can P&G pull together its favorite bits of its favorite (non P&G Chemicals) suppliers and say basically “here you guys get together and bring us the best of your respective strengths – oh and er.. leave behind all that overhead that we never use anyway”. Maybe P&G Chemicals is the cornerstone around which this new edifice is built? Look, in a sense, it is already happening that way. On their website, the section “What makes P&G Chemicals unique in the industry?” has a laundry list (pun intended) of things which seems as much directed to suppliers as to customers. These include, in part: “We work to give extreme supply assurance to P&G” (yeah well, who made you?) but also then “Our link with P&G serves as a unique point of access for suppliers to build their business and create joint value.” And also “We optimize our supply network by linking with others to leverage mutual strengths and capabilities.” So there you have it. Can it be long before a loft in SoHo, a WeWork in Venice or a Beach House in Spring Lake hum to a mellifluous mélange of Dutch , German and American accents as previous competitors collaborate to bring their best to P&G with an, if necessary, completely inverted, cost structure?   Yes, amateur-lawyer, I know, anti-trust, intellectual property and all that. But look, if P&G can do it with the once gin-soaked, now tattooed, pierced and THC-marinated ad agency crowd, chemicals should be a breeze no? This road really has been more traveled.

By the way, if you’ll permit me a diversion (from the already existing diversion above) into today’s world of advertising, I have this true story for you. A young lady of my close acquaintance works for a modern boutique advertising agency. This is a woman-owned, millennial run, SoCal domiciled progressive agency. I mean this company ticks PC boxes that you didn't even know existed- so you have the picture right? Along comes a big prospective client which is a well known brand of Scotch. The agency puts together a team to pitch the heck out of this client. It's a huge fish to land. And, of course, the creative pitch team is all men, because, you know, dudes like whisky. And chicks, well, they drink like cosmos and stuff right? These are roads well-travelled no? Believe me, when money and stereotypes collide, principles go out the window, apparently.

[caption id="attachment_1352" align="aligncenter" width="618"](Only) Real Men Drink Whisky[/caption]

Anyway a week passes. The team is struggling and the big (female) boss wanders by our young lady protagonist’s desk and nonchalantly asks if she would mind helping polish / refine some of the Scotch creative team’s ideas. Our young lady takes a look and of course it’s all garbage. She rewrites a whole set of new concepts and copy in a day or two and the client now loves it. Maybe this could have been foreseen. I suspect the darkest drink most of these blokes had ever consumed was the hippest hoppiest coffee/cumquat/cannabinoid mirobrewed ale from the people’s brewery collective down the street. Which roads, more or less traveled, could our progressive ad agency have followed.? First, the one they followed, let’s call it the Stereotype (only dudes like Scotch) road, wasn't appropriate. They could also have gone the opposite route and picked a team that checked every real or imagined demographic box, regardless of ability or aptitude. No reason to believe that would have worked any better. The third route, which they eventually took was based on talent regardless of boxes or stereotypes, and seems to have worked out just fine. The best people for the job. A road worth traveling. A lot.

Not that complicated

We’re not done yet with P&G. Again from the WSJ: In May, the company decided to go open-kimono [my words] with customers and let them know what all is inside their products. Via a partnership with Smart Label, the company is disclosing ingredients in most of its over 3,500 products. An interview with Kathy Fish, Chief R&D and Innovation Officer, goes into some of the reasons. She notes that they will eventually get into disclosing all the ingredients in the fragrances (up to 100) as well as the main product. It’s worth a read, although you may need a WSJ subscription. The conversation moves quickly into the subject of natural raw materials and consumer preferences for such. Fish makes a lot of good points about ingredient provenance and safety, but maybe misses an opportunity to emphasize the company’s natural history going back to 1837. They were built on soap and glycerine for gosh-sakes. What could be more natural than that? In any case, I am in two minds about ingredient disclosure on this scale. I agree that it is inevitable but the risks for P&G are much larger than for a garage based startup. It takes one mis-step or oddly named ingredient to set the internet on fire. If you are going open kimono then you better look good in your undies (or indeed whatever is traditionally worn, or not, under a kimono). Enough said. I trust P&G to have thought of this.

[caption id="attachment_1353" align="aligncenter" width="1024"]It matters what’s underneath[/caption]

In November, P&G finally adopted Nelson Peltz of Trian’s plan to reorganize and get rid of the sales presidents. https://www.wsj.com/articles/p-g-moves-to-streamline-its-structure-1541713822. After Peltz excoriated P&G, its management and board, many by name, in a white paper (Download the Trian white paper here.), the company seemed to adopt many of his proposals. The various sales and other presidents, so odious to Peltz were restructured or downgraded in a streamlining of the company structure. The number of business units will reduce from 10 to 6, each headed by a CEO. 4 of the unit presidents will now report to the CEO and 2 sales presidents will have their roles reduced, according to the WSJ. I must admit the more I look into P&G the more there is to admire, but even so, the plethora of presidents seemed a bit much and Peltz had a good point there. I much prefer the lean and hungry look (as WS said) of P&G Chemicals as a kick-ass, get-it-done model. Perhaps P&G parent can learn a bit from the daugher in this regard. In any case, some kings were killed (metaphorically) and Peltz is placated. For now.

Rainbow on a Road more or less traveled? Too easy.

Right.. so. Here’s what got me thinking about this whole road less traveled business. Some early folks who dashed headlong down the road less traveled and into history were the shepherds who were present at the nativity. They had one job. Stay in the fields until the sun came up and instead they raced off into town after the craziest of rumours. But they had a clear signpost. In fact I would assert an irresistible message that told them in fact, yeah – this is the way to go guys. They had 3 good reasons. They had a brilliant star, an angel choir and a trumpeter, as so beautifully intoned by the Canadian Brass in this short song.

Listen to that trumpet solo for the first 50 seconds. Not exactly “Christmassy” is it? No snowbells jingling or dinglingalingaling? In fact it’s rather plaintive and melancholy. It could almost be a foreshadowing of the fate that was to meet the baby in the manger in a little over 3 decades. This solo reminds me a lot of the The Lark Ascending by Ralph Vaugh Williams. Check out the first couple of minutes of this performance by Hilary Hahn.

Wow right? Red meat for the classical music carnivore. Focus on Hahn though. Yes, I know she’s other-world beautiful, but it’s more than that . Her face is virtually expressionless during the whole 15 minutes. No histrionics, no drama. All I see there is focus and, maybe I’m over-interpreting, but a desire to perfect her craft (like Stepan above). She still wants to improve. I like that. She must have played this hundreds (thousands?) of times, but it still seems like she’s finding new ways to be better. It’s a road more traveled for sure. She’s practiced for thousands of hours. But then she’s still pushing for new levels of achievement – some less traveled ways at the same time.

Lest you think I’ve gone all highbrow on you, here’s something brought to my attention by friend of the blog and regular speaker at my conferences, Mike Fevola VP R&D at Inolex. I had never heard of the band Clutch, one of Mike’s favorites, so I gave them a listen. I think you’ll agree they are following a road more travelled but in a very intense way. Hard rock. Craft being constantly perfected. This short song is a teaser. Not a groundbreaking riff (smoke on the water-ish?) but one you wish was about 10 minutes longer, I bet.

After sleeping on it; do you think Clutch may have listened to some BÖC along the way? Cities on Flame (with Rock and Roll )

OK let’s listen to some Rush now because that is what we tend to after a while on the blog. This next 3 minute clip features a certain slice of the Rush fan-base expressing an emotion that I think is a sort of pure distilled vindication. We started off 40 - 50 years ago down a path that we thought was less traveled. It really wasn’t that untrodden a route that we may have thought back then and I’ll explain why below; but it was less popular and it was certainly 100% less fashionable or hip than some other paths. So now let’s listen in as Rush are introduced as inductees into the Rock and Roll Hall of Fame. After a roll call of pop and rock icons, including even Donna Summer, at about 1:30, decades worth of emotion spills over.

The look on Geddy Lee’s wife’s face is one of incredulity and astonishment. I have to chuckle; when your own family finally realizes you did something pretty cool. But back to our essential question. Did Rush and their fans go down the road less traveled? To some extent, yes, but not as “less traveled” as we thought. Let’s go back 44 years to a concert in Los Angeles, 1975. Rush is playing “Finding My Way” from their first album [Band Clothing Warning – be ready]

A solid rock song, performed with energy and precision. Not groundbreaking. Not original. But loaded with commercial promise. Following this album, however, the group entered a commercial desert but a creative rainforest. Some of their greatest work was done during this period but to near universal critical condemnation and anemic sales. Then in 1976, 2112 altered the course. The album was a creative and commercial triumph. After this, the record company “left them alone” to make the music they wanted. The cognoscenti still looked down their noses at Rush, but the band flourished for 40 more years. Let’s treat ourselves and listen to the title track of 2112 performed live in Toronto.

Now I know for some of you, this music is headache inducing and you have turned it off after a minute. It’s personal taste, I know. So just believe me when I say that, to a teenager in 1976, music was not supposed to sound like this. 2112 was something simply not thought possible. Heavy. Progressive. Rock. Flawlessly executed. But was the road less traveled? Not so much, and that’s OK. Others had been down the road and provided some guideposts for our three young lads from Toronto. Let’s hear it in their own words as they introduce their heroes and mentors on the same Cleveland hall of fame stage.

Wait what? Yes inspired Rush? More than that. They showed Rush what music could sound like. They shone a searchlight down the path and said – hey guys, this is the way to go! Their own version of the brilliant star, the angel choir and the trumpeter. Alex and Geddy got their 10,000 hours in listening to and imitating Steve Howe and Chris Squire. That’s how dreams are realized. And honestly, many other musicians had also gone down that road, ELP, Genesis, King Crimson, The Nice etc.

Not convinced? Put your feet up and listen to these next two songs back to back. The incredible Close to the Edge (stick with it for the first 4 minutes if you don’t have time for the whole thing) followed by La Villa Strangiato (listen to it all please).

So, now you have that Yes song in mind. Go straight to La Villa, live in 1979, and see what you think. Especially about the most beautifully restrained guitar solo at 3:52.

You’re with me I hope? If not, then I hope you’re at least enjoying the music. For purely gratuitous reasons now, I am going to wind up with some selections from the aforementioned set of other musicians that, in my view, at least helped flatten the path for Rush’s transition from heavy rock band to, well, Rush.

If you are jazz fan, you might like this from ELP:

Then there’s this. Aah Steve Hackett; was there ever a guitarist as under-rated (5:46) ?

A chill piece from King Crimson.

And this from Nice. Classical? Jazz? Beautiful!

So wrapping it up in one easy message. Don’t be seduced by pop-culture aphorisms about the road less travelled. We’re sitting on several thousand years worth of human knowledge and experience, so maybe check that out first.

That’s it. I’m out of time and inspiration. Stop by one of our events in the coming year and we can continue the conversation if you like.

Neil

Surfactants Monthly – January 2019

Surfactants Monthly Review – January 2019

Can I ask you a favor before you read any further. Take a look at our surfactants value chain survey and fill it out. This year, we have some new questions and many old ones (so we get the same great time series data).

Survey Link: https://www.surveymonkey.co.uk/r/NDDLM2R

One more favor: Think about and nominate some companies or people for our 2019 Surfactants Awards. The winners and finalists will be recognized at a really great, inspiring and incredibly well attended, reception at the Jersey City Grand Hyatt at the end of the first day of our conference on May 16th.

Link: https://www.icisevents.com/ehome/worldsurfactants/awards/

By the way, readers of the blog can save, I am told, $300 off the registration fee for the conference, if you enter this code WSC19NBblog when you register here: https://www.icisevents.com/ereg/newreg.php?eventid=200178918

[caption id="attachment_1369" align="aligncenter" width="1024"]That $300 is a decent night out after the conference.[/caption]

End of commercials. Beginning of blog. Last month saw the (real) ACI meeting in Orlando. Outstanding. Record recent attendance and a thoroughly good time. Thanks to the staff and volunteers. It’s a great way to start the year. And we humbly offer to take you through the rest of year with our events in Jersey City, Europe, India and Singapore. For highlights of the ACI and insights into what happened, please join and attend the next meeting in Orlando January 27 – February 1, 2020. Because (all together now..) “you gotta be there!"

As I often note, most of the news here comes courtesy of ICIS and some from other publicly available sources. I will inevitably insert my own opinions and comments and when I do so, will put then in [these type of brackets]. Sometimes I forget, but it still should be pretty obvious. Poor jokes, expressions of surprise or mirth, unusual photographs and, of course, music videos are not in the ICIS style manual.

Perhaps unsurprisingly, the year started with reports by ICIS of a slowdown in the Chinese chemical industry. Of the 62 chemical products whose trades in China were tracked by ICIS, 28 registered year-on-year decrease in volume as per China Customs’ data, compared with 21 commodities in October. Surfactant related products, however painted a mainly bright picture, for Chinese producers and consumers, as illustrated below.

ProductImport (tonnes)YoY growth (%)Export (tonnes)YoY growth (%)Alkylbenzene1,148-49%25,943112%Anionic surfactants7,05617%20,53653%Non-ionic surfactants16,081N/A10,416N/A

INEOS continued its expansion into surfactants with the completion of its previously announced acquisition of the Wilmar ethoxylation plant in Lavera, France. INEO expects to reach an annual ethylene oxide production capacity of 270,000 tonnes/year at Lavera. As a result, INEOS Oxide now operates alkoxylation assets on three integrated INEOS sites. As part of the transaction, in support of Wilmar’s strategic goals, INEOS and Wilmar have entered into a toll manufacturing agreement to supply ethoxylation capacity to Wilmar from across the INEOS network. The acquisition includes production infrastructure and employees at the site, but Wilmar's commercial portfolio is not included in the deal and will remain with the company. No details announced on the financials of the deal.

[caption id="attachment_1370" align="aligncenter" width="1024"]INEOS Flying High[/caption]

Back in the USA, ethylene oxide (EO) contract prices for December settled flat on the back of a rollover in the December contract settlement for feedstock ethylene. December EO contracts were assessed on early January at 52.4-61.9 cents/lb ($1,155-1,365/tonne) FOB. According to ICIS US EO supply is likely to be healthy this month as production is normal and demand into downstream polyethylene terephthalate (PET) and surfactants is soft on seasonality.

The immensely talented (as I’ve said before) Kheng Wee Loy noted that Fatty alcohol ethoxylates (FAE) import markets in Asia could gain steam on some upstream rebounds and steady demand in the first quarter of 2019. The expected start-up of a new plant in China could, however, temper trading sentiment slightly. Regional prices for FAE have been mainly on a downtrend for the past year, tracing the spot volatility in feedstock markets to reach all-year lows. For the week ended 2 January, import prices for FAE-7,9 were assessed steady at $1,340/tonne CIF (cost, insurance & freight) China on average, having slumped by 24.3% from the start of 2018, according to ICIS data. Likewise in southeast Asia, drummed spot prices were at $1,435/tonne CIF SE (southeast) Asia on average, reflecting a 20.3% drop over the same period, ICIS data indicated.

Upstream fluctuations would remain as key concerns for market participants. The co-feedstocks required for FAE production are ethylene oxide (EO) and C12-14 fatty alcohols. Recent uplifts in these two sectors could point to some upward pressure for FAE values in the short term, some players said. Weekly prices for C12-14 fatty alcohols appeared to halt its downtrend in the second half of December 2018 and hiked up by $50/tonne, amid a sharp increase in feedstock palm oil prices and limited supply. Palm kernel oil (PKO) price movements may remain erratic in the near future. Regional PKO in south Malaysia were transacted higher in the $760s/tonne DEL (delivered) on 31 December, according to data collected by ICIS.

Speaking of alcohols, sad news from the UK. Shell’s synthetic fatty alcohol unit at Stanlow in the UK will be decommissioned following a fire in its higher olefins plant last year. The fatty alcohols unit has been under force majeure since the third quarter of 2018 following a fire at the olefins plant in August. Shell’s synthetic alcohols use ethylene as a feedstock. The force majeure was expected to be lifted by the end of 2019, but a spokesperson said that the company has now decided to decommission the unit instead. The spokesperson said: “Following the fire at Shell’s Higher Olefins Plant (SHOP) in August, the operator Essar and Shell considered repair options.  Shell concluded that it is unfortunately not economical to rebuild SHOP. “Though the Alcohol units were not damaged during the fire, it is simply not viable to run the units without feedstock from SHOP.  As a result, the Alcohol units at Stanlow will be decommissioned.”

Inl other, happierm, news from Shell and another hydrophobe: Shell has started production of the fourth alpha olefins unit at its Geismar, Louisiana, chemical manufacturing site. The new unit started production in December and will increase the annual output of the Geismar plant by 425,000 tonne to 1.3 million tonnes. Alpha olefins are used in a wide range of everyday products including motor oils and surfactants.

[caption id="attachment_1371" align="aligncenter" width="750"]Better News from Shell[/caption]

Ethylene import prices for Asia freshly rebounded to around $925/tonne CFR (cost & freight) NE (northeast) Asia in mid-December, after nosediving within the fourth quarter to touch a multi-year low, ICIS data showed. Downstream, domestic EO values in China declined to yuan (CNY) 8,500/tonne EXWH (ex-warehouse), the lowest since July 2016, based on data compiled by ICIS on 2 January. Regional availability is projected to be slightly mixed. Certain manufacturers would likely choose to allocate more volumes for their local markets to reap higher margins or produce on a make-to-order basis.

Separately, a new 150,000 tonne/year alkoxylation facility, managed by Sasol Limited, is slated to start operations in 2019. [This is not small right?] The unit is located in China’s Jiangsu province. It may take time for the product volumes to emerge and then for participants to gain clarity and respond accordingly, some market participants said [yes, well I said it's not small - but good for Sasol. You gotta keep investing in your core business].

[caption id="attachment_1372" align="aligncenter" width="1024"]Yep, it's big and we love it![/caption]

Meanwhile back in Europe, Sasol lifted its force majeure on ethylene oxide (EO) and EO derivatives such as EO based surfactants, ethanolamines and ethylene glycols in the second half of December, according to company correspondence seen by ICIS on 7 January. The FM was lifted on these products with immediate effect, according to company correspondence to customers dated 21 December. Sasol Performance Chemicals GmbH declared force majeure on 24 October on EO and derivatives on behalf of its affiliates in Sasol Italy Spa and Sloveca Sasol Slovakia on 24 October, because of production cuts, caused by upstream ethylene supply constraints. The latter was understood to be linked to low river Rhine water levels at that time, which have since improved. The plant involved was in Marl iwht a capacity of 215,000 MT/yr of EO and 450,000 MT/yr of ethanolamines.

ICIS’s talented and respected fatty alcohol expert, Judith Taylor, wrote a comprehensive outlook at the beginning of the year. We will excerpt some pieces here: Judith notes that the US C12-15 mid-cut fatty alcohols are entering the New Year of 2019 with mixed perspectives on both prices and supply in the first quarter.US fatty alcohol buyers and sellers are in the midst of first-quarter 2019 contract negotiations, with freshly emerging offers and some settlements taking place at mid-December. Offers and early settlements for the mid-cut alcohols are emerging at lower-than-expected levels, driven by uncertainty in the feedstock sector and mixed viewpoints within the market about supply conditions going into the New Year. Market participants said mid-cut price negotiations are edging down in spite of some expectations that the first-quarter prices could move up.

Underpinning this trend toward potentially moderated first-quarter mid-cut prices are fluctuations and uncertainties in feedstock palm kernel oil (PKO) and coconut oil (CNO). US buyers say there are significantly higher inventories of crude palm oil (CPO) and PKO than anticipated in the Asian markets, particularly in Malaysia. This factor plus ready supply of natural mid-cut shipments into the US market has eased US buyers’ tensions about sufficient requirements for the first quarter.

Synthetic alcohols remain in tight supply on the mid-cuts and likely to remain in this condition throughout the first quarter, mirroring several previous quarters.

Contract levels on the synthetics often lodge about the middle of the C12-15 assessment. The assessment takes natural and synthetic prices and trends into account. It can happen that natural alcohol supply and feedstock fundamentals lean one direction and the synthetics in the opposite direction because the feedstocks and production methods are significantly different.

By January 11th, US C12-15 mid-cut fatty alcohol Q1 contracts were assessed down, noted Judith, on ample supply in natural alcohols and up/down feedstock prices. The Q1 mid-cut fatty alcohol contract range was assessed at 71-79 cents/lb ($1,565-1,742/tonne), bulk delivered basis, shedding 9 cents/lb from the low end of the Q4 range and 10 cents/lb from the high end. Natural alcohol common low-end prices were at 70-71 cents/lb, but there were several contracts settled below the 70 cents/lb mark – bulk delivered - confirmed by buyers and sellers. Buyers and sellers said the up/down fluctuations on feedstock palm kernel oil (PKO) prices during the latter half of the fourth quarter discouraged purchases. Additionally, the US market was not affected by any fatty alcohol supply curtailment in the Asian natural alcohols. US buyers were confident in obtaining requirements for the first quarter. Synthetic alcohols are tight in the US market. This factor upheld both the low and high ends of the C12-15 first quarter assessment for the US alcohols.

Some upbeat news from a newly invigorated MFG Chemicals: US based, MFG aims to boost sales of its core dioctyl sulfosuccinate (DOSS) specialty products and custom formulations with its upgraded facility in Pasadena, Texas, US. “We are targeting four key areas for growth – coatings, surfactants, water treatment and oilfield chemicals,” said Keith Arnold, CEO of MFG Chemical, in an interview with ICIS. “For 2019, we expect double-digit volume growth in the 100-150m lb range,” he added. The Dalton, Georgia-based company is in the process of making improvements and debottlenecking units at the site, along with adding new capacity, by the end of the first quarter of 2019. It is adding two new reactors, one of which will be 20,000 gallons (gal) in size. The company currently has eight reactors at the Pasadena site totaling 55,100 gal, with capacities ranging from 2,800 gal to 20,000 gal. MFG picked up the 24.5-acre Pasadena plant in March 2018 through its acquisition of Houston, Texas-based Gulf Bayport Chemicals, making it one of the largest buyers of molten maleic anhydride (MA) in the US, according to the company. Its other three plants are located in Dalton, Georgia.

In North America, major MA producers include Ashland, Huntsman, LANXESS, Bartek along with INEOS Enterprises, which acquired the MA business of Flint Hills Resources in December 2018. Along with DOSS, MFG Chemical produces other MA derivatives, including octenyl succinic anhydride (OSA) and dodecenly succinic anhydride (DDSA) formulations through batch manufacturing. OSA is used as a food thickener, while DDSA goes into coatings and water treatment applications. With its specialty chemicals which include amides, esters, imidazolines, water soluble polymers, rheology modifiers, specialty anhydrides and DOSS formulations, MFG serves other end markets such as agriculture, lubricants, mining, personal care, and pulp and paper. DOSS itself has a wide range of applications, including clear coats for inks, mining surfactants, dispersants for agricultural formulations, stool softeners, and scale control and corrosion inhibition in water treatment processes.

MFG Chemical is owned by private equity firm Platte River Equity which acquired it in June 2017. Platte River’s support for MFG’s growth plan gives it bandwidth for further acquisitions.

[caption id="attachment_1373" align="aligncenter" width="1024"]We're back[/caption]

What else can we talk about? As always at the beginning of the year, ICIS publishes a bunch of “Outlook” articles for 2019. I’ll excerpt snippets from a few of them here.

The ethylene tidal wave: Some of the last plants of the first wave of new US projects should start up in 2019, closing out a spurt that started in 2017. The following table shows the integrated derivative projects that are expected to start up in 2019.

CompanyEthylene capacity (kt/year)Downstream (kt/year)LocationStart-UpFormosa Plastics1,200HDPE (400), LDPE (400), EG (800)Point Comfort, TexasH1 2019Sasol1,500LLDPE (470), LDPE (420), EO/EG (300), ethoxylates, detergent alcohols (300)Lake Charles, LouisianaQ1 2019, LLDPE Dec 2018, LDPE 2019, alcohols H2 2019Shintech500VCM (300), PVC (300), caustic soda (200)Plaquemine, LouisianaQ1 2019Westlake/Lotte1,000MEG (760) by Lotte, feed into existing PVC for WestlakeSt Charles, LouisianaH1 2019

The following table shows other projects that should start up in 2019.

CompanyCapacity (kt/year)ProductLocationStartupDow Chemical91Ethylene ExpansionOrange, TexasEarly 2019Dow Chemical500Ethylene ExpansionFreeport, TexasEnd 2019LyondellBasell500HDPELa Porte, TexasMid-2019ExxonMobil Chemical650PEBeaumont, Texas2019MEGlobal750MEGFreeport2019DowDuPont350LDPEPlaquemine, LouisianaQ1 2019DowDuPont200EPDMPlaquemine, LouisianaQ1 2019

[caption id="attachment_1374" align="aligncenter" width="640"]It's a (generally) good wave though[/caption]

In addition to starting up new plants, companies could announce final investment decisions (FIDs) on pending projects. Companies are by no means done building new plants in the US, and subsequent waves should continue in the next decade. The size of these next waves will depend on the outlook for economic growth and on the spread between ethane and naphtha prices. Higher oil prices should widen that spread, and that should encourage more projects in the US. Higher oil prices will also encourage US exploration and production (E&P) companies to drill more wells, which should increase production of both crude and natural-gas liquids via associated gas. Lower oil prices would lessen the spread and discourage new projects.n In addition to costs, demand for petrochemicals also has to warrant new capacity. Petrochemical demand typically changes at multiples of GDP, and several signs indicate that GDP growth could slow.

[caption id="attachment_1375" align="aligncenter" width="770"]The cure for high prices..[/caption]

Clearly, ethane remains strategically important to the US economy and chemicals industry. This next piece, therefore caught my eye. A December report on ethane from the US Department of Energy. : U.S. Department of Energy (DOE) published a Report to Congress:  Ethane Storage and Distribution Hub in the United States.  The report highlights the potential in Appalachia for the development of a new ethane hub based on the tremendous low-cost resource from the Marcellus and Utica shales, and the accompanying security and reliability benefits derived from geographic diversity in the nation’s petrochemicals manufacturing base.

“There is an incredible opportunity to establish an ethane storage and distribution hub in the Appalachian region and build a robust petrochemical industry in Appalachia,” said U.S. Secretary of Energy Rick Perry at the annual National Petroleum Council Meeting in Washington D.C. “As our report shows, there is sufficient global need, and enough regional resources, to help the U.S. gain a significant share of the global petrochemical market. The Trump Administration would also support an Appalachia hub to strengthen our energy and manufacturing security by increasing our geographic production diversity.”

The United States is now the top producer of oil and natural gas in the world, with an additional benefit in the form of increased natural gas liquids (NGLs), including ethane. Some NGLs are burned for space heating and cooking while others are blended into vehicle fuel.  Ethane is particularly useful as a feedstock for petrochemical manufacturing.  Ethane production in the Appalachian basin is projected to continue its rapid growth through 2025 to a total of 640,000 barrels per day, more than 20 times greater than just 5 years ago [Wow]. The Appalachian region has experienced near-exponential growth in natural gas production, and that production is expected to increase for decades to come. The region is home to the Marcellus and Utica shale formations, and were it an independent country, Appalachia would be the third-largest natural gas producer in the worl [Wow again].

According to the Energy Information Administration, production in Ohio, Pennsylvania, and West Virginia has increased so rapidly that their combined share of total U.S. natural gas production has jumped from only 2% in 2008 to 27% in 2017 [Wow, wow, wow!]. In addition, natural gas liquids (NGLs) processing and fractionating capacity in Appalachia has grown quickly to match this increase in natural gas production.  However, the Appalachian region currently lacks other physical infrastructure for a “hub” that connect supply and demand sources, including storage for the liquids.

This Report to Congress examines the potential for a hub by comparing it to existing ones that already service the Gulf Coast and Permian Basin, which account for most of the U.S. growth in NGLs outside of Appalachia.  In addition, market analysis from the report emphasizes that the development of an Appalachian hub may offer a competitive advantage for the U.S. to gain global petrochemical market share while not being in conflict with Gulf Coast expansion.  The report explains that a new Appalachian hub would enhance the geographic diversity of the vital US petrochemical industrial sector, supporting U.S. economic security. The full report can be found HERE.

[So look; regarding the above story. God Bless America right? I mean this not as some chest-beating cry of nationalist fervour, even as a 2002 vintage citizen myself. I mean what tremendous benefits a system of free markets and free people can deliver! The greatest recipe for human advancement ever devised. Was it devised or did it emerge – our capitalist system?. Hard to say if those founders and crafters of the Bill of Rights were responding to or making history; just as the barons who brought King John to heel ( and eventually his descendants) with the Magna Carta, actually appealed to a prior, supposed, golden age of English kings who respected people and property (of the barons anyway). Property rights have had a checkered history globally and still cause controversy, incredibly, in our own time and place. But empirically, the evidence is overwhelming, free people working in their own self-interest can do incredible, unimaginable and un-plannable things. You see, as an immigrant, when I think of America, it’s not just the grand canyon, the purple mountains, the fruited plain, the oceans white with foam, the rockets' red glare, the broad stripes or even the bright stars, that I think about. It’s a simple idea – liberty. That’s it.]

[caption id="attachment_1376" align="aligncenter" width="1024"]The cure for a lot of things..[/caption]

Meanwhile in Europe, not a lot of fracking going on, but lots of activity in energy and chemicals markets. This piece from Oils and Fats International caught my eye at the end of the year. : A Norwegian parliamentary decision made on 3 December and set to come into effect in 2020 called for the government “to formulate a comprehensive proposal for policies and taxes in the biofuels policy in order to exclude biofuels with high deforestation risk”.

“The stand taken by Norway against palm oil will adversely affect bilateral trade relations between Malaysia and the European Free Trade Association,” Malaysia’s Primary Industries Minister Teresa Kok said in a [what must rank as a huge understatement] statement on 28 December. “We view this as unfair and unjust, going against free and fair trade, and is certainly not something we will take lightly,” said Kok.

Malaysia’s last round of trade negotiations with EFTA was in May 2017, Reuters said. Earlier in December, Kok had spoken out against the French Parliament for excluding palm oil as an approved biodiesel feedstock, suggesting the move went against free trade and threatened the livelihood of Malaysian farmers.
Malaysia and Indonesia exported around 90% of the world’s palm oil and had criticised the EU in early 2018 for backing a decision to ban palm oil in biofuels from 2021, Reuters wrote. EU negotiators later agreed that palm oil usage in transport fuels would be capped at 2019 levels until 2023 and would be reduced to zero by 2030.

[So the EU (and Norway) has a conscience and these moves assuage, to some extent, the nagging of that conscience. I get it. I have a conscience too. But free and fair trade and the ability of same to lift millions of people to the middle class is also to me a matter of conscience. This ban seems like a an awfully blunt instrument, conveniently aimed a place thousands of miles away that seeks to follow in the socioeconomic path of the issuers of the ban. I hope the EU can, still, do better than that]

OK – we’re done for this month. I hope to see you all in Jersey City in May at our big week chock full of surfactants information, insights, networking and liberty!

Surfactants Monthly Review – February 2019

Surfactants Monthly Review – February 2019

Surprising and Unexpected

Those accustomed to inventing things in the course of their work, or as a hobby, will be familiar with the concept of “surprising and unexpected”, particularly in the field of chemistry. If your invention is to be judged innovative and not obvious (the most insulting charge that can be leveled against a putative invention) then it helps if your observation of a chemical reaction or its outcome yields a result that is surprising and unexpected. Hanging around P2, (11 granted patents, 20-odd in the pipeline) I am constantly encountering surprising and unexpected things in the lab and pilot plant. Every now and then I will even contribute to the surprise myself (OK once, I got to invent something, US Pat. 10,071,944).

Of course not everything surprising and unexpected is inventive, sometimes tragedies result which can shape history, ultimately for the better as the Hindenberg disaster helped hasten the advance of airplane travel. Thus aiding one, much safer, innovation (the airplane) at the expense of another (the short-lived airship).

[caption id="attachment_1384" align="aligncenter" width="735"]Surprising, Unexpected and Tragic[/caption]

By the way, the level of interest in our upcoming World Surfactants Conference in May in NYC has turned out to be surprising and unexpected, even though this is out 9th. Please book soon or you may be surprised and disappointed at being put on a waiting list.

Here’s the February news:

At the beginning of the month, ICIS reported that European ethylene oxide (EO) formula contracts rolled over on the back of unchanged ethylene feedstock costs for February.. The primary driver was largely flat naphtha feedstock values month on month, despite the volatility in crude oil seen earlier in January. EO February contracts remain between €1,268-1,436/tonne free delivered (FD) northwest Europe (NWE). ICIS reports that supply is currently good and players have started to discuss the heavier turnaround period expected in spring.

Some uncertainty surrounding demand has apparently started to creep in as January re-stocking activity was a bit delayed this year, according to ICIS. Surfactants demand is a bit quieter compared to previous expectations. This could be attributed to  concerns over a slowdown in global economic growth. Sources will be waiting to see how demand develops this month for EO derivatives.

Over in the US, ethylene oxide (EO) contract prices for January fell by 0.4 cent/lb ($9/tonne) on the back of a decreasein the January contract settlement for feedstock ethylene, ICIS reported. January EO contracts were assessed on Friday at 52.0-61.5 cents/lb FOB (free on board). US EO supply is likely to be healthy this month as demand into downstream polyethylene terephthalate (PET) and surfactants is soft on seasonality.

The renaissance of MFG continues, as first noted last month. The company named Darin Gyomory as CFO. Gyomory previously served as CFO of WL Plastics (INEOS), Scepter Inc, and area controller at Dean Foods. Regular readers will know that MFG Chemical manufactures specialty and custom chemicals including dioctyl sodium sulfosuccinates (DOSS), water soluble polymers, rheology modifiers, amides, esters, imidazolines, surfactants and specialty anhydrides. It serves various markets, including agriculture, asphalt, graphic arts, lubricants, mining, oilfield, paints and coatings, personal care, pulp and paper, as well as water treatment. Headquartered in Dalton, Georgia, MFG Chemical operates four manufacturing facilities in northwest Georgia and Pasadena, Texas.

[caption id="attachment_1385" align="aligncenter" width="836"]Another Renaissance Man[/caption]

I know how hard it is to build and start a plant, so I can only sympathize when ICIS reports that Sasol has pushed back the estimated start-up date for its new cracker in Lake Charles, Louisiana to July, a five-month delay from its most recent estimate, as projected costs of the petrochemicals complex continue to rise. Surprising and unexpected things like inclement weather in the closing months of 2018 have added to costs and resulted in delays to construction, exacerbated by high absenteeism among workers and unforeseen additions to the scope of the works mean that the final cost of the complex is likely to be $11.6bn-11.8bn. A $200m contingency and weather provision represents the difference between the upper and lower ends of the range, Sasol added.

[caption id="attachment_1386" align="aligncenter" width="1024"]Yep. This is what it's about..[/caption]

The extent of the delays have led Sasol to cut its expected  fiscal year 2019 earnings before interest, taxes, depreciation and amortisation (EBITDA) contribution from the complex from $110m-160m to a loss of $165m-195m. Weather issues and engineering cost and wage over-runs have dogged the project and inflated the budget, which was hiked by $2bn in 2016 to $11bn and by a further $130m in late 2017 due to the impact of Hurricane Harvey. The latest budget increases are the result of a cumulative month of work being lost due to excessive rainfall in late 2018, worker absenteeism around public holidays, incomplete engineering work on the cracker that had not previously been noticed. Staff at the site also identified defective carbon steel forgings on the cracker and ethylene oxide/ethylene glycol (EO/EG) units.

The linear low-density polyethylene (LLDPE) unit at the complex reached mechanical completion in December 2018 and produced its first material in 2019, but full operation is not expected now until February, and projected start-up dates for most units have been pushed back.

Engineering and procurement is largely completed at the site, and construction is 84% finished as of the end of December 2018, the company said. Overall project completion stands at 94% and capital expenditure thus far has come to $10.9bn.

Sasol Lake Charles Chemical Project (LCCP) timeline

UnitPrevious estimateUpdateLLDPEDecember 2018February 2019EO/EGFebruary 2019June 2019CrackerFebruary 2019July 2019Low-density PEMarch 2019August 2019Ziegler alcoholsH2 2019November 2019EthoxylateH2 2019December 2019Guerbet alcoholsH2 2019January 2020

 

In more US Cracker news, ICIS reports that Shintech’s new cracker in Plaquemine, Louisiana, did not reach mechanical completion by the end of 2018 as planned and remains behind schedule, according to market sources familiar with the operations. The company had planned to reach mechanical completion of the 500,000 tonne/year unit by the end of 2018 and to begin start-up during the first quarter. The ethane cracker is part of a $1.45bn expansion planned to support feedstock for the company’s ethylene vinyl chloride (VCM) and polyvinyl chloride (PVC) production.

Meanwhile. US-based Chevron Phillips Chemical (CP Chem) is seeking tax incentives for a possible cracker and at least one downstream unit in Orange County, Texas, according to government documents. The company did not specify the capacity of the units, but it said that the cracker would be worldscale. If the company decides to pursue the project, construction could start in the second quarter of 2020 and commercial operations could start in the third quarter of 2024, the documents said.

[caption id="attachment_1387" align="aligncenter" width="1024"]Tax Incentives !?[/caption]

In EO related news, Braskem and Denmark’s Haldor Topsoe have reached mechanical completion on the first phase of a demonstration plant that will produce bio-based monoethylene glycol (MEG) from sugars. Located in Lyngby, Denmark, the first phase of the project can produce over 100 tonnes/year of glycolaldehyde, which is converted into bio-MEG in the next process step. Operations will begin on 1 March. Construction on the next phase, the downstream conversion to MEG, is underway, with mechanical completion expected before the end of 2019. If this technology takes off, it decouples MEG production from purified EO. Interesting….

[caption id="attachment_1388" align="aligncenter" width="480"]Good Looking Pilot Plant[/caption]

Earnings news: Brazilian surfactants producer Oxiteno reported a sharp year-on-year rise in Q4 operating income because of higher sales and a one-time benefit. Oxiteno reported a benefit of real (R) 208.9m ($56.0m) in other operating income, up from R300,000 from the same time in 2017. Oxiteno attributed the benefit to tax credits.

The following table shows the performance of the company. Figures are in millions of reais.

m reaisQ4 18Q4 17ChangeSales1,199.901,131.906.0%Cost of sales973.7914.56.5%Gross profit226.2217.44.0%Operating income235.334.6 

The following table shows the performance of the company's sales volumes. Figures are in thousands of tonnes.

thousands of tonnesQ4 18Q4 17ChangeSpecialty chems148164-9.8%Commodities423810.5%Domestic141146-3.4%Foreign4955-10.9%

Sales rose because of a weaker real, partially offset by lower sales volumes and a greater share of commodities in the mix, Oxiteno said.

[caption id="attachment_1389" align="aligncenter" width="950"]Thankful for a Good Q1[/caption]

We don’t often write about Arkema here but ICIS’s Tom Brown notes in a recent article that the company is set to continue gradual growth of specialty chemicals as a proportion of its portfolio, as tailwinds for intermediates operations weaken in 2019 and the company eyes acquisitions in the adhesives and advanced materials spaces. The France-headquartered chemicals producer is continuing to rebalance its portfolio and geographical exposure as it focuses on resilience as a means of maintaining momentum in weak economic environment this year.

The article is quite long but a key section talks about acuqisitons. The CEO noted that acquisitions in the high-performance materials sector, covering polyamides, organic peroxides and surfactants, among others, are [also] an option.

That’s it for a short month. So what about this "surprising and unexpected" business then? Alert readers may already have guessed what this month’s musical post-script relates to. Led Zeppelin’s eponymously named first album was, in 1969, and is still now, surprising and unexpected. And to me that makes it innovative. In fact that argument can be made for the first 3 albums. Let’s rewind 50 years and join our eager young music fan as he gently places the precious black vinyl of Zep 1 on his turntable.

The first thing you notices is .. no not that it’s a catchy, almost pop, tune.. it’s the drums. John Bonham is a great drummer – and yeah it’s a catchy hard pop tune. But wait for a minute and a half. At 1:30, Jimmy Page appears on the world music scene and makes sure that we know he’s a great heavy rock guitarist. Two surprises, two world class musicians.

Track 2 : Big surprise – Led Zeppelin can sing the blues. But the real point is that Robert Plant can really really sing; vocal acrobatics type sing. 3:26 ++ cements Plant’s place as a vocal great.

So we are less than 10 minutes in and we have 3 world class musicians doing something quite eye opening for 1969. And be honest, isn’t it still quite surprisingly good today?

3rd Track – yeah we already know that these 4 boys from London can actually play the blues. But check out the back to back mellotron, harmonica and guitar solos starting at 2:08. Over 2 and a half minutes of musical bliss, just thrown in there. Wow.

Track 4 is Dazed and Confused. By the end of this track you are a little over 20 minutes into the career of Led Zeppelin and you’re thinking – how can this be so incredibly meaty and innovative. This psychedelic mash up of hard/acid/blues/metal/progressive has confounded your carefully crafted conclusions about the band from the first 15 minutes of listening and then… 3:28 – you think Iron Maiden may have listened to this as part of their 10,000 hours? And what about 4:32 (drums start to wind up ) and 4:57 (John Bonham was truly the bedrock).

So a surprising and unexpected delight for our music fan 50 years ago and we won’t even cover the rest of Zep 1. Let’s go now to Zep 2 and we’ll skip the first 2 tracks and settle into the Lemon Song. Listen only to the bass. Even at 3:00 under Plant’s vocal histrionics. Wait a sec- we now recongise that there are four world class musicians in Zeppelin.? John Paul Jones. Another surprise, that maybe just did not come through in that first album.

And I’ll point out at 4:04 one of the most surprisingly inappropriate lyrics that I will not repeat here in the interest of maintaining the blog’s G rating.

But there is much much more. Skip a track and listen to Heartbreaker. Jones is not done surprising you. That bassline …It is literally a living, breathing thing.

One more song. Third album. Zep 3 the acoustic album, I suppose. But there’s a unexpected thermonuclear device planted at the end of side 1. Since I’ve Been Loving You. The first five notes tell you it's a blues song. You’re just drifting off when the guitar break at 48 seconds serves you notice that you’re about to be laid out on the emotional rack and stretched to breaking point. I don't think I need to write more here. This song is so surprising because it’s so good. For me, 5:08 is a high point, but there are many. Enjoy it.

So what's the lesson? That I've ignored Led Zep for too long on the blog? Yes, but also you have to always be looking for the surprising and unexpected. Even in the most basic and familiar parts of your life. If not for innovation, then at least for preservation. Think about what you learned on your first day on the job. Is there something addtitional there you missed that bears further thought.? In May, we will talk about a familiar topic, surfactants. I guarantee you will learn many surprising and unexpected things and meet very many surprising and unexpected people. See you there.

Surfactants Monthly March 2019

Surfactants Monthly Review – March 2019

Authenticity

Occasionally in these columns, I like to riff on a word that has appeared suddenly in the popular lexicon. These days, apparently, the highest accolade that can be bestowed upon a person or company is that they are authentic. Authenticity beats the seven cardinal virtues all the way to the metaphorical bank. To paraphrase Groucho Marx, if you can fake authenticity, you’ve got it made. Who or what, then is authentic and how did they achieve such exalted status?

For more thoughts on authenticity, read, don’t skip, to the end of the blog. In the meantime, though you know what’s authentic? My surfactants conference coming up in May, covering bio-surfactants, digitalization, EO, EOD’s and the campus opportunity for ethoxylators, Estee Lauder, Exxon and every type of company in between. Along with hundreds of your colleagues, this is the authentic world surfactants experience, complete with our third exclusive awards ceremony. Please don’t miss out as we once again fill the Jersey City Hyatt for 3 glorious days of surfactants business. I’ll see you there.

End commercial. Start of authentic news.

The month started off with news from the biotech front. REG told ICIS that they have decided to pursue the sale of their Life-Sciences business unit, which is developing various fermentation technologies. Those who have been following this story for the past decade or more, know that we are talking about LS-9, the company who developed a way to make fatty alcohols from sugars and glycerine and once sold a single ton of lauryl alcohol to P&G and thereupon launching a press release across the bows of the industry several seconds after the product left the factory gate.

The decision to sell followed a strategic review of the business unit that REG started as we blogged, in November 2016, following the 2014 acquisition of LS-9. Life Sciences is developing fermentation technology to produce fatty acids, along with esters and alcohols, the company said. These would be mid- to long-chain molecules made up of 8-18 carbon atoms.

Specifically, the company was developing strains of E coli that can ferment crude glycerine to directly produce detergent-range fatty alcohols with chain lengths of 12 to 14 carbon atoms. Crude glycerine is a byproduct of biodiesel production.

The unit is developing other bacteria strains that can consume C-5 sugars. Such sugars make up hemicellulose, which, along with cellulose and lignin, make up biomass.

Of course, they have done other things since the P&G sale. Life Sciences has a development agreement with ExxonMobil. In October 2016, the unit delivered one metric tonne of a specialty fatty acid to Aroma Chemical Services International. It was the first commercial product of the unit. Earlier this year, Clariant signed a joint research agreement with REG and ExxonMobil, in which they would incorporate the company's sunliquid cellulosic sugar production process. Life Sciences has a demonstration-scale fermentation plant in Okeechobee, Florida with a capacity of 200 tons/year.

So, let’s see, maybe a private financial buyer can take the old LS-9 back to its venture roots, with a nice, tidy balance sheet and cap table.

[caption id="attachment_1401" align="aligncenter" width="622"]Roots in sight again[/caption]

More now on fatty alcohols made the old-fashioned way, from the talented ICIS reporter, Judith Taylor. The US mid-cut fatty alcohol market has a number of uncertainties going toward the second quarter of 2019, Judith notes.

Many market participants attended the Malaysian Palm Oil Conference (POC) in Kuala Lumpur 4-6 March, hoping to gauge the general direction that alcohol prices might take for the second quarter. PKO – a lauric oil – prices have scattered up and down since December, generating uncertainties for pricing in the second quarter. US mid-cut fatty alcohol contract prices are not directly tied to the price movements of PKO but the cost of the oil is a key factor in achievable contract offers and eventual settlements for the natural alcohols. Second-quarter contract offers have not emerged in the US, but are expected to enter the market during the second week of March when results of the POC can be gauged.

PKO pricing has been up and down during the first quarter, keeping feedstock costs unclear for alcohol producers and trading subdued. Alongside volatile PKO prices, US alcohol buyers are also seeing demand factors easily met by supply of both natural and synthetic alcohols. Synthetic (that is petrochemical) alcohol supply was tight for a number of quarters, but market sources said synthetic supply improved in January and February. In the first quarter, US C12-15 mid-cut fatty alcohol first-quarter contracts were assessed down, on ample supply in natural alcohols and fluctuating feedstock prices. The first-quarter mid-cut fatty alcohol contract range was assessed at 71-79 cents/lb, bulk delivered basis, shedding 9 cents/lb from the low end of the fourth-quarter range and 10 cents/lb from the high end.

Toward the end of the month the prognosis for European fatty alcohol prices was downward according to ICIS. Early second-quarter discussions for European fatty alcohols prices have been heard at levels slightly below figures for the first quarter. Most values heard so far have been below €1,300/tonne FD (free delivered) NWE (northwest Europe). The first quarter range was €1,300-1,450/tonne FD NWE. The downward pressure has been attributed to tumbling feedstock palm kernel oil (PKO) values in recent weeks. However, PKO prices rose last week and could impact on second-quarter discussions if the momentum continues. The majority of second-quarter contract discussions are now underway with some settlements anticipated within the next week. Demand has been relatively stable and there have been no production issues noted in March.

Also toward the end of the month, Judith noted a similar prognosis for US fatty alcohols. US C12-15 mid-cut fatty alcohols second-quarter contract negotiations are underway amid downward pressure driven by ongoing volatility and lower prices in key natural alcohol feedstock palm kernel oil (PKO). Settlement showed mixed prices in the mid-cuts, although all prices discussed were edging down. The C12-15 mid-cut fatty alcohols first-quarter contracts were assessed at 71-79 cents/lb. Sources said a key factor for 2019 is ample inventories of crude palm oil (CPO) and for feedstocks PKO and coconut oil (CNO). Inventories in one of the primary feedstock production regions exceeds 1m tonnes over the typical high point, exerting pressure on the entire natural alcohol complex in 2019. Mid-cut demand continues to be strong in the US, with surfactant uses in most applications showing continual progress and oilfield uses holding firm. By the way you can also follow Judith on Twitter

Downstream, the equally talented Kheng Wee Loy reported that Fatty alcohol ethoxylates (FAE) import markets in Asia were expected to nudge down because of weak upstream values and healthy supply. Regional prices for FAE, having been trapped in a downturn since early 2018, are currently the lowest in over two and a half years. In the week ended 6 March, import prices for FAE-7,9 were assessed down by $25/tonne to $1,395/tonne CIF (cost, insurance & freight) SE (southeast) Asia, and at $1,315/tonne CIF China, on average, according to ICIS data. Prices on CIF China basis remained stable over the same period. The dramatic reversal of upstream ethylene prices could thrust FAE discussions on an extensive downward spiral, diminishing the likelihood of a price rebound. Ethylene import markets in Asia have slumpedfor a second consecutive week amid lengthy supply, after surging for most of the quarter by over $300/tonne or nearly 40%, ICIS data showed.

People news: SI Group, a maker of surfactants and intermediates and other things, has named David Bradley as the company's new CEO, the US-based specialty-chemicals producer told ICIS. will replace the interim head, David Mezzanotte, who is also a director of the private-equity firm SK Capital. SK Capital had acquired SI Group in October 2018. David Bradley was previously the CEO of the US chemical distributor Nexeo Solutions. So a move up the value chain. Nexeo has been acquired by Univar. SI Group's previous CEO was Frank Bozich, who is now the head of Trinseo.

[caption id="attachment_1402" align="aligncenter" width="1000"]Gotta make it before you ship it in this job[/caption]

Polish manufacturer of surfactants and other chemicals, PCC Rokita, continues to make the news. The company has reached a deal with China’s Shandong Shida Shenghua Chemical Group to form a joint venture for the production of organic carbonates in Poland. A facility will be built at PCC Rokita’s production site in Brzeg Dolny, southwestern Poland, for the manufacturing of the product used in lithium batteries. The expected plant capacity is 20,000 tonnes/year. The joint venture, to be realised through a special purpose vehicle, will be split 49:51 between PCC Rokita and Shandong Shida Shenghua.

The initial investment commitment is €22m, the Polish company added.

PCC Rokita has several business partners in East Asia. In April last year, it acquired a further 25% of Thailand’s IRPC Polyol taking its ownership stake in the joint venture to 50%. In March last year, lpis, a subsidiary of sister companies PCC Exol and PCC Rokita, acquired 100% of the shares in PCC Oxyalkylates Malaysia. The PCC companies are subsidiaries of Duisburg, Germany-based energy, logistics and chemicals group PCC, which has operations in 17 countries. PCC Rokita produces polyols and polyurethane (PU) systems, along with chlorobenzene, chlor-alkali, surfactants, phosphorous derivatives and napthalene derivatives. Shandong Shida Shenghua Chemical, located in Dongying, near Beijing, is run by China’s University of Petroleum, according to its website. Its products include lithium hexafluorophosphate, imethyl carbonate, propylene carbonate, ethylene carbonate and methyl ethyl carbonate.

We don’t often write about the short-chain alcohol market here, so I was pleased to see this article by Jackie Wong in ICIS. Some short chain fatty alcohols producers in Asia were concerned about a potential increase in output with greater incentives for some producers to start converting their short chain fatty acids into alcohols, market sources said toward the end of the month.

Short chain fatty alcohols demand slowed down over the last few months, but that was offset by very tight supply, which helped some suppliers protect their margins. However, with sluggish short chain fatty acids sales and as the gap between the short chain fatty acids and short chain fatty alcohols widen, some producers were worried their competitors may start converting the fatty acids into alcohols to fetch better margins. A couple of southeast Asian fatty alcohols producers explained that while most producers would be reluctant to use their plants to convert the short chain fatty acids into alcohols as it would disrupt the production of other alcohols cuts, some producers may be incentivised to do so when the spread between the short chain fatty acids and short chain fatty alcohols reaches around $1,000/tonne, which is the current level. Increase in short chain fatty alcohols output would place downward pressure on prices and since the converters would be able to get the short chain fatty acids at a relatively cheap price, they would be more motivated to sell their short chain fatty alcohols at lower prices. Last week, Asia's C8 alcohols and C10 alcohols were assessed as $3,350-3,500/tonne FOB SE Asia and $3,010-3,110/tonne FOB SE Asia respectively.

[caption id="attachment_1403" align="aligncenter" width="407"]Short chains more valuable[/caption]

We like to keep you updated on the Sasol project and ICIS’s Al Greenwood does an excellent summary this month. He reports that various units are at different stages of final construction and commissioning at Sasol's new complex in Lake Charles, Louisiana. Already, operations have started at the linear low density polyethylene (LLDPE) unit.

The following table shows an earlier timeline that lists the start-up times for the various units.

UnitUpdateLLDPEFeb-19EO/EGJun-19CrackerJul-19Low-density PEAug-19Ziegler alcoholsNov-19EthoxylateDec-19Guerbet alcoholsJan-20

[caption id="attachment_1405" align="aligncenter" width="1000"]A veritable surfactants and intermediates gumbo[/caption]

In very important EO capacity news, INEOS Oxide plans to double the capacity of its new ethylene oxide (EO) and derivatives facility on the US Gulf Coast, expected to start up in 2023, the chemicals producer told ICIS. The plant will produce 1.2bn lb/year (520,000 tonnes/year) of EO. Previous planned capacity was 270,000 tonnes/year. [ Talk about a shot across the bows! ]INEOS is considering several sites on the US Gulf Coast. Expected project costs were not disclosed. “This build allows us to address a fast growing EO merchant market as well as our own requirements,” said Ghislain Decadt, operations director at INEOS Oxide. “Combined with our upstream olefins capabilities, this world class facility will secure our position as a reliable and competitive producer.” In addition to installing its own ethoxylate derivative capacity on site and infrastructure to supply customers by rail, INEOS plans to allow third parties to co-locate on site and consume EO by pipeline.

[caption id="attachment_1406" align="aligncenter" width="750"]Ineos announces EO plans[/caption]

To wrap up; the aforementioned Judith Taylor wrote an interesting article on how he detergent range fatty alcohol market could shift on the influence of the huge millennial demographic, affecting sectors from base oil additives to home cleaning products. Reasons leading to this viewpoint derive from changes in the upstream base oil market to changes in house and clothes cleaning products.

In base oils light viscosity oils are increasingly dominant and polyalphaolefins (PAOs) could hold the future. This links to the alcohols via the additives needed to make the passenger car motor oils (PCMOs) that form the major end-use for base oils. Millennials are keen on car sharing and rentals, factors also lending changes to base oils and motor oil sectors. In home cleaning and personal care segments for the alcohols, millennials are interested in gels and pods and less likely to use powdered products, factors that can mean less overall use of the detergent alcohols. Because the potential shifts in these markets are future-oriented, likely at least ten years out, some producing companies in both the base oil sector and in the fatty alcohol sector are approaching buyers with open questions about expectations and needs now and going forward. Food for thought.

[caption id="attachment_1407" align="aligncenter" width="1024"]..and this one has just a touch more C16[/caption]

So back to our question of – what is authentic? Well, let’s see, if you smoke dope and swear, you’re authentic (man, I must have known a lot of authentic people as a teenager). It further helps if you’re a billionaire and do it on the radio (I’m talking about Elon Musk if you haven’t twigged). Being a billionaire alone, however, is not enough. Warren Buffet, authentic. Kylie Jenner, hmmm. Any Koch brother, nope. Mark Zuckerberg, not any more, if he ever was.

[caption id="attachment_1408" align="aligncenter" width="1024"]Really?[/caption]

Skateboarding confers authenticity (see teenage comments above). Skiing not so much, I think. Can married couples be authentic together. George and Barbara, yeah I think so. Al and Tipper – c’mon you can’t un-see that made for TV kiss.

[caption id="attachment_1409" align="aligncenter" width="720"]Really ![/caption]

Can one marry across authenticity lines? Apparently so. Kanye West (aka Mr. Kim) is still viewed as an authentic rapper whilst married to what is surely the icon of American inauthenticity (don't pretend you don't know ).

[caption id="attachment_1410" align="aligncenter" width="900"]Are they real?[/caption]

I, like most of you, consider that, as a businessman and a consumer, I have a reasonably good nose for the authentic and the inauthentic. But this last month I was riveted by a story of inauthenticity on such a grand and audacious scale, that I could only stand and gaze in a wide-mouthed mix of horror and sadness at its protagonists. Exhibit number 1 in the federal case of Higher Education vs Authenticity, filed in the court of public opinion is one Olivia Jade (not her real name, natch). By the way, if you’ve no idea what I’m talking about go google “college admissions scandal” and come back here. The scandal essentially involves wealthy (not rich enough to have a building named after them, but with a few hundred extra $K to deploy in greasing the skids) parents bribing various college staff members to get their kids into prestigious colleges. A popular variant of this popular caper was to bribe a college sports coach to have your child falsely designated a sports recruit, thus enabling admission with a sub-par SAT. score. This resulted in some hilarious ruses with faces photo-shopped onto pole vaulting bodies and, in the case of Olivia and her sister Isabella, posing as Olympic level rowers next to a ..erm.. rowing machine at the gym because an actual boat was not readily to hand in Beverly Hills that day. The hapless sisters did not and most likely today, still do not, know which end of the oar goes in the water.

[caption id="attachment_1411" align="aligncenter" width="618"]Unreal[/caption]

But in the case of 19 year old Olivia, the story is uniquely exquisite. She had proudly professed no interest at all in college, apart from maybe “game days and parties” and in fact was seemingly blissfully unaware that she had even applied to USC, her parents having paid someone to do the application for her. You see she already had a perfectly good career as a B-list instagram influencer hawking, under contract, Sephora cosmetics and shilling (for pay) for Amazon and others to her 1.4 Million followers. She was earning good money and building a brand doing what teenage American girls, of a certain demographic, do. To be yanked, against ones will, from one arguably inauthentic life into what was formerly known as “getting an education”, via an artfully constructed fiction strikes me as ironic, sad and somehow poetic. To cap it all, at the very moment her parents were arrested, by the FBI, at 6.00AM, in a dawn raid, guns drawn, handcuffs eventually not used, for this crime, young Olivia was spending spring break aboard Invictus. Oh you don’t know? Invictus is the yacht belonging to the chairman of the USC board of trustees.

[caption id="attachment_1412" align="aligncenter" width="672"]Can't make this stuff up[/caption]

At this point, let’s observe a moment’s silence for the education system. …Thank You. It’s had a good run, but if any industry is ripe for disruption (another buzzy word) this is surely it.

Where does that leave us? Me and the handful of blog readers who read this far just to see how many Kardashians could fit into a blog post. Well we probably can’t reform education as well as hold down our day-jobs. But control what you can control, that is what you say and do, next, moment by moment. Look, I’m not dismissing all the Kaheneman and Tversky stuff about the influence of the subconscious. I’m talking more about Gladwell’s 10,000 hours. We are the sum total of all the things we do and I think that if you synch-up those actions with what you think and your inherent moral sense, then you are a lot more likely to be successful. Then the 10,000 hours you put into your craft are going to pass a lot more quickly and easily. Whether your craft is buying, selling or making surfactants or teaching or music or cosmetology or whatever it is, you won’t get truly great at it if you are somehow uneasy, conflicted or in any way at odds with it. I’m a bit wary of making high minded claims (although it usually doesn’t stop me). Our conferences are chock – full of authentic people who just want to get a little bit better at their jobs every day. They are the attendees and speakers and some of them will even get awards. These are really super-high quality hours that you will spend and they absolutely count against your authentic 10,000 hours. I’d love to see you there.

Neil

Surfactants Monthly Review – April 2019

Surfactants Monthly Review – April 2019

Most Influential

Can I remind you briefly here that My surfactants conference coming up in May, is covering covering bio-surfactants, digitalization, EO, EOD’s and the campus opportunity for ethoxylators. We have Estee Lauder, Exxon and every type of company in between. Along with hundreds of your colleagues, this is the authentic world surfactants experience, complete with our third exclusive awards ceremony at which we recognize the best, brightest and most accomplished. Please don’t miss out as we once again fill the Jersey City Hyatt for 3 glorious days of surfactants business. I’ll see you there.

End commercial. Start of the news for April.

I’m going to be upfront with you here. We have strictly the news in this edition and it is crisp and edited right down to the basics. I just don't have time right now for the usual music, pop culture and departures into Kardashian-land. More of that next month, I’m sure.

The talented and knowledgeable, Judith Taylor at ICIS notes at the beginning of the moth that US second-quarter C12-15 mid-cut fatty alcohol contracts remain under downward pressure. Finished business for the mid-cuts is largely at a drop from the first quarter but not as deeply down as some market participants expected. Feedstock price volatility dominated second-quarter contract discussions and continues to influence the natural alcohol price perspectives. Market participants said synthetic alcohol supply is readily available. Prices on the synthetics are said to be competitive with the natural alcohols for the second . By the time the price settled, US second-quarter mid-cut fatty alcohol contract prices fell. ICIS assessed mid-cut C12-15 alcohol second-quarter contracts at 68-77 cents/lb, down 5 cents/lb overall from the first quarter.

Meanwhile, the European fatty alcohols second-quarter prices fell, sliding to a three-year low amid slipping feedstock prices. Second-quarter contracts tumbled €150/tonne to €1,150-1,300/tonne FD (free delivered) NWE (northwest Europe). Prices last fell below this level in the first quarter of 2016, when the average value was €1,175/tonne FD NWE. The EU fatty alcohols market is currently balanced with ample supply and healthy demand.

Also in the US, ethylene oxide (EO) contract prices for March fell by 1 cent/lb ($22/tonne) on the back of a decrease in the March contract settlement for feedstock ethylene according to ICIS data. March EO contracts were assessed at 50.4-59.9 cents/lb FOB (free on board). US EO demand is likely to increase into downstream polyethylene terephthalate (PET) and surfactants in the second quarter during the peak season.

By April, the US ethylene oxide (EO) contract prices for fell by 1.4 cents/lb ($31/tonne) on the back of a decrease in the April contract settlement for feedstock ethylene. April EO contracts were assessed on Friday at 49.0-58.5 cents/lb FOB (free on board).

Meanwhile, Melissa Hurley of ICIS reports that,with a handful of planned turnarounds approaching, European ethylene oxide (EO) supply is expected to become more limited over the next couple of months, but patchy downstream demand could limit any impact on availability. Downstream demand strength is varied, depending on end use in the glycol ether, ethanolamine, monoethylene glycol (MEG) and surfactant markets. There is a general economic slowdown across the board, and EO market players noticed a lag in demand at the start of the year. Strong EO demand had been expected this year, which led to higher adder fees at the beginning of 2019, but this has not been widely seen so far.

By May 1, the EO contract price firmed by €25/tonne at both ends of the range, bringing prices to €1,343-1,511/tonne (free delivered) FD (northwest Europe) NWE.

The acquisitive Vantage Specialty Chemicals, has signed a definitive agreement to acquire Textron Plimon, S.L.U. Natural Oils Business. Textron is a manufacturer, processor and specialty formulator of natural oils for the personal care, food and chemical industries. Located near Barcelona in Granollers, Spain, Textron is focused on supplying high-quality natural oils out of a new state-of-the-art manufacturing facility that sources oils and seeds from all over the world. Textron’s product portfolio includes cosmetic oils, formulations of EVOIL plant oils, food oils, bismuth derivatives, cosmetic ingredients and preservatives. As part of the transaction, Textron will spin off its Spanish distribution business, Plimon, which will remain with the prior ownership group and continue distributing products for Textron.

As a reminder, In late November 2018, Vantage signed an agreement to acquire LEUNA-Tenside GmbH (LTG). LTG is a European manufacturer of high-quality specialty surfactants sold throughout Europe and globally. Located in Leuna, Germany, the company is focused on small-volume niche products supported by flexible manufacturing capabilities. LTG’s product portfolio includes anionic surfactants, non-ionic surfactants and emulsifiers based on naturally derived ingredients and used in a diversified range of end markets including personal care, soaps and detergents, industrial cleaners, lubricants and paints and coatings.

The ICIS Singapore office reported that fatty alcohol ethoxylate (FAE) import markets in Asia are generally stable mid month.bvFor the week ended 17 April, FAE-7,9 spot prices for April/May drummed cargoes were assessed steady at $1,200-1,300/tonne CIF (cost, insurance & freight) China and $1,330-1,380/tonne CIF SE (southeast) Asia, week on week, according to ICIS data.

Strike season ends early in Moerdijk, as Unions and employee representatives of Shell’s Moerdijk, Netherlands, petrochemicals complex agreed to end strike action at the site. An action committee convened on Friday agreed to allow Shell to temporarily take control at the site from 15:00 BST onward, after company management offered an improved salary offer at a meeting with unions on 25 April.

Unions backed the new offer, issued after nearly three weeks of industrial action at Moerdijk and the nearby Pernis refinery, which have delayed a long-planned turnaround for the cracker at Moerdijk, one of the largest in Europe. In what a Shell spokesperson termed an “ultimate” offer, the company has increased its wage hike offer for Pernis and Moerdijk employees to 3% this year, 2% in 2020 and 2.5% in 2021, plus a 1.5% annual merit pot.

While the move allows for normal operations to resume at the site after production was stifled and employees declined to work overtime, FNV will schedule meetings with members on 7-8 May to present the results and formally vote on the proposals. Action at the sites has reduced output at the Pernis refinery to 65% of capacity, according to union estimates, and considerably slowed a turnaround at Moerdijk. The moves to reduce capacity also initially prevented the start of shutdown preparation, and a refusal to work overtime slowing the process once employees agreed to begin the turnaround. The work, which heralds the beginning of a crowded turnaround season in Europe through the summer, was expected to begin on 16 April and last through 21 June, according to market sources.

In documentation submitted as part of summary legal proceedings against the unions initiated by Shell late last week, and subsequently overturned in court, Shell estimated that that first nine days of the action had resulted in €14.5m in costs. Shell's Moerdijk site produces ethylene, propylene, benzene, butadiene, crude C4, ethylbenzene, ethylene glycols, surfactants, and ethylene oxide, among others, according to ICIS data.

ON the last day of April ICIS reported that Stepan’s first-quarter net income fell 22% year on year on the back of an equipment failure at a Mexico surfactants plant during the quarter and higher European polymers costs on the back of debottlenecking in Germany.

Stepan ($)Q1 2019Q1 2018Change (%)Net sales489m499m-2Operating income29.7m41.3m-28Net income24.9m31.9m-22

Key points:

- Surfactants earnings dropped year on year as a result of a $2.3m operating loss incurred at its Ecatepec, Mexico, facility due to equipment failure in January, for which it is pursuing insurance compensation for damaged equipment, supply chain expenses and business interruption.

- First-quarter polymer division earnings also fell on lower volumes for North American phthalic anyhydride (PA) and specialty polyols, and higher European

Finally, one of our favourite International chemicals distributors Brenntag has acquired Marlin Company, a US-based provider of custom chemical blending and packaging services for liquid and powder products. Marlin, of Lenoir, North Carolina, had sales of $7m last year, according to a statement by Germany-headquartered Brenntag late on Thursday.

So what’s with the “Most Influential” tag-line. Time Magazine made the news recently – first by reminding everyone, that there is such a thing as Time magazine, then by publishing a list. Among the most influential people of the year, are not many I have heard of, apart from that bloke that played Freddy Mercury, very well, in the recent Queen film. Then there is the Time list of most influential teens (not making it up). I am proudly ignorant of everyone on that list and will no doubt remain so, as and when any of them make it onto the big-boy list. Why should you care? You really shouldn't unless you are chronicling the decline of Western civilization, but you don’t have time to because you are working. You should care about the Allergen of the Year, however. That is a dubious honor bestowed annually by the American Contact Dermatitis Society on a common material. You should know about this. Many in our industry do and some are talking about it. We will talk about it and many many other topics at our big event in Jersey City, may 15 – 17.  I’d love to see you there.

Neil

OK here's one bonus picture of the omnipresent Ms K who aparently has not made the cover of Time but has made the cover of Forbes for her money-making prowess. Influential? I don't really know yet. We'll discuss more in a couple of weeks.

[caption id="attachment_1419" align="aligncenter" width="793"]Revenue Recognition[/caption]

Independence Day – 2019

Surfactants Blog - Independence Day 2019

Happy Independence Day! I’ve written this before, but I love it so much, here it is again. Today is right up there with Christmas, Easter, Passover et al for me. Honestly, I woke up this morning with genuine excitement, like a kid anticipating presents. Today it was announced, to a candid world, that all men are created equal. Stop and think about that. A radical idea for the time and in fact, still radical in many parts of the world today. Now, certainly you could argue that the idea was not new in 1776 and that the Hebrew scriptures, the new testament and other texts had asserted much the same thousands of years prior. But here was a rebel bunch of colonies standing up to the world’s superpower and saying something that surely resounded through the palace of Westminster and beyond. You can imagine the great and the good, the crowned heads of Europe, spitting out their port, exclaiming “all men are created .. what!?!? – you gotta be kidding me!”. Outrage, mirth, contempt, maybe a little prescient dread formed regarding this radical concept dumped, like a rotting fish, into their well ordered drawing rooms.

Every Independence Day in my little town here in New Jersey, we gather in front of the town hall to read the declaration. About 120 people each get a part to read in front of the crowd, in sequence. As usual, I was given the part about “The history of the present king of Great Britain is a history of repeated injuries and usurpations….”, the British accent forming an amusing contrast to the meaning of the sentence. Great fun, patriotism, civic sharing and a nice example for the many youngsters there. This year, about a hundred motorbikes roared through town to join us. Freehold police closed off a few streets to facilitate their passage and the NJ Transit bus to New York, just had to wait. Loud, a little startling, reeking of individualism and a bit incongruous; just like America, at least in my view as a 35 year immigrant. Something (someone) else that I always thought was just like America- Lee Iacocca. He died on Wednesday and the WSJ published a superb obituary. My favorite line was a quote from Iacocca’s less known book published in 2007, in which he offered opinions on the quality of political leadership at the time. “Stay the course? You’ve got to be kidding. This is America, not the damned Titanic….” .

Anyway, here’s the thing about the declaration. As a political communiqué, they really could have skipped the second paragraph and gone straight from “Hey we’re declaring independence..” to the “here’s why” which is the laundry list of abuses and usurpations which forms the bulk of the rest of the document. Instead, some collective genius caused the second paragraph to be inserted, which goes all the way back to first principles. All men are created equal. Fantastic right. Truly brilliant for the reasons we know today. But it’s more than that. They could have said something like “Our new government will treat men as being created equal” or maybe “From now on, under our new system, all men are created equal” and any one of a number of statements of policy and that would have been just fine. And we would still celebrate July 4th. Instead, though they went back to the beginning for a truth. And they didn't even discover this truth or deduce it or invent it. They just held it to be self-evident and that’s it, that all men are created equal, since the beginning of time, now and for evermore. This fundamental truth along with the unalienable rights with which men are endowed by their creator, (not by their new rulers or by some evolution of society) requires certain standards for how governments are instituted among men. Given that King George had fallen short of these standards, then a change was needed. Then on to the abuses and usurpations which underline exactly how and how far, the king had fallen short. To me this paragraph ensures that the declaration, while very specific in its enumerations, is in fact a transcendent event that speaks to truths which have nothing to do with the time, 1776, the place, Philadelphia, or the politics of what was happening. Just like Christmas or Easter or Passover.

Here’s the other thing. This could just as easily been a declaration of war and, de facto, maybe it was. But there was no hint of contempt or even enmity. No pledges to rid the world of the British blight or to stamp out imperialism. Just a commitment to hold them (the British) “as we hold the rest of mankind, enemies in war, in peace, friends.” So, basically just saying that – if you guys want to get on board, then great, we’re not going to exact revenge on you for this long train of abuses. You know if you want to join us in conducting your affairs in line with this eternal truth we’ve been talking about, then cool; we’re friends. This to me is more evidence of the transcendent nature of the event. On one level – “we’ll fight you if we have to” and clearly there was plenty of fighting and heroism along with it. On another level the message was “here’s an eternal and fundamental truth about human existence. You guys might want to think about that, because, you know, you’re humans too!”. Not exactly trash-talking. Pretty radical.

So, what does this have to do with surfactants? Everything. Trade is the great democratizer. It’s quite interesting right? Because money can be really dirty and some horrible things are done to get it. However, your money is just as green as mine and it doesn't matter who or what you are, if you have the cash and I have the goods, we’ll find each other and transact and maybe even form a relationship which lasts for years. I talk a lot in my conferences this year about the think-say-do alignment. It sounds trite but it’s pretty hard to do consistently and that’s because you (and I) are barely in control of what we think, say and do, for starters. And that’s because we’re humans. We have, among other things, an autonomic nervous system that controls things we are completely unaware of (by definition – the things we do unconsciously). We have conscious and unconscious minds. We have dreams and emotions, many barely controlled. We worry about the future; heck we even worry about the past. Figure that one out. We can hardly understand our own thoughts, actions and motivations let alone someone else’s. Despite all that we accomplish a lot. When two companies do business with each other; it’s one bunch of humans with, in the case of the chemical industry, a load of expensive kit, trying to create value by trading with another bunch of humans. All the while acting in their own collective interest, and individual interest, competing with each other for money, status and pride, playing favorites and keeping grudges, reacting impulsively, subconsciously and trying to look good doing it. Oh and worrying aout the mortgage and tuition and car payments and the girl at the gym and are these shoes OK for work. In short, acting like humans. Ha! What could possibly go wrong? A lot and it sometimes does. What’s amazing to me is how much goes right – very right – most of the time. In fact things go incredibly right incredibly often and incredible things result. Insanely complex supply chains and technological marvels, and beauty; every single day. How come? I think because at the basic, trading level, humans interact with humans with the underlying assumption that we’re all created equal. Not that we all are equal, but created equal. It’s something that when it’s tacitly agreed between individuals and groups, the greatest things are accomplished. The less that view holds the more difficult and less efficient trade becomes between people who don’t respect and trust each other and you end up like, say, Soviet Russia or North Korea. Stilted. A spring, never stretched. Rusted over. Unfulfilled potential.

The people who wrote the declaration were clearly intellectual giants and who knows whether they really intended to write something so profound and timeless, but they did. For that, we should be grateful perhaps even just slightly more so than for the creation of the country built on the document.

That’s it for today’s blog. We’ll publish another one for the last month that actually does deal with the surfactants news.

In the meantime, here’s a couple of talented human beings with their rendition of the Star Spangled Banner.

And one of Dr. Who’s many commentaries on humans which I really like. Skip to 3:16 if you don’t want to watch the whole thing.

And Dr. Who on human life

Surfactants Monthly Review – May and June 2019

Surfactants Blog – May and June 2019

As I took a summer vacation early this year, we are doing the summer double-header blog a little earlier than usual. This blog covers key events in May and June. As a bonus, we have also published a special Independence Day Blog, which features how we might consider the day’s relevance to our business.

Something really significant happened to me recently. I got some criticism, offered in a constructive way. It was also heartfelt. I will not go into detail. However, I can say that it really hit me hard and made me realize the magnitude of the time, energy and attention that many people put into reading what I write here and engaging with what we produce in our conferences. With this attention comes appreciation (for which I am truly grateful) and an expectation that a high standard will be met. Earlier this year, it was brought to my attention, respectfully, that, on one occasion, I missed the mark and fell short of that standard. Initially, my defensive hackles went up but then I realized the point was valid. What really brought this home was the heartfelt way in which the message was conveyed. Every time I open my mouth or fail to, or put, metaphorical, pen to paper, more people take more notice than I really imagined would be the case when we started this surfactants project almost 10 years ago. I appreciate all the compliments for what we do here, of course. I love hearing that. But constructive criticism, from the heart? Priceless.

Keep an eye on Sadara, as we do here at the blog. ICIS reported that Saudi Arabia-based Sadara expects polyethylene (PE) demand in China to rebound in the second half of 2019. “Q1 was a rough part of the year but we believe we will see a rebound. In China, spot prices are up and we’re seeing less pushback from customers,” said a company official at a Saudi Aramco press tour. Sadara consists of 26 petrochemical units in Jubail Industrial City and is 65% owned by Saudi Aramco and 35% by US-based Dow.

The site runs three linear low density PE (LLDPE) units with capacities of 970,000 tonnes/year, and a low density PE (LDPE) unit with capacity of 350,000 tonnes/year, according to the ICIS Supply and Demand Database. Around 38% of Sadara’s PE output is exported to China, with much of it being C4 LLDPE for food packaging and film wrap. The rest of Sadara’s PE exports are going into Europe, Africa and other countries in the Middle East. For Sadara as a whole, 95% of its production are exported, a level it seeks to decrease as it develops the local Saudi Arabia market and attracts downstream customers to the adjacent PlasChem Park.

Sadara’s other products include ethylene, propylene, ethylene oxide (EO), butyl glycol (BG), amines, propylene oxide (PO), propylene glycol (PG), polyols and isocyanates. On the feedstock side, Sadara operates 12 furnaces in its mixed feed cracker – seven using gas, and five liquids with three of those five able to switch between feeds. Sadara is currently processing around 85,000 standard cubic feet (scf)/day of ethane, and 53,000 bbl/day of naphtha, for an approximate 60/40 ethane/naphtha mix, he added.

[caption id="attachment_1432" align="aligncenter" width="1024"]Keep an eye on it[/caption]

Early May, Sasol informed ICIS that the company has reached beneficial operations at its new 250,000 tonne/year ethylene glycol (EG) plant in Lake Charles, Louisiana, ahead of schedule, according to market sources. The company defines beneficial operations as production of on-spec material for at least 72 hours continuously. [3 days on spec. seems about right for this sort of metric although as any seasoned plant manager will tell you – let’s see how on-time stats stack up after a year or so of customers shipments before declaring “mission accomplished”] The EG unit is part of the company's Lake Charles Chemicals Project (LCCP), which will also include a 1.5m tonne/year ethane cracker and downstream units of 470,000 tonnes/year linear low density polyethylene (LLDPE), 420,000 tonnes/year low density polyethylene (LDPE) and 300,000 tonnes/year of ethylene oxide (EO).

[caption id="attachment_1433" align="aligncenter" width="640"]At Least in Ethylene Glycol[/caption]

Just along the Gulf Coast from Sasol, Indorama Ventures (Ltd) began trial runs at its 440,000 tonne/year ethane cracker at Westlake in Louisiana. The cracker is operated by IVL's indirect subsidiary Indorama Ventures Olefins.

"IVOL has stabilized production of on-spec ethylene and its byproducts at five of its seven furnaces and will ramp up gradually during the course of the second quarter of 2019," the company said in a filing to the Stock Exchange of Thailand."This project...creates an exciting new platform of growth as well as affording stability and supply chain advantages to our EO/EG business by its pipeline integration," it said. Once normal production starts, the company aims to capture around 75% of the ethylene output for its internal ethylene oxide (EO)/ethylene glycol (EG) production "and merchant the remaining output", the company added.

Separately, the the company announced that its indirect subsidiary Indorama Ventures Oxide & Glycols on 2 May lifted a force majeure at its 550,000 tonnes/year production site at Clear Lake, Texas, site which produces EO, PEO and glycols. Unfortunately this was not before the outage impacted earnings for the patrent company. Indorama Ventures Ltd's (IVL) first-quarter net profit fell, weighed partly by the unplanned shutdown of its ethylene oxide (EO)-ethylene glycols (EG) production site in the US, the Thai conglomerate said in a press release.

Thai baht (Bt) millionQ1 2019Q1 2018% changeSales95,81076,14325.8EBITDA8,39310,863-22.7Net profit3,7335,841-36.1

Key points

• Core EBITDA margin for the group fell to 10% in Q1 2019 from 14% in Q1 2018, weighed by lower margins at olefins and specialty chemicals units.

• Q1 group production volume rose by 28% year on year to 2.97m tonnes, despite a 77% drop in olefins output.

Outlook

• The strength in IVL's core businesses (integrated PET [polyethylene terephthalate], fibers and packaging) is likely to remain for the rest of 2019.

• Earnings from the olefins and specialty chemicals businesses are expected to remain weak for the rest of 2019.

• "This changed ecosystem necessitated a comprehensive review of our 2019 EBITDA guidance. At this juncture, we believe it may be prudent to lower the  previous guidance of core EBITDA for 2019 by 10-15%," the company said.

Chemicals distributor Brenntag, large marketer of surfactants, has acquired Marlin Company, a US-based provider of custom chemical blending and packaging services for liquid and powder products.

“Marlin’s unique powder and liquid blending services for many different industries and their professional packaging and labeling system are an excellent addition to Brenntag’s value-added services business,” said Markus Klahn, CEO of Brenntag in North America. Marlin, of Lenoir, North Carolina, had sales of $7m last year, according to a statement by Germany-headquartered Brenntag late on Thursday. The acquisition price was not disclosed.

M&A Activity in surfacants continues to be robust. Arkema will acquire US-based surfactants maker ArrMaz for an undisclosed amount, the French specialty chemicals producer said on Mid-May. ArrMaz produces surfactants for crop nutrition, mining and infrastructure markets; and has generated sales of $290m, with an EBITDA margin of 18%, Arkema noted to ICIS. Synergies from the acquisition are estimated to be worth about $15m by 2023, pertaining mostly to purchasing and commercial complementarities between the two companies. The acquisition is part of Arkema’s drive to realize 80% of revenues from specialties by 2023. And despite the old joke about a specialty business being one you just acquired (and a commodity business, one you just divested), it’s fair to say that ArrMaz is nothing if not a specialty business with highly performance driven niche markets around the world. Good for them and good for Arkema, I believe.

More details came on the deal from an Interview that Arkema’s CEO gave to Tom Brown of ICIS. Purchase price was $570m. Arrmaz generated sales of $290m, with an earnings before interest, tax, depreciation and amortisation (EBITDA) margin of 18%. This gives an EBITDA multiple of about 10.8 [ not crazy ].

I take a fairly strict “you gotta be there” stance when it comes to things that happen at my conferences. That is I don’t write about them because, if you really want to know what was discussed, you gotta be there. However, as ICIS has already published this, I can give you an excerpt of what they had to say about the veritable master level college course delivered in 40 minutes by the knowledgeable and talented Martin Herrington.

The global surfactants industry is unlikely to move away from using palm kernel oil (PKO) as a key feedstock, as noted by Martin. “As long as you need C12/C14 fatty alcohols and want bio-based availability, eliminating PKO on a large scale would be difficult,” said Martin Herrington, president of IP Specialties, at the 9th ICIS World Surfactants Conference. PKO has increasingly come under the environmental spotlight on concerns about mass deforestation. Most of the world’s PKO comes from southeast Asia.

The 1.3ha that it takes to produce 5 tonnes of palm oil and about 550kg of PKO would produce less than 1 tonne of soybean oil. .. I’ll cut it there – but I can tell you that I have never seen a paper as chock-full of data and analysis as Martin delivered in May. If you missed it, we are working on getting him back for a return engagement at one of our events later in the year. We’ll let you know.

We wrote about MFG Chemicals back in January and February as in investment continued to come in from new owners. According to ICIS, MFG Chemical now plans to upgrade its Dalton, Georgia, facilities to prepare for the next phase of growth. In early May, the company completed its $5.4m expansion in Pasadena which includes new 20,000 and 10,000 gallon reactors along with additional tankage capacity. The company now has 10 reactors at the site with capacity of 85,100 gallons.

MFG now plans to spend around $4m through mid-2021 at its Dalton sites to upgrade control and feed systems. It will also shift certain chemistries related to oilfield chemicals to its Pasadena site, which is closer to customers in this key end market. One of MFG Chemical’s core products is dioctyl sulfosuccinate (DOSS), which is used in oilfield chemicals among many other applications. Its key feedstock is maleic anhydride (MA). MFG picked up the 26.7-acre Pasadena plant in March 2018 through its acquisition of Houston, Texas-based Gulf Bayport Chemicals, making it one of the largest buyers of molten MA in the US, according to the company. Its other three plants are located in Dalton, Georgia.

Along with DOSS, MFG Chemical produces other MA derivatives, including octenyl succinic anhydride (OSA) and dodecenyl succinic anhydride (DDSA) formulations through batch manufacturing. OSA is used as a food thickener, while DDSA goes into coatings and water treatment applications. With its specialty chemicals which include amides, esters, imidazolines, water soluble polymers, rheology modifiers, specialty anhydrides and DOSS formulations, MFG serves other end markets such as agriculture, lubricants, mining, personal care, and pulp and paper.

More interesting and logical M&A news from Japan reported by ICIS: Japanese chemical producers Nippon Shokubai and Sanyo Chemical plan to merge, subject to a final agreement expected in December. The plan to integrate the companies’ operations was prompted by an “increasingly severe” business environment, both in Japan and internationally, Nippon Shokubai said in a filing. Nippon Shokubai produces basic chemicals, including acrylic acid (AA) and ethylene oxide (EO), as well as high-performance functional chemicals and environmental and catalyst products. Sanyo Chemical produces and markets about 3,000 types of performance chemicals. It depends on raw materials from Nippon Shokubai and other suppliers. Should the merger proceed, Nippon Shokubai and Sanyo Chemical will become wholly owned subsidiaries of an “integrated holding company” listed in Tokyo, with a listing planned for 1 October 2020.

In yet more M&A news: HB Fuller has agreed to sell its surfactants, thickeners and dispersants business to Tiarco for $71m, the US-based adhesives producer told ICIS. Tiarco is a subsidiary of Textile Rubber and Chemical Co. HB Fuller said the business is a non-strategic and non-adhesive business that the company acquired when it purchased Royal. Now according the the St. Paul. MN Star Tribune, H.B. Fuller's surfactants, thickeners and dispersants business has annual revenue of about $25 million and earnings of about $8 million. This would make a 8.9X multiple [again not crazy].

[caption id="attachment_1434" align="aligncenter" width="948"]Price Not That Insane[/caption]

And in even yet more M&A news, Genomatica's acquisition of REG's Life Sciences subsidiary has given the company access to a third group of renewable chemicals that it seeks to commercialise, according to an ICIS analysis. Life Sciences and its predecessor, LS9, had spent years developing strains of E coli that could produce oleochemicals of lengths of up to 18 carbon atoms by fermenting sugars. These oleochemicals give Genomatica a third group of renewable chemicals. Right now, the company is developing microorganisms that can produce C6 chemicals such as caprolactam (capro) and C4 chemicals such as butanediol (BDO) and butylene glycol (BGO).

Right now, oleochemical plants make a mixture of molecules that have varying lengths. Life Sciences has developedstrains of E coli that can produce tailored cuts of oleochemicals, whether it is C8, C10, C12 or higher. Looking ahead, Genomatica will continue the cellulosic biodiesel research programme that REG had earlier started with ExxonMobil. Genomatica is also intrigued by work REG had done in flavours and fragrances, which would be a new market for the company, Schilling said. A lot of this work revolves around musk-fragrance molecules. Still other promising products include molecules with functional groups on either end. In other cases, the placement of double bonds can vary within the molecule. [As I have noted before, someone’s going to get rich from this LS-9 work. Let’s see if it’s going be the Genomatica shareholders. ]

[caption id="attachment_1435" align="aligncenter" width="600"]Someone's Gotta Get Rich - Right?[/caption]

Toward the end of June, the talented and very plugged in, Judith Taylor reported on the detergent-range alcohols market. She noted that finished business for the mid-cuts is edging lower from the second quarter but not as deeply down as some market participants expected. Palm kernel oil (PKO) feedstock volatility that dominated second-quarter contract discussions abated in the third-quarter negotiations but continues to influence the natural alcohol price perspectives. Market participants said synthetic alcohol supply is readily available. Prices on the synthetics are said to be competitive with the natural alcohols for the third quarter. Second quarter C12-15 alcohol contracts were assessed at 68-77 cents/lb bulk delivered.

Over in Europe, Melissa Hurley noted that European ethylene oxide (EO) contract prices for July fell by double digits, following the steep decrease in the upstream ethylene contract which emerged.. The European ethylene contract reference price for July has been agreed at €1,000/tonne, down by €75/tonne compared with June on Friday. European July EO contract prices dropped by €62/tonne on both ends of the range, bringing prices to €1,281-1,449/tonne free delivered (FD) northwest Europe (NWE).

So, what else is new? A few things caught my eye this month.

First BASF is putting a renewed push on an old product, sulfonated fatty acids. In particular disodium 2 sulfolaurate, the subject of recent BASF patent filings (e.g. http://www.freepatentsonline.com/20180338898.pdf ) . BASF additionally claims to have developed a new manufacturing process to give high yields of light colored fatty acid sulfonates. There’s not a lot of material out there from BASF yet on this product, but it looks to me like it could be very low cost, especially if existing sulfonation assets can be used in its production. Let’s see

Kao (the vertically integrated consumer products and surfactants supplier) is now commercializing their Bio-IOS, an internal olefin sulfonate for use in detergents. In fact the product is already formulated in Kao’s Attack – Zero detergent. Read more here (https://www.kao.com/global/en/news/2019/20190123-001/ ) . Interestingly the product is based on C16’s and 18’s found in palm stearin, which means potentially low cost and biorenewability. Relevant patent activity includes: https://patents.google.com/patent/WO2014046175A1/en and https://patentimages.storage.googleapis.com/31/87/cf/65964681dc0e27/EP2899258A1.pdf

I think that both of the above are notable in that they represent potentially very low cost options for renewable with minimal registration barriers to commercialization. Keep a close watch!

[caption id="attachment_1436" align="aligncenter" width="1024"]Barriers Easily Cleared[/caption]

Finally, Early July, INEOS announced a big US project. A circa 520,000 MT/yr Ethylene Oxide (EO) unit and associated downstream Ethylene Oxide Derivatives (EOD) unit, to be built at INEOS’ Chocolate Bayou manufacturing works south of Houston on the Gulf of Mexico coast. Chocolate Bayou is currently host to two Olefins crackers, two Polypropylene units and two Cogen facilities operated by INEOS O&P USA. A new Linear Alpha Olefins unit and associated downstream Poly Alpha Olefins unit are also currently under construction at the site by INEOS Oligomers. More on this next month.

That’s it – all news. If you want opinion and musings check out our companion Independence Day Post.

Surfactants Monthly Review – July 2019

Surfactants Monthly – July 2019

Happy summer. It’s hot and humid, as it should be, on the East Coast. Down the shore, there’s the occasional cool breeze and chilled brew to provide relief. By the way, did you know there are some tremendous beers being brewed now in NJ? Kane and Icarus are world class, in my amateur opinion.

[caption id="attachment_1457" align="aligncenter" width="1024"]Silly Name. Outstanding Beer.[/caption]

There’s a lot going on at work but not that much I can talk about just now, so I’ll plug the fact that we have been working hard to bring you an outstanding program of surfactant events in Amsterdam (September 18 – 19), Mumbai (October 17 – 18) and Singapore (November 14 – 15). I should also mention that directly after Singapore, we head to KL, where arrangements have been finalized for the P2 Science triple header speaking engagement at PIPOC with Anastas, Foley and Burns on the podium (spread over 3 days you’ll be relieved to learn). I’ll also note that we have recorded a few new videos including a series with ICIS which is being released in parts over a month or so (and quite professionally produced I have to say, because they’ve managed to make me look and sound cogent and articulate).

End of Commercials. Start of News:

The month kicks off with the expected news that Arkema has completed the acquisition of US-based specialty surfactants firm Arrmaz (for an undisclosed fee.) ArrMaz offers tailored and sustainable solutions for customers in the crop nutrition, mining and infrastructure markets – as we reported last month.

"Present in North America, South America, Asia and in the fast-growing countries of the Middle East and Africa, ArrMaz achieves around $290m of sales," Arkema said in a statement.

So this is the latest in a long line of acquisitions for Arkema, stretching back for over 10 years. In fact in 10 years the company has added over 4 Billion Euros in sales – quite a big chunk considering they have 8.8 Billion Euros in sales today. An interesting outline of the strategy can be found on the website, here. And, you may not be familiar with their Surfactants and Additives business which includes surfactants polyols for applications like packaging, construction, agrochemicals and paints & coatings.

More in M&A : HB Fuller has completed the previously announced sale of its surfactants, thickeners and dispersants business to Tiarco, a subsidiary of Textile Rubber and Chemical Company, for $71m.The divested operations are a non- strategic and non-adhesive business Fuller acquired when it purchased Royal Adhesives & Sealants 2017. Fuller will use the net proceeds from the divestment to reduce its debt. Good for them.

Over in the LAB Asian Market - according to the latest data from ICIS Supply and Demand database – China LAB exports rose in May :

[caption id="attachment_1448" align="aligncenter" width="810"]Tarrifs be Darned..[/caption]

Back in the US ethylene oxide (EO) market, contract prices for June fell by 0.6 cent/lb ($13/tonne) on the back of a decrease in the June ethylene contract settlement. June EO contracts were assessed at 47.8-57.3 cents/lb FOB (free on board). US EO demand in polyethylene terephthalate (PET) remains weak for this time of year, according to ICIS. There may be limited upside in demand for pure EO derivatives as certain sectors have faced slower growth.

[caption id="attachment_1449" align="aligncenter" width="668"]Downward EO Trajectory[/caption]

We write a lot here about Sasol’s huge investment in Lake Charles, LA (see also below). But, just this month they opened a new 150,000 tonne/year alkoxylation plant at Nanjing in China’s Jiangsu province. The plant located at the Nanjing Jiangbei New Material Hi-Tech Park (formerly, Nanjing Chemical Industrial Park) reached “beneficial operation” in Aprilthis year. Construction of the plant, which is Sasol’s biggest expansion in Asia, started in June 2017.

The new plant can operate using either branched or linear alcohols to meet differentiated customer requirements in applications such as detergents, personal care, textile and leather, metalworking and lubrication, inks, paints and coatings, as well oil and gas, enhanced oil recovery and industrial cleaning, according to the company. The alkoxylation plant in Nanjing is the first fully Sasol-owned production facility in Asia. Sasol has been in China producing surfactants - including non-ionic alcohol ethoxylates, as well as anionic alcohol ether sulfates - since 1992 [I did not know that]

Elsewhere at Sasol, however, the company is projecting lower earnings for its fiscal year ending 30 June despite higher oil prices because of weaker chemical margins and cost overruns at its Lake Charles, Louisiana, cracker complex, according to ICIS. The firm is projecting a 4-14% year on year drop in earnings before interest, taxes, depreciation and amortization (EBITDA) compared to South African rand (R) 51.5bn ($3.63bn) during the previous fiscal year.

A 19% year on year increase in the rand price for Brent crude was offset in company performance by softer chemicals margins and expenses at the company’s Lake Charles Chemicals Project (LCCP).

An original cost estimate of around $9bn for the LCCP has ballooned since then to $12.6bn-12.9bn according to company estimates in May this year, due to engineering failures, worker absenteeism, and excessive rainfall. Sasol pushed backcompletion dates for the cracker and most of the downstream units by around five months in February. [Hey, I’m just reporting here. It gives me no schadenfreude or anything like that to note this. I ‘ve been there, believe me.]

The start-up sequence has been initiated at the cracker and the unit is expected online by the end of the month, keeping to Sasol’s revised timeline, but the low density polyethylene (LDPE) unit to be delayed by four to six weeks, as construction is not yet complete. The unit had been expected online in August.

The Ziegler alcohols production unit has also been hit by delays due to slower piping hydro-testing completion, which has pushed back the schedule by one to two months, from the estimated November start date, the company said.

Ethoxylate and Guerbet alcohols production units, expected online in December 2019 and January 2020, remain on track, Sasol added. The complex is overall 98% complete Sasol added, and linear LDPE and ethylene oxides and glycols units have already started up at the site.

An independent review [I’m not sure what that’s all about . All I could find is in the original press release ] of the project, announced in May when Sasol disclosed the latest cost estimates, is underway, with a report expected to be submitted to the board by the end of August this year.

In the ever-exciting and occasionally depressing, detergent range alcohol market, US C12-15 mid-cut fatty alcohol third-quarter contracts have fully settled, moving down 5 cents/lb on both sides of the assessed spread, as reported by ICIS. The C12-15 third quarter contracts were assessed at 63-72 cents/lb, bulk delivered. The assessment was down 5 cents/lb at the top and bottom ends from second quarter levels. Buyers and sellers said the assessed range was representative for most third-quarter contracts. There was at least one significantly lower outlier contract that settled below 60 cents/lb, but was not included as a factor in the assessment.

Low feedstock prices for palm kernel oil (PKO) were a factor in pushing down third-quarter contracts and remain a concern for natural alcohol price perspectives. A strong harvesting season is expected for palm oil and PKO, adding to already ample inventories. Market participants said synthetic [i.e. petrochemical] alcohol supply is readily available. Prices on the petros are said to be competitive with the natural alcohols for the third quarter. In the US, sellers’ contracts are on an account-by-account basis rather than announced price changes. The following graph shows price direction for the C12-15 mid-cut alcohol contracts.

[caption id="attachment_1450" align="aligncenter" width="668"]The laws of supply and demand, still working[/caption]

This month, Judith Taylor published one of her periodic and outstanding profiles of the fatty alcohol market. For the whole thing I have to point you to ICB, but I’ll give you a snippet “Lacklustre prospects for the remainder of this year are based on ample inventories of feedstock PKO, also supported by neutral demand factors in the US market and weak economics in the markets in the rest of the world. In the US, surfactant demand is holding steady. However, it is not boosting growth expectations.” [grist for your planning mill, I think]

[caption id="attachment_1451" align="aligncenter" width="320"]Important Crossing[/caption]

Jackie Wong also published a fatty acid profile. Again – just snippet here: “Fatty acids prices are likely to continue to face downward pressure from sluggish demand unless there is improvement to the current economic outlook.

China and the US may find a resolution to the ongoing trade war between both countries and that would provide a boost for the market, although the effects may only be felt towards the end of 2019.”

[caption id="attachment_1452" align="aligncenter" width="320"]Clear Trend[/caption]

Do you know I have 20 of those long sleeved sports shirts that Stepan gives away at the ACI. I recently took a bright red one on a cycling tour of Croatia in June. Its’ highly visible and wicks the sweat away very nicely. The green one, I wear pretty much every St. Patrick’s Day. Most of the others I wear at work so frequently that many folks assumed I worked there at some point. Far from it. Anyway, not sure why I told you that, except to highlight that I have a fondness for Stepan not least because of the shirts but also by virtue of having competed with, bought from and supplied to the company over the years.

So I was a bit disappointed to see that Stepan’s second-quarter net income fell year on year as a result of lower surfactants volumes and currency “headwinds” [headwinds? Is that a thing. I don't remember that from my Forex class].

Here’s the box-score:

Stepan ($)Q2 2019Q2 2018Change

(%)

Net sales473m520m-9Operating income41.1m45.4m-10Net income30.2m33.5m-10

Key points

- Surfactants operating income dropped almost $2m year on year from $34.0m to $32.1m on the back of an 8% decline in global volumes and foreign exchange wiping out margin improvements.

- Stepan’s exit from its German sulfonation business in 2018 and lower personal care market demand weighed on division earnings.

- The operational issues at its Ecatepec, Mexico, facility has been resolved and the company expects its insurance provider to cover the issue, after equipment failure led to a $2.3m operating loss in the first quarter of the year.

- Polymer division operating income rose year on year due to higher volumes and slight margin improvements, while specialty product income rose on medium chain triglyceride volumes and margins.

Outlook

- The company remains optimistic about the 2019 performance, according to CEO F Quinn Stepan, who declined to give specific guidance on relative group year on year earnings projections for 2019.

- Polymer and specialty product division margins are expected to improve this year versus 2018, he noted.

My Prognosis – They’ll be back. There’s nothing systemic here.

As we noted in last month’s blog, INEOS is plunking down a chunk of change in the US, to build EO and EOD capacity. The company confirmed at the start of July that it wants to build a 1.2bn lb/year (about 520,000 tonnes/year) EO and derivatives capacity at Chocolate Bayou in Texas. INEOS has two steam crackers there as well as polypropylene and linear alpha olefins units. It says the EO and derivatives facility will reinforce on-site integration to the benefit of the crackers and the other plants on site. Interestingly, according to ICIS, the idea of an EO ‘campus’ is being floated similar to that at its major Oxides production site in Zwijndrecht, near Antwerp, in Belgium. It would provide the opportunity for third party players to co-locate and consume EO by pipeline. The company also has 200,000 tonnes/year of ethanolamines at Plaqemine in Louisiana, where it buys EO from Dow, and is one of the top three ethanolamine suppliers in the US.

Generally, INEOS is pursuing a strategy of downstream value addition. Over the past few years in Europe, for instance, INEOS Oxide has debottlenecked its downstream products and started up a sixth alkoxylation unit. It has significantly increased EO storage capacity at Zwijndrecht. In France, the company has acquired ethoxylates capacity from Wilmar which is connected by pipeline to the INEOS unit at Lavera. One of the company’s biggest ethoxylation plants is in Cologne, Germany, a significant unit with 150,000 tonnes/year of finished product. It is planning a seventh alkoxylation plant (AO 7) which will, almost certainly, be built in Antwerp.

Pushing downstream has certainly been a help with the market for monoethylene glycol (MEG) this year under extreme pressure – the start of 2019 was particularly difficult as far as margins were concerned. The idea clearly is to move further into markets that are less exposed to commodity cycles.

INEOS said in its second quarter trading statement, issued last week, that demand for the Oxide business was generally flat. It said profit margins had been impacted by reduced glycol margins “due to weak Asian demand”.

The agriculture, construction and consumer goods markets remained fairly robust while MEG took its downturn. “We are looking at market need (for purified EO and for derivatives),” their CEO, Graham Beesley, said, as well as INEOS’s own derivatives such as glycol, PEGs (polyethylene glycols) and ethoxylates.

“The customer base is very welcoming about [us] being a new producer,” Beesley said of the US investment plans adding that the company would like to replicate what is being done at Zwijndrecht where third parties take raw materials from INEOS Oxide to process further. Currently INEOS has about a dozen third parties on its Zwijndrecht site.

‘As we advance the project and move towards [a] final investment decision (FID) that will sharpen what the array and the capex is,” Beesley said of the US project plans. The project may be stage, also, with downstream units added before EO capacity starts up. INEOS Oxide is interested in having a more global footprint over the longer term possibly with production capacity in the Middle East and in Asia. INEOS Oxide would benefit from being ‘East of Suez’ he said. INEOS is currently looking into investing $2bn on a 2m tonne/year production complex in Saudi Arabia but Beelsley thinks that there may be other locations in the region that might be of more interest to the Oxide business. [That’s a phrase you don’t hear often “ East of Suez” – first coined by Rudyard Kipling (according to Wikipedia). Beesley’s in good company there alongside the author of the Jungle Book. ]

That’s it for July. We’ll do an August blog and then I’ll see you, perhaps, in Amsterdam.

Books, music, podcasts, TV this summer? I’d be interested to hear what you’re watching or listening to. I just finished reading The Once and Future King by T. H. White. First published in 1958, it’s about King Arthur and the Knights of the Round Table. It starts out as basically a kids book that covers the childhood of Arthur, then known as “Wart” and his adventures after falling in with an absent minded magician, Merlin. The second half of the book, however, when Arthur becomes king deals with incredibly weighty philosophical and metaphysical matters at a pretty high intellectual level (in your bloggers view, anyway). It deals with Arthur’s realization and that “might should not mean right”. Right should mean right and force should only be used in the pursuit of justice not in the pursuit of personal gain. This principle became his life’s mission and the underpinning of the development of English common law. This principle animated the creation of the round table and the initiation of the quest for the hole grail. I won’t retell the whole book here, but Wow! I had to remind myself that in fact Arthur was a mythological character. One who lives nonetheless in the collective psyche via archetypal stories like these:

and this from the 2017 movie

and, go on then..

I’ve also just started to dip into the work of Akira the Don. His picture is in the blog header. He’s a British DJ who has popularized, perhaps even coined, the term “meaningwave” for a style of hip-hop that mixes the words of certain modern philosophers / thinkers with various beats. It’s pretty weird stuff but I have to admit a certain fascination with this one. ….”If you have to choose.. be the one who does things…” Can’t argue with that.

Surfactant Monthly Review – August 2019

Monthly Blog August 2019

Back to work. Back to School. Back on the Road. September. Time to execute what you’ve been thinking about all summer. If it you don’t do it now, it won’t get done, because you don't want it enough. Let someone else who wants it succeed… sorry I’ve been listening to motivational lo-fi hip hop all summer. It gets a bit intense. More about that later.

Some folks didn’t wait until the end of the summer.

Oxiteno’s parent, Ultrapar is now looking at opportunities for investments in Brazil’s refining sector. The company,during Ultrapar’s Q2 earnings call, pointed to changes in Brazil’s oil and gas value chain in the wake of Petrobras’ exit from the refining business, along with divestments of Petrobras natural gas infrastructure assets. Any investment by Ultrapar would depend on opportunities to integrate refining with its downstream fuels distribution and storage businesses. The company is active in fuels and liquefied petroleum gas (LPG) distribution, and in bulk liquids storage - through its Ipiranga, Utragaz and Utracargo businesses.

[caption id="attachment_1497" align="aligncenter" width="764"]Finding the Right Combination in Brazil[/caption]

As for Oxiteno, it looks like they had a bit of a rough quarter. Figures are in millions of reais.

 As ICIS reported right at the beginning of August: A significant $1bn-plus ethylene oxide (EO) and derivatives investment in the US is the next publicised planned major strategic move for INEOS Oxide. The company confirmed at the start of July that it wants to build a 1.2bn lb/year (about 520,000 tonnes/year) EO and derivatives capacity at Chocolate Bayou in Texas.

INEOS has two steam crackers there as well as polypropylene (PP) and linear alpha olefins (LAO) units. It says the EO and derivatives facility will reinforce on-site integration to the benefit of the crackers and the other plants on site. The idea of an EO “campus” is being floated similar to that at its major Oxides production site in Zwijndrecht, near Antwerp, in Belgium. It would provide the opportunity for third party players to co-locate and consume EO by pipeline.

“We are looking at what’s going to make a worldscale unit for purified EO,” INEOS Oxide CEO Graham Beesley told ICIS after the announcement. Earlier, publicised capacity ideas had doubled. INEOS Oxide had been talking to customers and, being well received, was looking to maximise on the downstream advantage of adding value to its EO stream. The company has 200,000 tonnes/year of ethanolamines capacity at Plaqemine in Louisiana, where it buys EO from Dow, and is one of the top three ethanolamine suppliers in the US.

Adding capacity on a large integrated site, however, fits into the broader INEOS theme of running from upstream down to add value. Over the past few years in Europe, for instance, INEOS Oxide has debottlenecked its downstream products and started up a sixth alkoxylation unit. It has significantly increased EO storage capacity at Zwijndrecht. In France, the company has acquired ethoxylates capacity from Wilmar which is connected by pipeline to the INEOS unit at Lavera.

One of the company’s biggest ethoxylation plants is in Cologne, Germany, a significant unit with 150,000 tonnes/year of finished product. It is planning a seventh alkoxylation plant (AO 7) which will almost certainly be built in Antwerp.

INEOS Oxide is interested in having a more global footprint over the longer term possibly with production capacity in the Middle East and in Asia. INEOS is currently looking into investing $2bn in a 2m tonne/year production complex in Saudi Arabia.

[caption id="attachment_1480" align="aligncenter" width="540"]INEOS Bulks Up[/caption]

Speaking of EO: US ethylene oxide (EO) contract prices for July rose by 0.6 cent/lb ($13/tonne) on the back of an increase in the July ethylene contract settlement. July EO contracts were assessed at 48.4-57.9 cents/lb FOB (free on board). US EO demand into polyethylene terephthalate (PET) and other EO pure derivatives is steady, but has faced a delayed peak season and slow growth in demand.

More action in EO and M&A. Huntsman agreed sell its surfactants and chemical intermediates businesses, including LAB, Ethoxylates, propylene oxide and methyl tertiary butyl ether to Thai company, Indorama Ventures for $2.076bn. Indorama will acquire Huntsman’s US manufacturing facilities in Port Neches, Texas; Dayton, Texas; and Chocolate Bayou, Texas; as well as Ankleshwar, India and Botany, Australia. The transaction is expected to close near the end of the year, pending regulatory approvals. As I noted in our Vlog below, this feels like the end of an era. It’s also the major step by an Asian company into the US surfacants market, but not exactly the step I had predicted. That’s OK. Things continue to be exciting. Get smart. Get Savvy, Wake up early. Be prepared (sorry – there’s those motivational aphorisms coming through again. True though..)

On to the hydrlophobe side of the molecule, ICIS’ immensely talented and highly networked Judith Taylor, reported that US mid-cut fatty alcohols were stable in August and expected to remain steady throughout the third quarter. Good surfactant demand is upholding the third-quarter assessments for the mid-cut alcohols. Flat demand remains in place for the C16-18s and is not expected to change. Third-quarter contract prices were assessed down on high feedstock inventories for the natural alcohol sector and overall ready supply of both natural and synthetic alcohols in the US.

ICIS assessed the mid-cut C12-15 alcohol third-quarter contracts at 63-72 cents/lb, a 5 cent/lb drop on both sides of the spread from the second-quarter assessment. The heavy-chain C16-18 blended alcohol contract assessment for the third quarter also moved down. The ranges shed 1 cent/lb from the previous low and 2 cents/lb from the previous high for a 77-81 cent/lb third-quarter assessment.

The following graph shows price trends for the C12-15 mid-cuts and for the C16-18 alongside the comparative southeast Asian spot range trends for these alcohols.

Rumbles continue in the market about Asian natural alcohol producers cutting back on alcohol production rates in favour of other oleochemical products. Underpinning this move are the low alcohol prices now prevailing, especially in the mid-cuts. Only vague confirmation of Asian production changes or rates has surfaced in the US,  while low demand in China is cited as the leading factor for the Asian cutbacks. Comparative prices on mid-cuts and on the C16-18 blend reveal the US market continuing to be the most attractive global price option. This factor appears set to maintain throughout the third quarter and into the fourth.

The following graph shows the mid-cut C12-15 US contract prices alongside the natural C12-14 spot prices in southeast Asia and the European C12-14 alcohol range assessment.  Please note the European price is given in US cents/lb for this chart.

In the US, Following several quarters of short supply, mid-cut synthetic alcohol production has improved during Q3 2019. This has added supply into the US domestic market as well as offering material into Europe to sustain requirements following the closure of alcohol production at the Stanlow refinery in the UK.

Sasol’s asset struggles continue as the company resumed start-up at its 1.5m tonne/year ethane cracker in Lake Charles, Louisiana.

The issue that initially interrupted start-up activities has been resolved, and a beneficial operation test run is halfway complete, the company said. Sasol defines beneficial operation as production of on-spec material for at least 72 hours continuously. On Saturday August 24th , the cracker produced ethylene that meets the requirements of some downstream derivative units but is "marginally below" polymer-grade specification as the acetylene reactor system is not performing up to expectations, the company said. Sasol is upgrading the ethylene to specification. The cracker is running at 50% and will ramp up further as operational issues are resolved, which Sasol said is in line with its plan.

The delay in the cracker has delayed the start-up of derivative units at the Lake Charles Chemicals Project (LCCP). The 420,000 tonne/year low-density polyethylene (LDPE) plant, which was previously pushed back to mid-October, is now expected to achieve beneficial operations in November. The Ziegler alcohols production unit and the ethoxylates unit should achieve beneficial operations in January 2020. The Guerbet alcohols unit should achieve beneficial operations in March 2020.

[caption id="attachment_1484" align="aligncenter" width="530"]Struggling in Louisiana[/caption]

What else? I guess I missed this but back in June, Ajinomoto announced that they are planning to build a facility to produce surfactants from amino acids derived from plant-based resources. The new plant at Pederneiras, Brazil will cost approximately $21 million and begin production in fall 2020. The site will increase Ajinomoto’s production capacity for the surfactants, trade named Amisoft, by 60%. The new facility closely follows an Amisoft expansion at Tokai, Japan and is the largest investment in history of the company’s personal care business. Interesting.

Also – one of our favorite companies, Galaxy Surfactants of India reported a 15% year-on-year increase in net profit for the fiscal first quarter, which ended on 30 June. The company’s net profit reached 530 million Indian rupees ($7.3 million). Revenue was down 6.6% YOY to Rs6.6 billion owing to lower prices of fatty alcohol, a major raw material for the company’s performance surfactants.

The company’s production volume for the first three months increased 4.3% YOY to 54,767 metric tons. Performance surfactants volume remained flat at 33,771 metric tons. Specialty care product volumes increased by 11.5% YOY to 20,996 metric tons.

Another of our favorite companies Godrej Industries of India reported a 31% rise in net profit for its fiscal first quarter ended 30 June. The company reported a net profit of 1 billion Indian rupees ($14.3 million), compared with a net profit of Rs790 million year-earlier. Net sales stood at Rs29.4 billion, down 3% year on year (YOY). Profit before tax at the chemicals sector increased 41.6% YOY to Rs340 million, and sales at this sector was Rs4 billion, up by 4% YOY. The fatty acid business constituted 41% of sales; fatty alcohols, 30%; surfactants, 22%; and glycerin, 7%.

For more insights from India, you should join us in Mumbai, October 17th – 18th for our third conference there. But before that, of course, I’ll see you in Amsterdam.

Finally: New name, old company (Akzo Chemicals) Nouryon will invest €12m to double its capacity at its surfactants plant in Stenungsund, Sweden to support the growth of several existing products, the specialty chemicals firm late this month. The expansion will also support growth of several new sustainable technologies for markets including oil and gas, lubricants and fuels as well as asphalt. Not a lot of detail was given on chemistry. As far as I can glean the site does ethoxylation and makes amines and derivatives and so that is probably where they are expanding.

Did I ever mention that the first surfactant I ever touched, outside of my daily ablutions, was a Berol (Akzo) nonionic used as an Iron Blue pigment dispersant in my first job out of college at Manox in Manchester. Funny how some things stick in your mind. The sales-guy from Berol was Tony Service. Yes; his real name and aptly named. He was attentive, professional, unflappable and listened so intently that you could literally feel all the information in the room being sucked through his brain first; like an overzealous air-conditioner but the effect was anything but chilling. It was exhilarating and confidence building. With Tony for us, who could be against us. I’m serious. R&D at Manox was on a war footing 24/7. We needed to solve a problem before the company was crushed by a competitor with a superior product. I remember sitting in the lab one Saturday afternoon, hungover head in blue pigmented hands, after realizing we probably needed a surfactant but that the world of surfactants was improbably complex and nichey and hard to figure out quickly. My boss, on hearing the predicament, immediately relaxed and said “well, look lad, we’ll just call Tony on Monday and see what he’s got”. That’s it. Chaos begins to coalesce into some sort of order. Doesn’t every company wish that their commercial effort had a Tony Service; the first person you contact when a problem arises? Of course, but only one company, one person can be the first and you need to be that company, that person if you are to be all you can and should be. And you know what else, you don’t just wake up one morning and decide you’re going to be the Tony Service of your field. Maybe you could pull it off for a day or two but then you go back to your old comfortable ways and most people leave it there. 10% or less try again then 10% of those keep at it after failing twice and before you know it, there’s one guy left and he’s got his 10,000 hours under his belt and what started as a chore is now a good, unshakeable habit. I like to think that Tony actually started life as, like, Tony Smith. And after a decade of perfecting his craft, he actually earned his real name. I never asked him that. I didn’t have to. What would you be like if you earned your real name?

[caption id="attachment_1485" align="aligncenter" width="1024"]What Would You be Like?[/caption]

So wrapping all this up: Last month I mentioned that I’d just started digging into the works of Akira the Don and we sampled one of his meaningwave pieces. As alluded to in the opening paragraph, I spent August listening to everything of his that I could get my hands on. The dude is weird, of that there is no doubt, but some of these mash-ups of anime, hip-hop and philosophy are really quite moving. We had a management retreat earlier this month at P2 and I played a couple of the Don’s Meaningwave videos as a warm-up.

First this:

I love this idea of “what would you be like?” (see Akzo-Berol true story above) . It’s worth thinking about.

Then this: where he mashes “a spaceman came travelling” with a gut-wrenching anime and a challenging message.

Honestly, just in your day-job, making, using or flogging surfactants, the things that you and you don’t are more important than you think. Are you ready to act accordingly?

And then to actually kick off the meeting, I played this. Rudyard Kipling needs no introduction:

Every line, of course, is bursting with meaning but it’s that last one that really fit the occasion. “If you can fill the unforgiving minute with 60 seconds worth of distance run, yours is the earth and everything that’s in it…” In this coming week, if you spent just one day – not even – just one morning focused on what you came to do, trying as hard as you can, no distractions, no facebook, no instagram, no idle chit chat, no daydreaming, just being present, mindful and there to do what you came to do. What would you be like? Like Tony, actually.

Surfactants Monthly Review – September 2019

September Monthly Surfactants Review

Last month’s blog attracted a lot of very positive feedback. Thanks for that. The story of Tony Service certainly seems to have inspired many people and that makes me feel very good, for obvious reasons. Now, Tony was in the commercial field. There are clearly Tonys or Tonyas or Rishis out there who are in manufacturing, finance, R&D, whatever. Have you ever known one? If you’d like to share the story, I and the blog readers would love to hear it, I’m sure. Please get in touch. Let’s see if we can make this a periodic feature. What would you be like if you worked to become the Tony Service of your field / industry / hobby?

[caption id="attachment_1502" align="aligncenter" width="450"]What would you be like?[/caption]

Now the news; provided largely by the good folks at ICIS. If you like this information, you should subscribe to their service, like I do.

The month started with news of the Q4 fatty alcohol contract negotiations from ICIS’s Judith Taylor as she reported that US mid-cut fatty alcohols were mixed as contract negotiations were slowly emerging for Q4 business. Judith noted that several producers were looking at potential rollover from Q3 prices. A few buyers considered this a possibility, but more input suggested a slight edging down from Q3 levels for the mid-cuts. Third-quarter contract prices were assessed down on high feedstock inventories for the natural alcohol sector and overall ready supply of both natural and synthetic alcohols in the US market.

ICIS assessed the mid-cut C12-15 alcohol Q3 contracts at 63-72 cents/lb ($1,389-1,587/tonne), a 5 cent/lb drop on both sides of the spread from the Q2 assessment. The following graph shows price trends for the C12-15 mid-cuts alongside the C12-14 natural alcohol spot prices in southeast Asia. The US C12-15 carbon spread seeks to include synthetic alcohols by showing the extra carbon unit.

[caption id="attachment_1503" align="aligncenter" width="668"]The trend is there..[/caption]

In the US, synthetic (petrochemical) alcohol production is another supply route for mid-cut alcohols. Following several quarters of short supply, mid-cut synthetic alcohol production improved during the third quarter. This gave ready supply into the US domestic market as well as offering material into Europe to sustain requirements following the closure of alcohol production at the Stanlow refinery in the United Kingdom. Entering the Q4 contract negotiations on the mid-cuts, buyers commented about being approached by synthetic producers for the first time in a number of quarters.

These early actions on Q4 volumes caused several buyers to say that sharper competitive activity could develop between the natural alcohol importers/sellers and the synthetic alcohol producers. Some sources speculated that more synthetic alcohol is in the market because less volume is going to Europe. Other sources said synthetic producer expansions are becoming active, bringing more alcohol into the market. Judith ends the article by noting that “Synthetic producers do not comment on market activity or on alcohol production output.” [That’s because they are smart..]

[caption id="attachment_1504" align="aligncenter" width="1024"]Shell's Spokesman..Strong, Silent.. and Smart[/caption]

It’s rare that we read about patent battles in the surfactants industry, so it is with great interest that I read the following as reported by ICIS. PCC Exol said late on Thursday that it will fight a lawsuit filed by US company HH Technology Corpthat alleges the violation of an alkoxylates production patent. In a note to investors, PCC Exol said that it had received a notice from Wroclaw District Court in southern Poland stating that HH Technology Corp has requested an order that demands Exol cease violating the terms of a patent on a “method for producing alkoxylates and a device for carrying out this method.”

The plaintiff, added Exol, in particular wants to “prohibit PCC Exol from offering and marketing alkoxylates based on fatty alcohols and order PCC Exol to withdraw from the market alkoxylates or products derived from the use of these alkoxylates”. HH Technology also wants the Polish company to pay a sum corresponding to the amount of damage HH Technology has suffered as a result of the infringement of the patent, the note added. PCC Exol, headquartered in Brzeg Dolny, southwestern Poland, said it would fully dispute the claims made by HH Technology. The Duisburg, Germany-based PCC conglomerate, which has operations in 17 countries, owns PCC Exol.

Now, I don’t have any other details beyond what is reported but as we know, HHT is a process technology company providing key equipment and engineering to companies in the alkoxylation and other areas. PCC is a diversified Polish / German company, involved in chemicals, logistics and of course, surfactants. Process technology patent breaches are tough to prove, unless you are dealing with unique products unable to be produced without that particular technology. Ethoxylates, I don’t think are that type of product. So HHT, I’m speculating, must have had some inside knowledge of some sort. A spy? A whistleblower (aren't they like the same thing?) Maybe a former business relationship gone sour? In any event it is a tough decision for a company to sue a customer or potential customer. We’ll only know the full story if this dispute actually goes to court, so stay tuned I guess.

[caption id="attachment_1505" align="aligncenter" width="780"]Mmm.. so tell me more about that spray nozzle[/caption]

In early September, ICIS reported that August ethylene contracts have not fully settled and will likely be part of a two-month settlement in early October, amid mixed views about production costs. Feedstock ethane prices have risen on strong demand and higher ethylene spot prices. Demand for downstream monoethylene glycol (MEG) from the antifreeze sector is beginning to pick up ahead of the colder winter months, while the derivative polyethylene terephthalate (PET) peak bottled drink season is tailing off. Downstream diethylene glycol (DEG) demand is slightly lower than expected in downstream surfactants, including ethoxylates, and polyols.

Not purely surfactant related but fatty acid related and interesting: A technical fellow [notice how that title depends on where you place the emphasis. You put it on the first word “technical” and it sounds like any one of thousands of folks in the lab. On the second word, and suddenly we’re talking about a superstar] at Chemours has received an award for his work in developing a durable water repellent that is nonfluorinated and made with renewable feedstock. John Sworen received the SCI Gordon E Moore Medal from the Society of Chemical Industry (SCI), America Group. Sworen led the team that developed the repellents. Chemours's new water repellent, called Teflon EcoElite, stands out because it is non-fluorinated and made with renewable materials. Chemours would not provide much details about the chemistry of Teflon EcoElite. It did say that the raw material is plant based and would be classified as a fatty acid polyester. Altogether, Teflon EcoElite has 63% renewably sourced content, the company said. It is already being used by Colmar, an Italian company that makes ski-wear and other sports apparel.

[caption id="attachment_1506" align="aligncenter" width="555"]..And 63% natural[/caption]

In the latest on the tariff wars, China will exclude 16 products from a 25% additional tariff on US goods for a year starting from 17 September 2019 to 16 September 2020, ICIS reported. The listed products are mostly covered in China’s tariffs on $16bn of US goods enacted on 24 August last year. Under the arrangement, importers can get paid tariffs refunded for a number of products, one of which is HS code 34021300 – nonionic organic surfactants, because clearly they are needed and US production is very competitive.  So – what are you waiting for..?

[caption id="attachment_1507" align="aligncenter" width="720"]You want your money back?[/caption]

Mid-month, Evonik announced that they expanded production capacity for the C13 alcohol isotridecanol (ITDA) at the Marl site in Germany. Evonik said the expansion driven by higher market demand and represents a strengthening of its production verbund at the Marl chemical park - from raw materials to niche specialty products. The company did not comment on the scale of the expansion or the size of the investment involved [because they, also, are smart].

And in somewhat embarrassing news, Sasol has delayed the release of its fiscal 2019 results again because of an investigation into cost overruns at its new Lake Charles cracker and olefins project, stating that the results will be out no later than 31 October, according to an announcement by the company. The company said in mid-August that it was delaying the release of fiscal results because it needed more time to assess the situation at its Lake Charles, Louisiana, cracker and petrochemicals complex.

ICIS’s Nigel Davis wrote an excellent article on Huntsman’s strategy after the disposition of their surfactants business to Indorama recently. Here’s a couple of snippets:

Peter Huntsman noted that “If Huntsman can go further downstream, it can capitalise on ingenuity, creativity and speed to market”.. The competition downstream for Huntsman is not with big suppliers of polyurethane intermediates, for instance, but with polyurethanes systems houses around the world who themselves are smaller, more nimble entities.

Huntsman will become an Indorama customer and a manufacturing partner with long-term supply arrangements of intermediates including propylene oxide. The move is seen by Huntsman as part of its strategy to focus downstream and on specialties where it expects to generate more stable margins and consistent free cash flow. Peter Huntsman is not really a fan of organic capital investment [Well at least he’s honest!] given the potential returns. That having been said, the company is investing $125m in its Geismar facilities in Louisiana on a new MDI (methyl di-phenylene di-isocyanate) splitter. It will increase the company’s flexibility for producing higher margin MDI for the Americas market and a similar split ratio to existing facilities in Europe and China. The internal rate of return on the project is said by the company to be substantially higher than 20%.

Later in the article, Peter notes that innovation seems to be rewarded more in Europe than other places, particularly China [I do know what he means]. He also noted that a big strategic acquisition is not on the cards as they might need they need the money to weather a 2008 style recession [You’ve been warned!].

[caption id="attachment_1508" align="aligncenter" width="1024"]It's better downstream[/caption]

In contrast, right at the end of the month, BASF told ICIS that they are significantly expanding  ethylene oxide (EO) and derivatives complex at the Verbund site in Antwerp, Belgium. The investment is expected to exceed €500m and will increase production capacity for EO and downstream products by 400,000 tonnes/year. BASF is the largest EO producer in Europe, with combined output of 845,000 tonnes/year from sites at Antwerp and Ludwigshafen, Germany. The expansion will entail a second world-scale ethylene oxide line, with capacity for purified EO, as well as several EO derivative plants including a non-ionic surfactants, glycol ethers for automotive applications and other downstream alkoxylates. Sequential start-up of new capacities at the site is expected to begin in 2022.

In news from the feedstocks front, ExxonMobil has begun construction on its 350,000 tonne/year linear alpha olefin (LAO) unit in Baytown. The new unit is expected to start-up in 2022, the company said.

Finally, Colonial Chemical, a blog favourite, has opened an office in Shanghai, China. It will help sell and distribute the company’s products in mainland China and work with local raw material suppliers.

So that ends the news. Music-wise, I’ve been spending a lot of time this month digging into the back-catalogue of Deep Purple and, thereby, Rainbow and, yes even Whitesnake. I feel like we need a whole separate blog on this rich vein. So maybe the year end. In the meantime, I just want you to listen to this guitar solo that is often hidden in the shadow of the vocal histrionics for which the song is known. We pick it up right where Richie Blackmore comes in..

I've always found this solo really upbeat and almost jaunty in contrast to the rather deep and foreboding song itself. Notice how theres's a hint of the intro to Lazy in there as well some classical riffs. In fact we could do a whole blog on this guitar solo, if we wanted. OK, so year end we'll do this.

What else? Well, in Amsterdam this month we had a packed house for the 8th European surfactants conference and I encouraged our group to stay authentic, by aligning what they think, say and do, oh and to er.. read People Magazine.

Yes that’s right. I read People Magazine. There, I’ve said it. It’s out there on the internet now. Carve it into the blockchain if you like. I don’t care. I read it every single week. It comes to our house, on paper, and I study it like scripture, from the 100 most beautiful people, to the latest red carpet looks to how I lost 80 lbs and found the bachelorette of my dreams. Do I read it because.. I like it? (not really), it’s entertaining? (meh) it’s interesting? (kinda), informative? (yes!). People informs you about the (mainly American) culture. Now wait a sec, let me stop there. This is sounding like an "I only read Playboy for the articles" type of argument. If I only read People because it's informative, then I must like it because, presumably, I like to be informed. Therfore I read People, becasue I like it. OK - glad that's off my chest, Now, You may not like what People says (“Meghan Markle’s cute nickname for Archie”) or how they say it (“Kylie Jenner- I’m sick!”) but this paper is read by 98.5 million people a week[1]. That beats your precious Economist ( 1.7 ), New Yorker (1.2), even Time ( 17.2) and Newsweek (Apparently it still exists).

[caption id="attachment_1509" align="aligncenter" width="768"]The Big Voice of the Culture[/caption]

Something with that deep a reach, reflects the culture and the culture reflects it. You may not like it, but – it does. I’m not saying it’s the comprehensive profile of American culture. I’m saying it reflects and shapes a huge chunk of the culture – and it’s a chunk I bet you really don't know or care much about – because, you know, it’s kinda low-brow right?. You’re above that sort of thing. What J-lo wore on the red carpet or what Princess Kate wore on back to school day. What Kim is saying about criminal justice reform (wait what? – don’t pretend you don’t know who Kim is. If you even occasionally read this blog, you know who Kim is).

[caption id="attachment_1510" align="aligncenter" width="992"]You may not like it but...[/caption]

In fact you probably pride yourself in not knowing this stuff. I remember when a large consumer goods company signed Kendall Jenner to shill for them. I called my contacts there to congratulate them on what I thought was a shrewd move by the company in signing the highest paid model on the planet[2] (blog favourite, Gisele, is #5 by the way). To a man (and woman) they claimed to have no knowledge of who in fact, this Kendall Jenner is. They had to google her – “isn’t it a bloke’s name?..”. I’m still skeptical and I think they knew but it was not cool to know in their circle…so.. have you ever done that? Acted dumb when all around you are dumb? In this case, though it was acting dumb to appear smart, or something like that. I guess it’s better than acting smart when you’re not particularly. That never ends well (in my brief career of trying it). Best to do neither. Relax. If you are reading this blog, you are really, really smart. Really.

[caption id="attachment_1511" align="aligncenter" width="1024"]Highly Paid, Really Smart and Wearing Versace[/caption]

Anyway, back to People magazine, - you should know and care about this large slice of the culture. Why should you care? If you work at L’Oreal you already know what I’m talking about. They, along with others at the front end of our value chain, spend boatloads of money advertising in People and like-minded outlets. Let’s take a look at just this current, October 7th, issue of People.:

[caption id="attachment_1520" align="aligncenter" width="765"]Felicity, George, Renee, Meghan, Procter and Gamble[/caption]

Page 5           L’Oreal (and p. 109 and the back cover)

Page 13         J&J

Page 17         Boots, Skincare

Page 26         Church and Dwight (and p. 38)

Page 40         Colgate

Page 57         P&G (Sulfate Free Shampoos!)

Page 58         Meghan Markle (there’s no People without Meghan it seems)

Page 107      Pfizer Consumer

Yep, there’s sulfate free (P&G p.57) and alcohol and fragrance free (L’oreal, back cover) and that is just the ads from our industry colleagues. The EWG (Environmental Working Group) is in there – also on Page 57 in the P&G ad. There’s nothing wrong with this. Consumer products companies have to meet consumers where they hang out and talk to them in the language they understand. People is a huge part of that scene. That’s why you should read it. And you gotta know how the other half thinks anyway, because, first, it’s probably more than half and you live and work with them. You’re in this culture. And again, you may not like it but ..may as well learn some of the local customs.

Another thing you should do. Come to our conferences in India and Singapore where we dig into the matters noted in this blog and many more besides. Perhaps I will see you there?

Neil

[1] https://www.statista.com/topics/1265/magazines/

[2] Forbes Magazine, December 13, 2018

Surfactants Monthly Review – October 2019

Surfactants Review- October 2019

October was notable for a few things. First for our 3rd Indian surfactants conference in Mumbai. Second for the denoument of a major (non-surfactant related) scandal I’ve been following (WeWork) and third for the completion of a major project I’ve been working on, which it looks like I won’t be able to talk about until next month’s blog, because the actual press release isn’t out yet. So – this just to remind you that we don’t publish behind the scenes news or gossip here. Everything here is already public domain. Of course, the opinions, I like to think, are original, but even there, we stand on the shoulders.. right?

Nonetheless we have a few interesting snippets of news for the month. Here we go.

First some economics:

All businesses involved in international trade should be aware of the wider impact of the current trade war on economic activity. The Wall Street Journal noted in an opinion piece titled “Adam Smith’s Revenge” a few days ago “The great counterfactual of the Trump Presidency is how much faster the economy would be growing without the damage of his trade protectionism. Wednesday’s report of lackluster 1.9% growth in the third quarter shows again that you can’t escape Adam Smith’s revenge for indulging in bad economic policy for political goals.”

[caption id="attachment_1534" align="aligncenter" width="1024"]He Told You So[/caption]

Having said that, leave it to the comments section to point out that we should not just be focused on some near term discomfort .. “Re-ordering our unfair and disadvantaged historical trade arrangements with China using tariffs is in our long term interests. Those wringing  their hands over short term inconveniences during this transitional period are short sighted. We must require China to deal with America and the rest of the world as a mature economic trading partner. The special treatment during it's climb out of 3rd world status resulted in trade policies that no longer apply. Better to have economic warfare with China now than the much less pleasant kind later…” Fair point.

So... what is it good for?

Whilst sympathetic to issues of national security and intellectual property protection, as noted above, the rhetoric and activity around the “trade war” leave me a little uneasy. Joe Chang has produced an excellent status report on the US-China tussle in chemicals. The direct impact on surfactants is not large. Round 3 tariffs on the US side impacted surfactants but volumes are not significant as the graph below shows.

[caption id="attachment_1533" align="aligncenter" width="893"]The Impacts of  a Trade War[/caption]

In news obliquely related to Oxiteno: Ultracargo of Brazil announced a new CEO. Decio de Sampaio Amaral will become executive officer and CEO at Ultracargo on 1 January 2020, the Brazil liquids storage company announced. With more than 28 years of experience in logistics, supply and project management, de Sampaio Amaral most recently served as CEO of Camargo Correa Infraestrutura. Ultracargo is a subsidiary of the Brazilian conglomerate Ultrapar, which also owns surfactants producer Oxiteno.

In the world of detergent alcohols, ICIS editor, Lucas Hall has taken over from the legendary Judith Taylor who has retired after 21 years on the alcohol beat with ICIS and predecessors.

At the beginning of the month, Lucas, in a superb article, commented that fatty alcohol contracts were assessed mostly flat to down. Although domestic demand is healthy, contracts faced downward pressure amid ample supply to meet domestic demand as well as lower feedstock costs in southeast Asia.

Fourth quarter C12-C15 mid-cut contracts settled anywhere from a rollover to down 3 cents/lb ($66/tonne) to 61.50-70.50 cents/lb on a delivered (DEL) basis. Despite healthy demand, lower fourth quarter contracts largely decreased because of high feedstock inventory levels and lower feedstock prices in the natural alcohols sector. However, some contracts decreased because of ready supply of both natural and synthetic alcohols in the US market.

Following several quarters of short supply, mid-cut synthetic (i.e. petrochemical) alcohol production improved during the third quarter. This gave ready supply into the US domestic market as well as offering material into Europe to sustain requirements following the closure of alcohol production at the Stanlow refinery in the United Kingdom. Entering the fourth-quarter contract negotiations on the mid-cuts, buyers commented about being approached by synthetic producers for the first time in a number of quarters, putting downward pressure on contract prices despite healthy demand. These actions on fourth-quarter volumes could prompt sharper competitive activity to develop between synthetic and natural alcohols players, pressuring prices further. Some sources have speculated that more synthetic alcohol is in the market because less volume is going to Europe. Other sources said synthetic producer expansions are becoming active, bringing more alcohol into the market.

Fourth quarter C16-18 contracts largely settled at a rollover, with some contracts slightly down. Although domestic demand is healthy, contracts faced downward pressure from lower feedstock costs in Asia and ample supply. C16-18 blended alcohol demand is slightly lower amid higher inventory levels, prompting some contracts to settle slightly lower in the fourth quarter.

The following graph shows price trends for the C12-15 mid-cuts alongside the C12-14 natural alcohol spot prices in southeast Asia. The graph also shows price trends for the US C16-18 market alongside spot prices in southeast Asia.

[caption id="attachment_1531" align="aligncenter" width="668"]Price Trends in Alcohols[/caption]

Meanwhile in Europe, ICIS’ Melissa Hurley reports that ethylene oxide (EO) market sources envisage the relaxed supply and demand conditions to continue. Despite short-term challenges surrounding demand, the current supply in Europe is expected to outstrip demand by 2028 according ICIS data projections. There have been several announcements to expand capacity in Europe from suppliers.

[caption id="attachment_1532" align="aligncenter" width="719"]How EO Demands Stacks Up[/caption]

Here’s a company, I’m pretty sure we have never mentioned in the blog. That is the Maroon Group .ICIS reports that since being acquired by private equity (PE) group CI Capital in 2014, Maroon has become extremely acquisitive, buying nine distributors which have helped grow sales from around $100m to pro-forma $500m for 2019. The group’s merger and acquisitions (M&A) strategy saw it focus first on core areas and geographies before moving further into specialties and new territories.In 2014 Maroon Group was focused on coatings, adhesives and sealants (CASE) plus plastics. Its heavy focus on industrial end markets meant it was heavily reliant on automotive, housing and commercial construction. It was a regional US business with the vast majority of revenue coming from the mid-western US. President and chief operating office, Mike McKenna, said: “With the PE partner in place we made the decision to not only focus on organic growth in CASE and plastics, but to add strategic acquisitions. For our first 37 years we never made an acquisition, then we achieved nine in the space of five years. It’s been a massive evolution for us.” Interestingly enough, I met Mike a few weeks ago at an ICIS Advisory meeting. He’s focused on growth; the customer base has grown from 700 to 4,700, and on surfactants. You should read the whole article. This is a company to watch as it expands into Canada, with the acquisition of Cambian and has its eyes on overseas opportunities.

In one of their periodic and interesting pieces on M&A, ICIS had some great commentary from Frederico Menellas of Rothschild, who says, in part “….Great strategy beats great markets…” [In some cases, yes, but then again, I’d rather be lucky than good]. He goes on to cite former surfactant producer, Huntsman as an example: …once a highly diversified commodity and intermediate chemical company, Huntsman is slimming down with the planned $2.1bn sale of its intermediates and surfactants business to Thailand-based Indorama Ventures to focus on polyurethanes (PU), including further downstream to PU systems houses… “It’s not just about cutting costs but improving pricing and delivery, managing inventories and producing more efficiently,” said Frederico. “If you can build or acquire a system that enables dynamic pricing, you can scale this - graft it onto existing structures - to be able to price on the basis of value to the customer rather than cost,” [Now I’m with you]

[caption id="attachment_1535" align="aligncenter" width="735"]Huntsman Focuses[/caption]

I don’t normally write about what happened at my conference because, you know “you gotta be there”. However, ace ICIS reporter Yuanlin Koh, penned a superb analysis of the the Indian LAB market based on what she heard in Mumbai, do I thought I would go ahead and excerpt a few pieces, as it’s already out there.

Yuanlin says that India’s linear alkylbenzene (LAB) players are bullish about market prospects despite a slowing economy. Consumption for is expected to remain strong in developing economies like India, where annual demand growth is projected at 5%, according to market players at the recently concluded ICIS surfactants industry conference in Mumbai. A growing middle class population in both urban and rural areas remained the strongest support for downstream use in the industry, they said. Swacch Bharat Abhiyan or The Clean India Movement also played a major role in boosting surfactants' consumption.

For the first seven months of 2019, India's LAB imports stood at 152,832 tonnes, representing a 21% increase from the same period last year, according to ICIS demand and supply database. Monthly LAB imports so far in 2019 have mostly posted growths on a year-on-year basis.

[caption id="attachment_1536" align="aligncenter" width="752"]Not enough domestic capacity[/caption]

Higher imports was partly due to shortage of domestic supply as most domestic plants were undergoing turnarounds during the period, with some prolonging/delaying their shutdowns either because of feedstock issues or facility troubles.

LAB import prices this year have been hovering below $1,200/tonne CFR (cost & freight) India, according to ICIS data, partly weighed down by weakness in the Indian rupee against the US dollar. India’s LAB import volume has been rising despite the general decline in the country’s overall value of chemical imports amid domestic economic weakness.

[caption id="attachment_1537" align="aligncenter" width="668"]Worth importing[/caption]

The south Asian economy is projected to grow at a slower rate of 6.1% in the fiscal year ending March 2020 compared with an earlier forecast of 7.0%, according to global financial stability watchdog, the International Monetary Fund (IMF). Economic growth will be supported by lagged effects of monetary policy easing, a reduction in corporate income tax rates, recent measures to address corporate and environmental regulatory uncertainty and government programmers to support rural consumption, the IMF stated. In September, the country’s exports and imports fell the steepest in three years. Total imports for the month declined 13.9% year on year to $36.9bn, with those for chemicals recording a 16.2% fall.

I don’t usually consider propylene glycol to be a surfactant but it often ends up in many of the same formulas as surfactants and so I ready the following report by ICIS with great interest. Evonik and Dow are working together to develop an industrial-scale method of synthesising propylene glycol (PG) from propylene and hydrogen peroxide. The partnership will begin with a pilot plant being constructed at Evonik’s site in Hanau, Germany, by the end of 2020, with large-scale technical implementation to be rolled out in the following years.

Compared to the traditional process where propylene oxide (PO) is converted to PG using water, the new method of synthesis provides a high yield of PG for comparatively low energy consumption. As this process combines all reaction steps in a single reactor, then the need for investing in additional PO capacity would be eliminated as existing PG plants could be retrofitted for a competitive price. The production cost could also come down as only hydrogen peroxide and propylene would be needed as feedstocks. Around 1.9m tonnes of propylene glycol were used worldwide in 2018, which is used in the production of polyester resins and as a de-icing agent, as well as in food additives, and acts as a co-solvent in many home and personal care products.

In more project news from Sasol, the company delayed the planned start-up dates for its low density polyethylene (LDPE), ethoxylates, Ziegler and Guerbert alcohols plants at its Lake Charles, Louisiana complex, according to a company release on production and sales metrics.] The company anticipates reaching beneficial operations at its 420,000 tonne/year LDPE plant by the end of the fourth quarter of 2019. The ethoxylates plant at the Lake Charles Chemicals Project (LCCP) is anticipated to start-up in the first quarter of 2020 while the Ziegler and Guerbet alcohols plants are scheduled to start up in the second quarter of 2020, according to the company. As of the end of September 2019, construction progress at the site was 96% complete and overall project completion was at 99%, the company stated. Sasol is currently operating the 470,000 tonne/year linear low density polyethylene (LLDPE) plant at the site while the 1.5m tonne/year cracker is running at around 50% of capacity as the company works to improve the quality of ethylene production at the site.

Now in related news, the Wall Street Journal reported that in view of the major capex over-runs and delays in the Louisiana project, Sasol’s two co-CEO’s Bongani Nqwababa and Stephen Cornell are leaving the companyimmediately. Fleetwood Grobler (who many readers know), Sasol’s EVP Chemicals has been promoted to President. Brad Griffith (also well known to blog readers) has then been promoted to Fleetwoods vacated post as EVP Chemicals. Congrats to both. Steady hands on the tiller in turbulent times. Good for Sasol.

[caption id="attachment_1538" align="aligncenter" width="756"]New Sasol Management[/caption]

In palm sustainability news, if you are interested in some facts regarding the use of fire to clear plantation land in Indonesia, Wilmar has published an excellent briefing. You can download it here. One key point: Indonesian law actually allows the use of burning to clear land – not by large palm companies, but by smallholders (under 2 hectares) who are often not running palm operations. Read the whole document to get the full story. For more palm perspectives, don’t miss PIPOC in a couple of weeks where the two co-founders of P2 Science will speak along with a return speaking engagement for the CEO (that’s me).

[caption id="attachment_1539" align="aligncenter" width="594"]Not always what they seem[/caption]

In specialties : BASF has bolstered its production capacity for Alkyl Polyglucosides (APG), in Jinshan, China by an additional 10,000 metric tons, as part of the production improvement project announced in 2018. With this expansion, the company’s production capacity of APG in Jinshan, China is up from 20,000 to 30,000 metric tons. Moreover, BASF has already acquired the required approvals and prepared the basic infrastructure to swiftly scale up the capacity by an additional 10,000 metric tons, in the near future, thereby doubling the production capacity. This will enable the company to better support the market and its customer’s demand growth.

Finally, In their third quarter earnings report, one of the blog’s favourite surfactant manufacturers, Stepan ,attributed a decline in global surfactants operating income mostly to the company's exit from its sulfonation business in Germany in 2018; lower agricultural demand amid wet weather in the US farm belt this year; and weaker demand in the US commodity consumer end-markets.

Year to Date for Stepan: Reported net income was $81.1 million, or $3.48 per diluted share, versus $87.2 million, or $3.74 per diluted share, in the prior year. Adjusted net income was $93.7 million, or $4.02 per diluted share, versus $92.2 million, or $3.95 per diluted share, in the prior year. Total Company sales volume declined 3% compared to the first nine months of 2018. Sales volume growth within the Polymer and Specialty Product segments was offset by a 4% decline in Surfactant sales volume, or a 2% decline excluding the exit from the sulfonation business in Germany.

Now I normally let these earnings announcements stand on their own but this has quite a lot that ‘s worth unpacking so: First – getting out of sulfonation in Germany was an outstanding long term move by Stepan; proving that yes, in fact it is possible to close a sulfonation plant in Europe without the world actually ending. Good for them. Why torture yourself selling the lowest margin surfactants in the lowest growth, lowest profit markets in the world for surfactants. Second – the thing about the weather. I’m always a little skeptical when companies blame the weather for financial setbacks but this is legit. Flooding in the Midwest delayed and reduced the application of fertilizers (and with them their surfactant adjuvants) and this hit the results of DuPont, Corteva and others (according to the WSJ ) so, OK. Third the “weaker demand in the US commodity consumer end-markets”. This to me means laundry or at the very broadest, HPC (Household and Personal Care). This got me thinking. Is there a slowdown happening in these so-called consumer staples, perhaps where folks trade-down to private label products containing less surfactants. Or maybe just some make-vs-buy shenanigans going on with the soapers? Hard to tell honestly. My concern would be – is there a thrifty canary in the laundry coalmine? I recall this phenomenon in 2008 – 9 and the effect was not pretty although Stepan themselves weathered that storm pretty well.

[caption id="attachment_1540" align="aligncenter" width="576"]Return of the Thrifty Canary?[/caption]

Higher inventory-related costs associated with the company's internal Asian-US supply chain - estimated around $2m - as well as the lingering impact of an equipment failure at its Ecatepec, Mexico, surfactants plant also weighed on the third quarter, said the company. The Ecatepec facility has returned to full operations.

Slowing market conditions (there’s that canary again) caused weaker performance in North and Latin America, despite the pass-through of lower raw material costs. Stepan expects higher volumes in the fourth quarter compared with the third quarter amid a seasonal uptick in agricultural sector. The company does not anticipate significant growth in the commodity space from the fourth quarter into 2020. Looking forward, the company plans to work down its reliance on commodity volumes and instead grow in the more functional markets in the surfactants space. [Good news and I think in line with the company strategy over the last 10 years. ]

Finally the article notes that Stepan has room to de-emphasise its commodity business, with current operating rates probably around 75-80% capacity utilisation, according to the company. [So, I don’t fully understand what this means.] Going back into the company announcements, it looks like this came up on the conference call with analysts in response to questions and it was characterized as “we still have some excess capacity” in sulfonation] I take this to mean that the company could take on business if it wanted to – that is if the economics were good. But right now – the economics are not that good, especially compared to the higher margin functional products.  In my experience, at 75 – 80 % capacity utilization in commodity products, you’re really not doing that great. I can’t quite figure that one out. Perhaps someone else can – if so please get in touch.

Nonetheless it has to be noted that 9 month net income is 2% ahead of the 2018 record and they expect solid growth for the full year, despite the aforementioned challenges.

OK so now that we are talking about Stepan, I have to share some additional thoughts with you. Googling around, I came across an interesting analysis of Stepan from May of this year on the Seeking Alpha site, entitled “Buy This Overlooked, Boring Company For The Long-Haul”. The article goes on to characterize Stepan as a “relatively “boring”, stable company that provides consistent, growing results”. Now, if you have not already realized, “boring” in this context is a compliment and one that I think is absolutely spot-on. The article ends by noting that “While we do not expect the company to double or triple any time soon, we do expect Stepan Co. to be a successful investment for long-term buy-and-hold investors….” In my view, there are many fields of endeavour where boring can be really good. Well, by way of illustration, let’s consider a couple of companies that are not boring.

First one in our very own (chemical ) industry , since Bayer announced the acquisition of Monsanto in May 2016, the company has been roiled by the mounting lawsuits and judgments around Roundup. That sort of not-boring excitement, I am sure they could live without.

Second the poster – child for not-boring companies today is of course, Wework , who, mere months ago, was looking at a record breaking IPO at a valuation well North of $47 Billion only to be eventually bailed out by it’s lead investor, Softbank, a couple of weeks ago at a valuation of less than $8 Billion. There’s an excellent article in the Wall Street Journal with a couple of superb scenes that illustrate what happened. Scene 1 happens at “one of” Adam Neumann’s (WeWork founder) homes in the Hamptons where he had summoned the heads of the NASDAQ and the NYSE to audition for the right to handle the Wework IPO. NASDAQ’s Adena Friedman won out by offering to create a new index, the We 50, of companies committed to sustainability. Scene 2 – just weeks later has Neumann fired and the company valuation a fraction of what it was.  The lead investor, Softbank has now invested into the company twice the amount Wework is now worth. What’s interesting is that over those few weeks, when the company fell off a cliff, the business model had not changed. What had changed is that the company filed an IPO prospectus and the world got to take a look under the hood of Wework. Nothing good under there in terms of ability to make money, to say nothing about accompanying stories of dope-smoking, morning tequila-shot-sodden company meetings, astrology and self-dealing on a massive scale. Nonetheless, Neumann leaves his job with about $1Billiion while 90% of employee options are under-water and thousands are laid off. Not boring.

[caption id="attachment_1542" align="aligncenter" width="1024"]Exciting Times at Wework[/caption]

It’s great to read around the subject of Wework as there continue to be some staunch apologists for Neumann. In a book-promoting interview with Fortune’s Termsheet, Ben Horowitz, founder of well-known VC firm Andreesen Horowitz lapses into the Anglo Saxon vernacular while explaining carefully “If a guy who’s born a slave can take a bunch of slaves and turn them into one of the greatest fighting forces in the world [referring to the Haitian Revolution’s slave revolt], you absolutely can change the fucking culture at your company. That’s a mistake that people often make—that you can’t.” Ooooh Ben said a bad word. I guess he really believes in what he says. He goes on “It’s easy to shit all over everything Adam [Neumann, WeWork’s co-founder and former CEO] did now—the swing and the miss with the IPO, [the takeover by] SoftBank, all of that. But what he accomplished wasn’t trivial; it was very real. WeWork started with a giant vision: “We will change the way that work happens, and make it much more human.” He built a culture around that, and lived it himself.” Wow – another naughty word. Clearly Ben is committed to this view. Another interpretation is that Neumann was fortunate enough to be the world’s biggest snake-oil salesman, who met the world’s richest sucker (Masayoshi Son of Wework backer, Softbank). The result was anything but boring. No expletives needed to make that clear.

[caption id="attachment_1544" align="aligncenter" width="630"]Please listen to me![/caption]

So circling back to Stepan. Maybe that is one good indicator of a genuinely good company. I really do not recall any analyst reports, articles or interviews about Stepan where the F-bomb was dropped. No-one ever said that Stepan is a  f***ing great surfactant company that makes a s*** load of money in some really f****ing challenging markets. No I really don’t recall seeing that sort of thing anywhere about Stepan. Kinda boring really – in a really good way.

Finally finally – some good stuff on the telly these days. We’ve been watching Spirited on Amazon; about the ghost of a 70’s punk rocker haunting a present day Sydney apartment building. It’s a love story and it really pulls the hearstrings. I was first attracted to it by the music running over the opening credits; the 1976 single by the Saints – I’m Stranded , which I remember buying at Saville records that Summer in South Shields. Both sides of the single are great. Australia had the Saints while the UK had the Sex Pistols and Queens, NY had the Ramones. I honestly think the Ramones inspired the other two. Other abrasive and disruptive things have come out of Queens, I think. Anyway that’s another blog. Enjoy the following trip back to those times…

The A side:

The B side:

The Sex Pistols (check out Steve Jones's riffs)

And.. hey ho, let's go..

That's it - see you at PIPOC and in Singapore..

Surfactants Monthly Review – November 2019

November 2019 – Surfactants Monthly

We’re delayed this week due to a last minute trip to Europe. In-flight wi-fi just wasn’t co-operating to get this done on the plane. And a cold and a board meeting and the dog ate my homework! November itself was marked by a trip to Singapore and then Malaysia, where PIPOC made it’s biannual appearance in KL. This time, P2 Science did a PIPOC takeover with a triple header appearance by Paul Anastas, Patrick Foley (the two scientific co-founders of the company) and me. More later on this interesting few days.

I want to talk about Keira Knightley, because she has something to teach us.

[caption id="attachment_1571" align="aligncenter" width="1024"]Watch and Learn[/caption]

First some context setting. This month in surfactants, federal and state governments loom large and that is not a good thing. As readers know, my view is that governments looming large in any commercial field is generally not such a good thing. Here’s one of my favorite video clips on that:

ICIS reported that a new bipartisan [uh oh – watch out!] congressional task force will address the safety of ethylene oxide (EO) emissions. Representatives from the US states of Illinois and Georgia have formed the group to urge the US Environmental Protection Agency (EPA) to act [just act darn it, doesn't matter how].

The website for Brad Schneider, a Democratic representative from Illinois, said: "The task force supports legislative efforts ... which would require EPA to issue new, strict EO emissions standards for medical sterilization and chemical facilities and require the EPA to notify the public no more than 30 days after it learns that the new standards have been violated." [actually that sounds reasonable] The American Chemistry Council (ACC) released a statement on the new group, saying: "Ethylene oxide is a versatile and valuable compound that’s used to help make countless everyday products. We use it to make household cleaners and personal care items, create fabrics, and manufacture raw materials into more useful forms. A small but critical use of ethylene oxide is the sterilization of medical equipment. It’s estimated that more than 50 percent of all medical devices that families rely on are sterilized with ethylene oxide. “There has been much confusion about the health risk of ethylene oxide, and we look forward to clarifying these issues as we work with this new task force and continue to protect the safety of our communities, our environment and our workers.” [That also sounds reasonable]

And there ends the story. But of course there’s more to it. Congressman Brad Schneider clearly has the EO bit between his teeth. His website notes the bill that he and the IL delegation introduced to force the EPA to be more diligent in its monitoring of EO. It also links to a letter from the EPA, about which the congressmen have expressed some skepticism. While most of the discussion centers around the use of EO in medical sterilization, there is at least one user of EO in surfactants in the Schneider’s district and that is Vantage in Gurnee. Vantage’s website covers the matter quite well in a September 2019 letter here. It includes some useful links to additional resources at the bottom of the page.

New York State government is also lending a hand in another EO related area – that is dioxane. As reported in numerous outlets, including C&E News, A NY State bill (S4389B) would effectively ban 1,4-dioxane in cleaning and personal care products sold in the state. Apparently, high levels of 1,4-dioxane have been found in the groundwater in Long Island, New York, from former industrial and military facilities in the area. The legislation would limit 1,4-dioxane in household cleaning products to a level of 1 ppm by the end of 2023, in an effort to protect water quality. The chemical is an impurity in ethoxylated compounds used in some household detergents and personal care products. “Unfortunately, this bill will have no measurable impact on groundwater and it will not have the intended effect for Long Island’s residents,” a coalition of cleaning products trade groups [ including ACI] said in a statement.

[caption id="attachment_1558" align="aligncenter" width="1024"]The Pre-Dioxane Era[/caption]

I’m often asked, if such and such a chemical (LAB, ethoxylates, PKO based alcohols, etc..) will be banned. My answer is usually something along the lines of .. “it’s hard to imagine”. Of course, things that are hard to imagine often happen. You know, tipping point and all that stuff.

[caption id="attachment_1559" align="aligncenter" width="1024"]Once Hard to Imagine[/caption]

So, you have to think in terms of what could happen and what can you do about it. I think the ACI and fellow groups are doing a great job but the challenge may be at a more fundamental societal level. For example, how many of our blog’s readers understand the difference between hazard and risk. I’m guessing many. How about college students, high school kids, grade schoolers, soccer moms, millennials, hipsters, union members, see what I’m saying? One thing you should know. That bill passed unanimously. No dissent. No abstentions. 62 for and none (0) against. Interesting.

So what’s an industry to do? I don’t know but we will learn and discuss more in May when this story will have advanced further.

I guess, one thing is – I like simple communication. Remember this one?

First off, I don’t carry this clip around in my head, in case you wondered, although the movie is one of my favourites. I looked it up after Boris’s ad hit the airwaves – this one:

Am I saying that Keira Knightley is like “the public” ? In this movie yes and in Bend it Like Beckham for sure; albeit a kind of flawless version of the girl next door. But hey it’s the movies, so that’s OK. The lady in the Boris ad is much more like the voter next door.

So that’s one thing – simple, heartfelt communication; no nonsense. “The other guy might win”. “Let’s get Brexit done”. Think of your message as going to Boris’s voter, or Keira (if that helps). There’s something else. I’ve noticed recently that there is a tendency to dismiss groups of folks who disagree with you as being foolish people, manipulated by clever liars. And this is a very tempting conclusion because of course both parts of the assertion carry a lot of truth. We all know some foolish people and also some clever liars. How convenient to group them together, give them a label (tree hugger, nationalist, etc.) and there you are. It’s not your fault. You’re not foolish and you don’t listen to liars. Were all 62 state senators who voted for this bill, foolish people who were manipulated by liars at the EWG and MSNBC? Probably not right? As scientists or at least folks working in a science heavy industry, it’s sometimes too easy to label people as ignorant and then throw your hands up and walk away. Think of them as your mam or aunty or brother-in-law (yeah that one. The one who’s a practicing psychologist who still believes everything he reads in the New York Times. Like journalists aren’t humans who have biases and perspectives?)

OK that’s it on this topic. That’s not the whole story of course but I’ve got more news to get to.

In an interesting ICIS piece, Oxiteno is noted to be targeting operating improvements and a tripling of production at its alkoxylates plant in Pasadena, Texas, US by 2022. “The plan is to produce around 50 different products [ that’s a lot] which is different from running a commodity plant [ for sure] , so we are gradually increasing the complexity of products there,” said Joao Parolin, CEO of Oxiteno. “We faced some technical issues that are normal in the first phase of operations but we are on an upward trend in terms of reliability and service to customers,” he added.

When the US plant comprising two reactors started in late 2018, there were high inventories from the pre-marketing of surfactants made in Brazil and Mexico. However, Oxiteno has been running down those inventories and is now selling US-produced products, he. Oxiteno is targeting surfactants production from the plant of 120,000 to 125,000 tonnes by 2022, up significantly from expected production of around 40,000 tonnes in 2019, said the CEO. The plant’s nameplate capacity is 170,000 tonnes/year. [ some ambitious numbers, especially given the number of products]

“It will take time to certify some surfactants in areas such as food ingredients, agricultural chemicals and consumer products”, Parolin noted. Key end markets for the surfactants produced at the plant are agricultural chemicals, food additives, health and personal care, and oil and gas..

Oxiteno’s business in the US is under relatively new management with Alberto Slikta appointed as chief operating officer of 
Oxiteno USA in April 2019, replacing Timothy Madden who is now CEO of Jiahua Chemicals, Inc – the US arm of Chinese surfactants company, Jiahua.

Parolin went on to comment on the Brazilian economy: “With Brazil GDP shrinking by about 8% in 2015 and 2016, and GDP expected to grow just 0.9% in 2019, we are still well below 2011 and 2012 levels. It’s been a lost decade for Brazil,”. However, the agricultural sector is Brazil is a bright spot and Oxiteno is benefiting from the production of surfactants going into ag chemicals, he noted. Brazil is benefiting from greater Chinese demand for grains, soybeans and meat as China buys less from the US because of tariffs. While the consumer goods market has been “very resilient”, growth in the home and personal care sector has been challenging as customers there have been reducing the use of active ingredients in their formulations to be more cost competitive, he said. [we’ve seen that here also]Projections are for Brazil GDP to recover to about 2% in 2020, he noted.

[caption id="attachment_1560" align="aligncenter" width="800"]Brazilian Agricultural Bright Spot[/caption]

The new reporter on the ICIS Detergent Alcohols beat, Lucas Hall, has written that Contract negotiations for US first quarter mid-cut fatty alcohols  are likely to continue to face downward pressure from increased competition in the domestic market at a time when demand typically begins to slow. A southeast Asian player not known to traditionally compete in the US [ no prizes for guessing who] is heard to be penetrating the US mid-cut alcohols market, with at least one large volume buyer heard to have settled a full year contract with the company well below the average ICIS 2019 contract price. N Competition is also increasing as synthetic alcohols producers vie to increase their market share ahead of the startup of Sasol's fatty alcohols and ethoxylates expansion in Lake Charles, Louisiana, which is slated for early 2020 according the company's most recent press release. At the same time, demand for the C12-C14 detergent range mid-cut alcohols primarily sought by US buyers in the main end-use surfactant market  is softening as does typically occur this time of year.

Although palm oil and PKO prices have sharply increased since the second-half of October amid expectations of increased consumption in Indonesia and Malaysia ahead of increased biodiesel blending mandates slated to be implemented in 2020, southeast Asian inventories are at their highest levels since 2015. Higher PKO prices normally put upward pressure on US alcohols prices since the US imports its alcohols from southeast Asia. However, the high inventory levels [ of PKO] suggest production is exceeding consumption and exports. Some market participants think prices could face a downward correction as exports begin to slow in December and in China in January, with a drop in feedstock costs likely to limit any upward pressure currently being exerted on US first quarter contract negotiations. [ whoever said purchasing wasn't interesting and exciting?]

[caption id="attachment_1561" align="aligncenter" width="1024"]Downward Correction in Palm?[/caption]

I don’t normally report on exactly what goes on in my conferences. However ICIS has already reported these insights from our speaker, Yu Jing of the CICCC, so here goes: The consumption of surfactants in China is expected to grow at an annual average rate of 4.1% over the next five years after reaching 3.35m tonnes in 2018, mostly driven by demand from household and industrial cleaning applications, an industry executive said on Thursday. This rate of growth is lower than the 9.7% rate seen in 2013-2018 as China’s economy is slowing down and transforming into an era of “high-quality development”, said Yu Jing, deputy chief engineer at China International Chemical Consulting Corporation (CICCC). China’s consumption of surfactants will be spurred by the rapid increase in population, urbanisation, wages and “increased awareness of health and hygiene”, she told delegates at the 9th ICIS Asian Surfactants Conference in Singapore. The country’s surfactant industry is more involved in the production of commodity-type surfactants and will continue to be a net importer of consumer nonionic surfactants in the future, according to Jing. The largest surfactant-consuming application area in China is the detergent industry, with liquid detergents making up 61% of the market last year, she said. Liquid detergents will continue to take a greater share of power detergent in the future, while surfactants based on oil and fat also showing good growth opportunities in China, according to Jing. China produced 3.2m tonnes of surfactants in 2018, which means 10% of overall demand needed to be imported, she added.

Also in China Ethylene oxide (EO) prices fell for the first time in ten weeks, breaking under downward pressure from bearish downstream markets. EO prices are usually decided by one of the largest EO producers in China - China Petroleum & Chemical Corporation, or Sinopec Corp, as it is more widely known. Prices have been at Chinese yuan (CNY) 8,000/tonne ex-tank since 21 August. On 6 November, finally yielding to weak downstream markets, Sinopec Corp announced a CNY400/tonne drop to CNY7,600/tonne ex-tank.

In the US, according to AFPM data, production of ethylene oxide (EO) in the third quarter fell year on year. The seasonal pickup for downstream derivatives such as polyethylene terephthalate (PET), the biggest end-use for monoethylene glycol (MEG), for bottled drinks was limited amid economic headwinds and a delay to summer weather. Q3 production increased quarter on quarter amid new capacity and as planned turnarounds came to an end. No data was reported by Lotte Chemical, Nan Ya Plastics or Sasol. Both Lotte and Sasol started up new EO/EG (ethylene glycol) units in Lake Charles, Louisiana, this year.

More from our Asian conference as reported by ICIS. French beauty products maker L’Oreal is on track to meet its 2020 target of not using ingredients and raw materials for its products that could be linked in any way to deforestation, a senior company executive said at the conference. However, the company still faces challenges to meet its targets, which includes the “lack of traceability to palm oil plantations”, human rights issues and having to deal with non-compliant practices of indirect suppliers, said Philippe Provost, raw materials category director at L’Oreal. “Despite increasing NDPE [no deforestation, no peat, no exploitation] commitments in the industry, palm-driven deforestation continues its progress,” Provost said.

In Borneo Island alone, palm oil was the driver for 39% of the deforestation between 2000 and 2018, according to Provost. L’Oreal in 2019 is still expected to purchase about 70,000 tonnes of palm oil derivatives and palm kernel oil derivatives, according to provost. The company has pledged to ensure that 100% of its volumes of its raw materials are physically certified by sustainable palm oil products watchdog Roundtable on Sustainable Palm Oil (RSPO) by 2020.

[caption id="attachment_1562" align="aligncenter" width="730"]I said No Deforestation! (Lipstick by L'Oreal)[/caption]

Meanwhile, the newest member of the North American surfactants industry, Indorama Ventures’ announced that third-quarter earnings fell on the back of weaker spreads for some key products and unplanned shutdowns.

($m)Q3 2019Q3 2018% change Revenue2,8322,920-3Core EBITDA281409-31Core net profit after tax and non-controlling interests92260-65

- Spreads between product and feedstock prices fell for Indorama’s integrated polyethylene terephthalate, monoethylene glycol, isopropanol and fibres chains due to higher inventories along the pipeline and indirect impact from the US-China trade dispute.

- Earnings were also impacted in the quarter and through the year to September by unplanned shutdowns, a catalyst change at its ethylene oxide/ethylene glycol unit in the US and a line conversion from purified terephthalic acid to isopropanol in the country. The acquisition of intermediates and surfactants assets owned by Huntsman for $2.1bn is expected to close by the first quarter of 2020, with Indorama estimated the EBITDA from those assets during the quarter at $122m.

The latest on the Sasol project in Louisiana has them delaying the planned start-up for its low density polyethylene (LDPE), ethoxylates, Ziegler and Guerbert alcohols plants at its Lake Charles, Louisiana, complex, according to a company release on production and sales metrics. The company anticipates reaching beneficial operations at its 420,000 tonne/year LDPE plant by the end of the fourth quarter of 2019. The ethoxylates plant at the Lake Charles Chemicals Project (LCCP) is anticipated to start-up in the first quarter of 2020 while the Ziegler and Guerbet alcohols plants are scheduled to start up in the second quarter of 2020, according to the company.

Our good friends, Galaxy Surfactants (Mumbai, India) reported a 44.6% year-on-year (YOY) increase in net profit for the fiscal second quarter, which ended on 30 September. The company’s net profit reached 670 million Indian rupees ($9.3 million). Higher profit was achieved because of a one-time deferred tax gain of Rs94.3 million. Revenue was down 5.3% YOY to Rs6.6 billion owing to lower prices of fatty alcohol, a major raw material for the company’s performance surfactants. Galaxy states that the price of fatty alcohol declined by 21% YOY. The company’s production volume for the first half increased 7% YOY to 111,834 metric tons. Performance surfactants volume remained flat at 69,990 metric tons, up by 5.7% YOY. Specialty care product volumes increased by 11.5% YOY to 42,144 metric tons, up 10% YOY. Now that Galaxy has shares on the stock exchange, you can look up some very good information here.

As previewed earlier in our blog, BASF has launched a surfactant using Roundtable on Sustainable Palm Oil (RSPO)-certified ingredients that can be used in a range of personal care products. Texapon SFA can be dried into a noodle base to incorporate into solid cleansing bars, tapping into the industry trend to get rid of plastic packaging. It is also very gentle on skin and eyes, making it especially suitable for baby skin and tear-free shampoos. This is the Alpha Sulfo Fatty Acid C12-14 Disodium Salt (INCI name: Disodium 2-Sulfolaurate) that we wrote about in June.

As noted above, I spent a few days at PIPOC in November and it was an outstanding and flawlessly produced event by the Malaysian Palm Oil Board as usual. The Prime Minister of Malasia, Mahathir Mohamad, 94 years (!) old gave the opening address. It was a hearfelt defence of the palm industry against what he thought was a hypocritical assault by the EU, a region more interested in protecting their own oilseed crops that in protecting the environment. Much of what he said made a lot of sense. The country is launching a “Love my Palm Oil” campaign along with a new branding of 5-star Malaysian Palm Oil. There’s passion on both sides for sure. Have fools been manipulated by liars anywhere in this debate? Certainly. It often seems protagonists on each side label themselves either pro or anti-palm oil. After that, facts matter much less. It’s as if, after deciding that you are a Man. Utd. fan (much like your father and his father) you would sit down and carefully consider, given all the stats, whether or not Man. City is truly the better football team. Not gonna happen.

[caption id="attachment_1563" align="aligncenter" width="700"]Not this time[/caption]

December 2019 – Monthly Review

December 2019 – Monthly Review

Strictly the news this month. If I have time, I’ll publish a year-end editorial some time in the coming week. As always, most of the news content here comes courtesy of ICIS and what you see here is just a fraction of what is available if you subscribe. I do and you should consider it also: (https://subscriber.icis.com/). End of commercial.

Right at the beginning of December, Huntsman told ICIS that its propylene oxide (PO) and methyl tertiary butyl ether (MTBE) units remained down ]following an explosion at a neighbouring butadiene (BD) complex owned by TPC Group. Huntsman's PO plant has a capacity of 240,000 tonnes/year, and it produces tertiary butyl alcohol (TBA) as a byproduct, according to the ICIS Supply & Demand Database. TBA is dehydrated to produce MTBE. Huntsman's MTBE capacity is 650,000 tonnes/year.

"Although the PO/MTBE unit was not damaged, it remains idled for the time being because of certain dependencies with the adjacent site that was damaged by the fire," Huntsman said in a statement. The company did not elaborate on the nature of those dependencies. Huntsman is waiting to get access to the TPC site and is reviewing alternative ways to bring the units fully back online, it said. Meanwhile, it does not know how long the units will remain down or what the ultimate effect the shutdown will have on its earnings.

So far, Huntsman expects it will take a hit of a few million dollars to its fourth-quarter adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) for continuing operations, the company said. This is largely related to sourcing PO. The other units at Huntsman's Port Neches complex have returned to their pre-blast operation levels, the company said. Huntsman is selling the complex to Indorama Ventures as part of a larger $2.1bn deal that includes its chemical intermediates and surfactants businesses. That deal is still on track to close in early 2020, Huntsman said. It recently received approval from the Committee on Foreign Investment in the US (CFIUS), one of the regulatory milestones the agreement needs to reach before the companies can complete the sale.

[caption id="attachment_1575" align="aligncenter" width="1024"]The Deal's Still on Track[/caption]

My alma mater, Pilot Chemical acquired Mexico’s fine chemicals company Organo Sintesis for an undisclosed sum, as reported mid-month. Organo manufactures products for the personal care, disinfection, sanitising, cleaning, oil and gas, and water treatment industries, serving customers worldwide. The acquisition will expand Pilot Chemical’s business into the Mexican market, as well as South and Central America, and it will provide growth opportunities for Pilot’s surfactants and antimicrobial businesses, the Cincinnati, Ohio-based company said in a statement. The deal includes Organo’s headquarters in Mexico City and a production site in Toluca, along with a workforce of nearly 100 employees. Organo will continue to be led by director general Federico Soto, who will report to Mike Clark, Pilot's president and chief operating officer. [I believe that this is the first step outside of the US for manufacturing at Pilot Chemical, so congrats and well done to the new team there. Taking a quick look at the website, it looks like quat based specialties and a CGMP plant – so nothing like the core anionics business at Pilot and more of a fit with Mason. Good for them!]

[caption id="attachment_1576" align="aligncenter" width="1024"]Looks like a good fit[/caption]

In the latest periodic update, ICIS reported that Sasol is increasing ethylene production rates at its Lake Charles Chemicals Project (LCCP) in Louisiana following the successful replacement of an acetylene reactor catalyst. The 1.5m tonne/year LCCP ethane cracker had achieved “beneficial operation” in August, but ran at only about 50-60% of nameplate capacity due to an underperformance at the plant's acetylene removal system. “This issue has now been resolved. The outage to replace the catalyst was successfully completed on schedule and within budget,” the company said in the update. Following the outage, the unit was started up smoothly and ethylene production rates are about 85-90% of nameplate capacity and increasing, it said. The quality of the ethylene produced also meets US Gulf Coast ethylene pipeline specifications, it added.

Sasol said that low density polyethylene (LDPE) from the LCCP has been commissioned, with beneficial operation expected later this month. The company defines beneficial operation as production of on-spec material for at least 72 hours continuously. The remaining three downstream units under construction to complete the integrated LCCP site - Ziegler Alcohols and Alumina; Alcohol Ethoxylates; and Guerbet Alcohols - remain on cost and schedule, it said.

[caption id="attachment_1578" align="aligncenter" width="800"]Moving a lot better at Sasol[/caption]

For those keeping track, the US / China tradewar grinds on and affects chemicals. Just a reminder that ICIS keeps a live topic page on the matter here. https://subscriber.icis.com/news/petchem/news-article-00110241140

We don’t often write about DEA here as it is a small part of the surfactants market. However, ICIS notes that the European ethanolamines market may already be adjusting to the idea of lower diethanolamine (DEA) offtake into the downstream global glyphosate sector in 2020. [I’m assuming you know why that is - A ruling this year by a US judge that Bayer's weedkiller Roundup - which contains glyphosate - is carcinogenic, is likely to impact on US demand and could also have a knock on effect globally. ]. Some suppliers are already cutting DEA out of their production process as much as possible, but also looking for other end uses. DEA is primarily used in the production of glyphosate, a herbicide, but is also used as a surfactant intermediate for products used in in personal care applications, in polyurethane production, in gas treatment and as a corrosion inhibitor. Glyphosate volumes are likely to shrink over the next year as concerns surrounding  usage in weedkiller continue to grow. While glyphosate is not widely used in Europe, the loss of a DEA export market could be a problem for European producers. Last year, total DEA exports out of Europe were 61,700 tonnes.

[caption id="attachment_1579" align="aligncenter" width="660"]Throttling the DEA market[/caption]

ICIS takes a look ahead at the fatty alcohols market and concludes that European fatty alcohols are likely to see more stable demand for 2020. There are still some concerns that an economic downturn is on the way. This would typically drive down demand for several products, including surfactants. The traditional cracker maintenance period in the second quarter is expected to impact EO and PO supply and in turn could limit demand for fatty alcohols. There will likely be a peak in buying interest just before and just after the maintenance period. No major production issues are anticipated in 2020. There was one unit in maintenance in December but this was expected back on line in the New Year.

Feedstock palm kernel oil (PKO) imports remained healthy at the beginning of the fourth quarter, though a significant hike in prices seen heading towards the end of 2019 could impact the level of imports sent over in 2020.

[caption id="attachment_1580" align="aligncenter" width="1024"]I wouldn't try to read too much into this graph[/caption]

At the end of the year, ICIS published a pretty nice M&A review, which you should read. It notes that the year started strong with Sika’s acquisition of fellow construction chemicals specialist Parex, and Evonik’s methacrylates business selling to private equity firm Advent International for €3bn, a price tag so far above guidance that it required fresh regulatory disclosures.

Also European chemicals firms remain intent on pushing into more specialised sectors and away from commodity chemicals, and that continues to drive M&A appetite, with a flurry of late fourth-quarter activity in the ingredients and cosmetics sectors. Most notably, International Flavors & Fragrances announced a merger with DuPont’s nutrition and biosciences division to create a $45bn giant in the sector.

Here’s a useful summary of some of the key deals in the sector.

SellerCompany/divisionBuyerSectorPriceParexParexSikaConstructionSwfr2.5bn*EvonikMethacrylates opsAdvent InternationalPlastics€3bnInnophosInnophosOne Rock CapitalIngredients$932mBlackstoneArmacellPAI PartnersFoams, insulation€1.4bn*BASFPigmentsDICPaints, coatings€1.15bnLORD CorpLORDParker HannifinAdhesives, coatings$3.68bnGolden Gate CapitalArrMazArkemaSpecialty surfactants$570mHuntsmanChemical intermediatesIndoramaPO, GE, ethanolamines$2bnVersumVersumMerckSemiconductors€5.8bnPolyOnePerformance productsSK CapitalConstruction, packaging$775mLANXESSChrome chemicalsBrother EnterprisesLeather treatmentNot disclosedClariantMasterbatchesPolyOnePigments$1.6bn*HitachiChemicalsShowa DenkoAdvanced materials$8.8bn

Evonik has been somewhat successful with sophorolipids commercially and has spoken extensively at my conferenceson the matter. Right at the end of the year Unilever announced that they have launched a dishwashing liquid using rhamnolipid produced by Evonik. It is the first time the naturally occurring and biodegradable surfactant has been used in a household cleaning product. The rhamnolipid is included in dishwashing brand Quix, which Unilever launched in Chile earlier this year. Rhamnolipid is 100% renewable and biodegradable but is also ultra-mild on skin, which sets it apart from other surfactant options. “Our R&D team had been aware of Rhamnolipid for some years, but the technology and the science weren’t at a point where we were able to scale it and it remained an invention in a lab, until now,” says Peter ter Kulve, president of Unilever’s Home Care. “That’s why we are so delighted to be partnering with Evonik. Together, our teams have worked hard to deliver a sustainable and safe product with even better performance.”

[caption id="attachment_1581" align="aligncenter" width="740"]This is a big deal for biosurfactants[/caption]

As a follow-up to last month’s piece on dioxane, CBS New York reports - In a little over a year from now, cleaning products containing the contaminant 1,4-dioxane can no longer be sold New York. The chemical has been found in drinking water wells and is considered a likely carcinogen, CBS 2’s Carolyn Gusoff reported. Some well-known cleaning and cosmetic products will have to change their formula to remain on store shelves in the Empire State Gov. Andrew Cuomo signed a bill into law that prohibits the sale of thousands of products that contain more than a trace of 1,4-dioxane. “Whether you hold it in your hand, apply it to your face or drink it in your water, it can cause cancer,” said Assemblyman Steve Englebright, D-East Setauket. Englebright, a scientist, sponsored the bill, after Long Island turned up the highest detected levels in the entire country. With no federal standards for the chemical, he said the state had to lead the way and does not expect the products to disappear from New York. “Those products need our market to remain viable, so they will make adjustments in the manufacturing process,” Englebright said.

[caption id="attachment_1582" align="aligncenter" width="1024"]They've dealt with far worse[/caption]

The American Cleaning Institute, which represents more than 100 companies, called the law ill advised. It blames contaminants in drinking water on products from decades ago, adding today’s product levels are so low, lowering them further is not feasible. “The passage of this bill will not have addressed the issue at hand and it could take safe and essential cleaning products off store shelves,” the ACI’s Brian Sansoni told Gusoff during a phone interview. The law gives manufacturers until 2022 to adjust their formula. Environmental groups said it is possible to make cleaning products that don’t produce the 1,4-dioxane. “The industry doesn’t want to remove the 1,4-dioxane, but they can. We can no longer live in a day and age where we are shampooing our hair and bathing our children in cancer-causing chemicals,” said Adrienne Esposito of the Citizens Campaign for the Environment. Water customers will soon be paying dearly to strip the contaminant already in Long Island’s ground water from decades of industrial dumping. Notices just sent to Suffolk County water customers reveals a new $20-per-quarter surcharge.

The utility said it supports the new law to prevent 1,4-dioxane from reaching ground water in the future and sponsors said the product ban will eventually save municipalities millions by preventing continued contamination. [I will say no more on this. See last month’s blog for relevant opinion]. You can be assured that this matter will be covered and discussed in depth at my conference in May.

And finally in the news. P&G has been involved in the stealth of a range of water free cleaning products for home and personal care, marketed under the DS3 brand. Very cool. These videos give you the basics. The concept is – you have water already at home so why buy it (the water) in the shop and schlep it home with you in your gas-guzzling minivan? Fair point. Can someone tell me what the ingredients are?

and

That's it for now. Have a great 2020.

January 2020 – Surfactants Monthly Review

January 2020 – Surfactants Monthly Review

Highlights of this month, of course, include the ACI annual meeting in Orlando. Many great sessions, some organized, some spontaneous. If you’re expecting Page 6  gossip, of the what-Meghan-told Harry, what Kim wore and what Cardi did, type. Sorry. We don’t do that here. To know all that stuff, you gotta be there. Like a thousand of our colleagues were.

[caption id="attachment_1679" align="aligncenter" width="1024"]What you may or may not have missed in Orlando[/caption]

This blog is brought to you by Desmet Ballestra. I’ve always wanted to say that. Unfortunately it’s not true. No money changed hands to have me run the ad below. It’s interesting and relevant to the dioxane issue, so I’m putting it in here. And I guess I can say that the dioxane matter was extensively discussed at ACI. It’s a big deal if you’re a sulfonator or a user of ether sulfates in your cleaning products. You can be assured that we’ll have a number of views on this topic at our conference in May.

Last month’s editorial on Cardi B and Mother Theresa actually, surprisingly, got some positive feedback, but don’t worry – this blog will be strictly the news until the, clearly marked, final section where we dip into the lyrics of Neil Peart for our education and entertainment.

The News: At the beginning of the month, Sasol announced that their Lousiana expansions are expected to be delayeduntil the second quarter. The 100,000 tonne/year ethoxylates unit expansion is currently under commissioning, with the first volumes targeted for the end of January [which did happen] or early February. The 173,000 tonne/year Ziegler alcohol plant expansion, which includes a 30,000 tonne/year alumina unit and 30,000 tonne/year Guerbet alcohol unit, is expected early in the second quarter. The alumina unit, which is part of the Ziegler alcohol plant, will start with the Ziegler expansion early in the second quarter. Alumina, also known as aluminium oxide, is produced as a result from the use of aluminium as a catalyst to produce the alcohol. Commissioning of the Guerbet alcohols unit is expected following the Ziegler expansion, with volumes expected in early summer. The Guerbet unit will produce C12, C16 and C18 alcohols as well as longer-chain C20, C24, C24-26, C28 and C32 alcohols included in the standard Guerbet alcohol product slate.

On Monday 13th of January, Sasol reported a small fire on the site in Lake Charles Louisiana. Local media reported a loud boom, which apparently blew the hurricane doors off a fire department next door. No injuries were reported.

In related news, ICIS reported that US first quarter fatty alcohols contracts were assessed flat to up from the fourth quarter amid a sustained upswing in palm oil and feedstock palm kernel oil (PKO) costs over the last three months, as buyers begin first-quarter restocking efforts. Players that finalised negotiations earlier secured contracts skewed toward the low end of the posted ranges, while players that finalised negotiations late secured contracts toward the high end of the posted ranges.

Contracts also varied based on buyer size and and shipping point, with east coast suppliers and New Orleans, Louisiana, based suppliers facing higher logistics costs than those in the Houston, Texas, area. Single-cut C16 and C18 alcohols were heard to be more available relative to the C16-18 blend, limiting the upswing in the contract range. Single-cut alcohols tend to sell at a premium to blended cuts.

Demand is rebounding, with demand for the mid-cut C12-C15 alcohols especially strong relative to the C16-18 alcohols following maintenance among surfactants producers in the fourth quarter. Although demand is rebounding, it remains to be seen if the market will fully absorb higher costs. Sasol has delayed the startup of its alcohols expansion to the second quarter, which may keep synthetic alcohols inventories tight until the second-half of the year, further pressuring the market.

In the spot market, the upswing in PKO and other feedstock oil markets continues to put serious upward pressure on prices. One buyer who lost out on first-quarter volumes was heard to have bid in the 80 cent/lb DEL (delivered) range for mid-cut material in the US Gulf following a delayed shipment. Spot prices in the Gulf were heard no lower than the 70 cent/lb range. Q1 mid-cut C12-C15 alcohols were assessed up 4.5 cents/lb from the fourth quarter at 66-75 cents/lb  DEL (delivered) in the US Gulf. C16-18 alcohols were assessed 5 cents/lb higher on the high end at 77-85 cents/lb DEL US Gulf.

[caption id="attachment_1691" align="aligncenter" width="668"]Looking up![/caption]

Meanwhile over in Europe, later in the month; European fatty alcohol first quarter contract prices rocketed amid strong increases in feedstock prices throughout the previous quarter. Values jumped €240/tonne on the low end and €310/tonne on the high end to €1200-1410/tonne FD (free delivered) NWE (northwest Europe).

Feedstock palm kernel oil (PKO) values spiked over the past few months. The sustained increases seen in recent months were due mainly to a rise in biodiesel mandates in Indonesia, as there is higher demand expected for palm products in Asia this year. Availability is healthy, with no production issues seen in the region. Demand has been fairly slow in January, with expectations that it will pick up further into the quarter. Some market participants are seeing lower demand from alcohol ethoxylates players in the first quarter, due to length in the ethoxylates market.

[caption id="attachment_1692" align="aligncenter" width="668"]Looking further up[/caption]

EO scrutiny continues: ICIS reports that a new project aims to improve air quality monitoring information for ethylene oxide (EO) in the US state of Georgia, according to an American Chemistry Council (ACC) statement. The project will collect, analyse and share the results as US Environmental Protection Agency (EPA) and state and local officials set safety standards and determine the best emission control technology. "Limited air emissions data from Georgia, as well as recent data released by the EPA regarding EO emissions in various areas around the country, raise questions about normal background levels of EO in the air," the ACC said.

"More research into levels of EO in the air is needed." As the blog noted in November representatives from the US states of Illinois and Georgia formed a bipartisan group to address the safety of EO emissions. The group's purpose is to urge the EPA to act.

[caption id="attachment_1693" align="aligncenter" width="700"]Much ado about 7 atoms[/caption]

Interestingly, according to a table of EO emitters put together by C&E News, using EPA’s TRI data, none of the top sources of EO emissions in the US are in GA or IL. See below. They’re in LA and TX (with one in VA)

[caption id="attachment_1695" align="aligncenter" width="923"]Where the EO is[/caption]

EO did not have a great month as news of the Industrias Quimicas de Oxido de Etileno (IQOXE) ethylene oxide (EO) plant explosion filtered through the industry. As reported in Chemanager, the explosion killed one worker and initially injured eight others in the late hours of Jan. 14. The ensuing fire raged into the morning hours of Jan. 15 and a local hospital confirmed the death of a second worker from extensive burns later in the day. According to reports, the explosion, which occurred in an ethoxylation reactor, then damaged a tank filled with 20 kg of EO, and shockwaves from the blast caused a building to collapse 2 km away, killing another man. Authorities said no toxic chemicals were measured in the atmosphere.

IQOXE, which is owned by Spain’s CL Grupo Industrial, said it has opened an internal investigation into the cause of the blast. The explosion took place in a part the complex that had begun operations in June 2017 and had been operating normally up to then. The affected facility may be one of several plants belonging to bankrupt PET producer La Seda de Barcelona that were acquired by Cristian Lay, a manufacturer of designer jewelry, watches and cosmetics, for only €15 million in 2014.

By the way, some of the video online is quite horrifiying:

Does EO have a problem? Is it a PR problem which turns quickly into a trial lawyer problem? To some extent that is up to the industry. The other side is already mobilizing.

[caption id="attachment_1696" align="aligncenter" width="411"]EO - Who paints the first picture?[/caption]

Notwithstanding this run of bad news for EO, IHS published a rather bullish outlook on ethoxylation as summarized in the graph below:

[caption id="attachment_1694" align="aligncenter" width="512"]Strong Outlook[/caption]

After swallowing a large chunk of Huntsman, Indorama has created a new division to integrate the ethylene oxide (EO) and propylene oxide (PO) assets acquired from Huntsman, ICIS reported. Integrated Oxide will have under its name the $2.1bn assets acquired from Huntsman, which also included production plants for methyl tertiary butyl ether (MTBE) and surfactants. The facilities are located in Port Neches, Chocolate Bayou, and Dayton in Texas, US, as well as Ankleshwar in India, and Botany in Australia. The acquisition was announced in August 2019 and finalised earlier in January. Former Huntsman executive Alastair Port has been appointed president of Integrated Oxide, effective 3 January. He will report to Dilip Kumar Agarwal, CEO of the Feedstock and PET businesses. From what I understand most of the Huntsman organization remains in place at the acquired business.

A fascinating piece in ICIS News, discusses the Coronavirus, which this week killed more people than SARS. Among other things the outbreak was predicted to be potentially good for surfactants (as more are used in hygiene and washing) but potentially very bad for the Chinese and global economy. So, hard to say really how to play this one. Except – be careful when travelling out there.

[caption id="attachment_1697" align="aligncenter" width="1024"]Travel Safely[/caption]

Right at the end of the month, ICIS’s talented Lucas Hall published an outstanding analysis of the Q2 picture for fatty alcohols. He notes that the downward correction in the oil palm complex since the beginning of the year, as well as emerging concerns regarding the ongoing coronavirus outbreak in China, have stalled early negotiations for US Q2 fatty alcohols. Feedstock crude palm oil (CPO) and palm kernel oil (PKO) costs have posted significant declines in January following a sustained uptrend in Q4, tracking decreased demand for edible oils in China during the Lunar New Year holiday and decreased demand for Malaysian palm oils in India amid a diplomatic dispute between the two countries.

Feedstock oil prices trended up in Q4 ahead of the rollout of increased biodiesel blending mandates in Indonesia and Malaysia at the start of the year. The outbreak of the coronavirus in China as players return to the market following the Lunar New Year festivities has exacerbated concerns, as a lockdown in cities in China as well as curfews and curbs in travel weaken demand for edible oils in the food industry and limit economic activity in the country.

Crude palm oil (CPO) and palm kernel oil (PKO) closed lower at $661.12/tonne and $809.73/tonne on 28 January, the first day of trading after the market resumed in Malaysia following the Lunar New Year break, reflecting losses of 9.88% and 11.59% respectively. Costs have since come down further, prompting US players to establish a more wait-and-see stance as they monitor developments in China and elsewhere. CPO and palm stearin prices have fallen less significantly than PKO, easing any downward pressure faced by the long-chain alcohols.

Buyers rejected offers for the mid-cut, C12-15 detergent range of fatty alcohols commonly consumed into the US surfactants market in the low-to-mid 80 cent/lb DEL (delivered) USG (US Gulf) range, shifting instead to a more hand-to-mouth approach as they monitor movements in palm oil. Players are also monitoring developments ahead of the completion of Sasol's fatty alcohols expansion in Lake Charles, Louisiana.

In other news, MFG Chemical (Dalton, Georgia) continued integrating its Pasadena, Texas, facility in 2019, as well as implementing upgrades to its two plants in Georgia and Texas, as reported by ChemWeek. The Pasadena facility was acquired by MFG in 2018. Improvements in 2019 included a new stainless steel reactor at a pilot plant in Dalton, Georgia, and upgrades at Pasadena including a 20,000-gallon reactor and new capabilities for existing reactors. Oilfield chemicals and water treatment are two of the company’s four growth drivers, in addition to dioctyl sodium sulfosuccinate (DOSS), a specialty surfactant, and anhydrides.

Finally, in news, only tangentially related to surfactants, P2 Science, of which your humble blogger is the CEO, reported the first close of its C-Round. The company brought in $12 Million and two new investors, one of whom is Chanel.

[caption id="attachment_1698" align="aligncenter" width="522"]Yep. That one.[/caption]

Yes, that Chanel, the one of perfume and handbag fame. This of course, is super-cool and a lot of new developments are slated for the coming year at our young company. I’m sure most of you are familiar with the BagHunter report showing that a Chanel handbag is one of the best investments you can make – right up there now with green chemistry.

[caption id="attachment_1699" align="aligncenter" width="1024"]Put your money in bags my son[/caption]

OK – that was the end of the news. Now as promised last month, more on Neil Peart. What to write about the world’s greatest drummer in the world’s greatest musical group, while still being interesting and readable? I’m going to focus on the lyrics because, since joining the group after the first album, Peart, a reader and thinker, wrote all of Rush’s lyrics. These songs, to me, were a soundtrack to growing up and are still a robustly relevant soundtrack to life today. I’ll talk about just a few songs that really got me thinking.

[caption id="attachment_1700" align="aligncenter" width="486"]Reading and Thinking[/caption]

There are a few key themes that run through Peart’s lyrics. These are i) the struggle of the individual against an overbearing state – and particularly, within that category, the evils of communism ii) the tensions between the head and the heart , between logical reason and illogical love and iii) it has to be said, there’s a healthy distaste for religion in his songs, something which always bothered me a bit.

Here’s the first song from Fly by Night (1975) the first album on which Peart appeared. We sample the live version from 1976 in Toronto.

I’m not even going to comment on drumming, but honestly, the average 2 second drum fill from Peart is chock full of more goodness than a 10 minute drum solo by pretty much anyone else. In the lyrics, though you can already tell our lad’s been reading Ayn Rand and of course back then we all dutifully followed suit and got Atlass Shrugged etc out of the library. Interesting. Pure, harsh, objectivism, but still interesting.

Nonetheless, even after crediting the “genius of Ayn Rand” on one album, Peart was already driven to explore the role of the heart opposite the head. A pinnacle of this journey was the first side of the album Hemispheres, where Peart writes about the ancient struggle between the gods of love and reason for the possession of the hearts and souls of men. Here’s a video with lyrics.

Check out the incredibly percussive intro as Neil brings along Alex and Geddy especially from 1:57

If there was one thing pretty obvious early on with Peart, he really despised communism; not exactly a trendy view back then in that era of Che Guevara T shirts and red-star caps. A really crisp and shocking exposition of his views was captured in the song The Trees also from the Hemispheres album. Here’s the song and lyrics.

“And now the trees are all kept equal, by hatchet, axe and saw”

Peart loved free will as much as he hated totalitarianism. This next song also hints at some of his problems with religion. Freewill.

“The stars aren’t aligned or the gods are malign. Blame is better to give than receive”

The greatest example of Rush music to me is 2112 off the album of the same name. This was the album that propelled Rush into autonomy (meaning it made enough money so that they did not have to listen to the record company telling them what to write any more). The song is about the struggle of a lone man against the overpowering state. Our hero discovers a banned guitar in a future totalitarian world and is dismissed as a troublemaker. The song leaves an enormous question mark, however. Peart starts with a quote from the sermon on the mount. “and the meek shall inherit the earth” but does he mean it literally or is it stated with irony? Then at the end of the song, it appears that our hero actually commits suicide, but that is not 100% clear. It seemed unfair and inappropriate to me, notwithstanding the fact that the song overall is a 20 minute, guitar-bass-drums, masterpiece.

“My spirits are low in the depths of despair. My lifeblood spills over”

So where to go from here. For me it takes Peart 40 years to close the loop on 2112. The last song on their last album. The Garden.

“The measure of a life is a measure of love and respect. So hard to earn, so easily burned. In the fullness of time a garden to nurture and protect. “

I could go on forever on Neil Peart, but I hope this brief selection brought back some good memories. It did for me.

Thanks for reading.

Surfactants Monthly – February 2020

Surfactants Monthly – February 2020

I write this month’s blog safely self-isolated in the study of a suburban New Jersey house. A trip to Home Depot this morning was cancelled out of an abundance of corona-caution and so the needed repairs in the downstairs bathroom will have to be postponed until it’s safe to visit busy hardware stores again – perhaps some time next year, hopefully. Oh well, more time to write the blog.

Saw a great movie on Netflix, Friday. The invention of lying, with Ricky Gervais. It’s from 2009 and panned by most critics, so well worth a look. It’s set in an alternative present in which humans have evolved unable ever to tell a lie, except our protagonist, Gervais, who wreaks some havoc along the way to finally getting the girl, (Jennifer Garner) and learning a good lesson.

[caption id="attachment_1710" align="aligncenter" width="560"]Gets the girl. Learns a lesson.[/caption]

Yeah it's corny and soppy but that sometimes makes a truly great movie for me. A classic scene is this one, where we get to see a Coke commercial in this alternative, brutally honest, world.

Regular readers and attendees at my conferences will know why I find this commercial absolutely delightful – and why I seem to have watched it upwards of 30 times already on Youtube this weekend. Well I won’t retread old ground, except to say that it’s been the mighty and self-righteous Pepsi that’s been on the receiving end of my happy sarcasm for the past several years. Here’s the thing: Let’s imagine we’re in that alternative present and we had to run a commercial for our industry, or indeed the chemical industry as a whole. Would the unvarnished truth be as embarrassing and awkward as that Coke commercial? No of course not. It would be pretty much what we talk about at our events and training courses. The truth about our industry is truly mind-blowing. It’s amazing what these products do and the role they play in making lives better and, as I like to say; making civilization, well, civilized. A brutally honest world would suit us just fine compared to many other human economic endeavors. “It’s basically just brown sugar water” “ we put the polar bear on the can to attract kids”.

[caption id="attachment_1711" align="aligncenter" width="654"]Awww..[/caption]

I’d love to have just one day in that world wouldn’t you? Well you can in a sense. In fact you can have three days if you like: May 13th, 14th and 15th. We’ll be telling the whole truth about our surfactants industry from the palm plantation to the supermarket shelf – and beyond to the consumer’s heart and soul – the GenZ consumer, that is. We’ll tell everything like it is, no BS. Of course, no babies will be called ugly as we’re not complete sociopaths. We’ll just enjoy the ability to say what we think and do what we say and engage in beautiful intellectual engagement and free speech with informed and conscientious people who don't feel awkward about telling the truth. I’ve never been to a soft drinks conference but I have to believe that it’s got to be a much less forthright environment than one of our events.

Starting the news this month: The great Lucas Hall, ICIS detergent alcohol expert and successor to the legendary Judith Taylor writes that US fatty alcohols prices continued to face upward pressure at the start of the month, despite the downward correction in the oil palm complex stemming from decreased demand for edible oils in China amid the ongoing outbreak of coronavirus in the country.

As prices for feedstock palm kernel oil (PKO) have come down much more significantly than crude palm oil (CPO) or palm stearin, however, mid-cut sellers have begun to lower their offers for February and March volumes as buyers shift to buying more spot material over contracted volumes.

[caption id="attachment_1712" align="aligncenter" width="668"]Downward Trend[/caption]

Spot prices for mid-cut alcohols were heard notionally lower, in the 70 cent/lb DEL (delivered) range, as sellers lower their offers to attract bidders amid the downward correction in feedstock costs in southeast Asia. The C16-18 alcohols market has held more firmly, as the market is not as subject to swings in PKO pricing. Spot prices for C16-18 alcohols were also heard in the upper 70 cent/lb DEL range, underpinned by strong demand in the US on restocking efforts despite the downtrend in feedstock costs. Q2 contract negotiations remain limited, nonetheless, as market players continue to eye developments in Asia alongside the anticipated startup of Sasol's Ziegler alcohols expansion in early Q2. If palm prices remain on a downtrend alongside the startup of Sasol's alcohols expansion, Q2 pricing could become more competitive as sellers vie for market share among buyers with formulations that can utilize either natural-based or synthetic alcohols.

Later in the month, as corona-economics started to apply; Hall writes that the uncertain effect that the coronavirus (Covid-19) will have on the oil palm complex is delaying early discussions regarding US Q2 fatty alcohols contracts.

Buyers have largely moved to the sidelines, shifting to more spot buying over negotiating Q2 contract volumes, amid expectations that prices for feedstock palm oils may fall further as muted demand for edible oils in China puts downward pressure on the market.

[caption id="attachment_1713" align="aligncenter" width="720"]Absence makes for downward pressure[/caption]

The pressure is being most significantly felt in the natural mid-cut C12-C14 detergent range of fatty alcohols commonly consumed in the US over the C16-C18 chain alcohols, as feedstock palm kernel oil (PKO) costs have fallen more significantly than palm oil since the start of the year. Spot volumes for mid-cut alcohols have been heard done in the mid-to-upper 70 cent/lb ($1,543/tonne) range DEL (delivered) US Gulf. Some sellers are unwilling to lower their offers, as the price of material currently making its way into the market is reflective of feedstock prices 4-6 weeks ago, when costs were much higher. Feedstock costs rose the last three months of 2019 on the back of increased consumption into the biodiesel sector ahead of increased blending mandates rolled out in Indonesia and Malaysia at the start of 2020.

However, feedstock costs have fallen since the start of the year amid an ongoing diplomatic spat between Malaysia and India that has led to decreased consumption of edible oils in India against the backdrop of decreased demand from China during the coronavirus outbreak. Sellers are further unwilling to lower their offers, as feedstock oil inventories are at multi-year lows, suggesting longer-term upward pressure on feedstock costs despite the current downturn in the market. Moreover, feedstock costs are expected to see significant upward pressure once the Chinese market reopens.

[caption id="attachment_1714" align="aligncenter" width="800"]They disagree on Kashmir[/caption]

In the meantime, pricing discussions are expected to remain competitive, as market participants hedge their bets on where feedstock prices will move in the coming weeks before Q2 contracts need to be settled.

In the crude oil market – corona-concerns weigh on pricing due to decreased travel and a slowdown in heavy industry in China in particular. Al Greenwood, in a superb analysis lays out how this could affect the US economy, particularly if oil settles well below $50/bbl. He also calls out surfactant demand in drilling and recovery as being potentially affected detrimentally. The whole article is well worth reading here. I still find it hard to get used to the idea that lower oil prices are anything but an unalloyed good for the US economy, but Al points out that US oil production is about 3 times what it was 10 years ago and so is a much larger part of the economy than it was back then.

[caption id="attachment_1715" align="aligncenter" width="991"]Cheap and abundant is good - no?[/caption]

Hmm… I still think that lower abundant and cheaper energy has to be good for the economy as a whole. Let's see, I guess, how things play out.

US EO (ethylene oxide) prices continued their downward trend, following ethylene, of course, since late last year. January EO contracts were assessed at 49.6-59.1 cents/lb ($1,093-1,303/tonne) FOB (free on board) US Gulf, a decrease of 1 cent/lb from December. January ethylene contracts settled lower by 1.25 cents/lb, on lengthening supply and lacklustre demand.

[caption id="attachment_1716" align="aligncenter" width="668"]More downward pressure[/caption]

Disappointing news from Brazil mid-month as surfactants producer Oxiteno reported a net loss of reais (R) 20.4m reais ($4.67m), compared with a net income of R235.3m because of lower sales and fewer one-time benefits.

During Q4 2018, Oxiteno reported a benefit of R208.9m in other operating income, which it attributed to tax credits. Fourth-quarter gross profit, which factors out the one-time benefit, also fell year on year because sales fell faster than costs.

[caption id="attachment_1717" align="aligncenter" width="1024"]Disappointed in Brazil[/caption]

The following table summarizes the company's financial performance. Figures are in millions of reais.

 Q4 19Q4 18 

%

Sales1,0121,200-15.7Cost of sales827.2973.7-15.0Gross profit184.5226.2-18.4Operating income-20.4235.3-108.7    

Cost of sales fell because of cheaper prices for ethylene and palm kernel oil. Costs also fell because of lower sales volumes. These were partially offset by a weaker real. Oxiteno attributed the drop in revenue to lower international prices and to lower volumes.

Oxiteno also noted that it faced a more difficult time in starting up in Pasadena, Texas, in the US. The company keeps working to ramp up its US alkoxylation plant at Pasadena, Texas, which has yet to reach break even, Frederico Curado, CEO of Oxiteno’s parent Ultrapar, said in an update on a couple of weeks ago.

The 170,000 tonne/year alkoxylation plant, which started up in September 2018, produces surfactants and specialty alkoxylates. Curado, speaking during the Ultrapar/Oxiteno Q4 earnings call, said that the Texas plant has not yet reached break-even point - but is expected to do so in late 2020 or early 2021.

“Execution, execution, execution” is Ultrapars’ focus in running the plant, he added.

[caption id="attachment_1718" align="aligncenter" width="700"]They know how it's done[/caption]

Regarding possible acquisitions, Curado, in reiterating previous comments, said that Ultrapar remains interested in the refining or related assets Brazil’s state oil major Petrobras is seeking to sell. While Utrapar cannot comment on Petrobras' divestment process, there would be synergies between the Petrobras assets and Ultrapar’s businesses, he said. The break-up of the Petrobras monopoly would improve the way that company's respective regional plants in Brazil are operated, he said. “There is an intrinsic opportunity for higher efficiency and utilisation of the  [Petrobras] assets,” he added. He also said that Ultrapar is eyeing opportunities from a reduction in the prices Petrobras charges for bulk liquefied petroleum gas (LPG). The price reduction makes LPG more competitive in regard to other energy sources, he said. In the mid-term, Ultrapar could also see upside from importing lower-cost LPG, he said.

Disappointing, although not at all unexpected news from South Africa as Sasol earnings for the closing six months of 2019 fell 72% to South African rand (R) 4.5bn ($297.1m) on the back of weaker oil pricing, softer chemicals margins, and losses from the delays and outages incurred at its Lake Charles, Louisiana, petrochemicals complex. The company booked a total of R4.8bn in losses related to the Lake Charles (LCCP) project, made up of a 1.1bn hit on earnings before interest, taxes, depreciation and amortisation (EBITDA), R1.7bn in depreciation charges and R2bn in finance charges as the company brought units at the site online.

Rand-denominated crude oil pricing fell 9% year on year during the period, while overall gross margins dropped 2% due to the softer macroeconomic environment. The company projects that chemicals prices will continue softer through the next 12-24 months, with a structural rebound not expected until the medium-to-long term. The Lake Charles complex has been beset by delays, outages and poor weather that has seen its budget balloon from $9bn to $12.6bn-12.9bn and led to the ouster of the company’s former co-CEOs.

Sasol achieved beneficial operation at the site’s ethoxylates unit at the end of January, while a fire that knocked out the low-density polyethylene (LDPE) plant at the site that had been in the process of ramping up has not had an impact on work at the Ziegler and Guerbet alcohols units under development.

“As the LCCP units progress through the sequential beneficial operation schedule, our revenues do not yet match the costs expensed,” the company said in a statement.

The company projects that Lake Charles earnings will better match costs from the second half of 2020 onwards, and will ultimately produce a positive EBITDA contribution for the period.

[caption id="attachment_1719" align="aligncenter" width="1024"]They too know how it's done[/caption]

Good news from India, though. I love India because people seem so positive and upbeat about things – at least in the business world that I see. Galaxy Surfactants reported a 14.6% year on year (YOY) increase in net profit for the fiscal third quarter, which ended on 31 December, to 479.9 million Indian rupees ($6.7 million). Higher profit was achieved because of a one-time deferred tax payment, it says. Revenue was down 7.5% YOY to Rs6.2 billion due to lower prices of fatty alcohol, a major raw material for the company’s performance surfactants. Galaxy states that the average price of fatty alcohol declined by 16.3% YOY to $1,138 per metric ton. It reports a 25.2% YOY rise in profit to Rs1.67 billion for the fiscal nine months ended 31 December, on sales of Rs19.4 billion, down 6.8% YOY. The company’s production volume increased to 214,711 metric tons, a rise of 8.7% YOY. Performance surfactants volume grew by 3.6% YOY to 135,337 metric tons, while specialty care product volumes increased 19% YOY to 79,374 metric tons.

[caption id="attachment_1720" align="aligncenter" width="900"]Yep[/caption]

Occasionally I will browse the internet to see what the culture is saying about surfactants – usually not much directly. Generally I’ll end up studying a Kardashian story or five then call it a day. Today, however, I happened upon an article in a UK newspaper. I used to read the Guardian as a 18 year-old student because I thought if made me look cool. Well, just like desert boots, bleached denim and long hair, it really didn’t (I can conclude in retrospect). The paper hasn’t changed much and a recent article has highlighted (doubtless much the trial lawyers’ delight) a new villain in the Bayer / Monsanto Roundup story. The villain is surfactants! I hesitantly link to the article here. They note that although the US National Toxicology Program (NTP) finds pure glyphosate not to cause genetic damage, the formulated product with other ingredients does. Those other ingredients include surfactants as well as other herbicides. The link to surfactants of course is the red-tofu for the Guardian reader and her trial lawyer benefactors. And the paper points out that the EU banned tallow-amine ethoxylates in 2016. The Guardian positions itself as a serious news organ but a quick look at other articles in the same paper by the same author yields one entitled “Neurotoxins on your kid's broccoli: that's life under Trump”. Enough said. The culture has spoken. Ignore it at your peril.

[caption id="attachment_1721" align="aligncenter" width="1024"]Orange man bad. Green stuff worse.[/caption]

So what to make of this and the industry struggle with dioxane legislation in New York; all while Coke and Pepsi rule the culture. I stumbled across this quote from stoic philosopher Marcus Aurelius – no not by reading the Guardian or other high-brow publication but by listening to more lo-fi hip-hip. First the quote, then the video. I think you’ll agree, it’s brilliantly appropriate.

“When you wake up in the morning, tell yourself: the people I deal with today will be meddling, ungrateful, arrogant, dishonest, jealous and surly. They are like this because they can't tell good from evil. But I have seen the beauty of good, and the ugliness of evil, and have recognized that the wrongdoer has a nature related to my own - not of the same blood and birth, but the same mind, and possessing a share of the divine. And so none of them can hurt me. No one can implicate me in ugliness.”

Brilliant right? But is throwing away the books the right approach. Stoicism is a valid approach but maybe it’s good just to fight sometimes?

“I’m learning and reading and studying more now than I ever have in my whole life” – Yep there’s a reason we used this music for our 10 year video for the conference series.

Regardless of your approach to what comes your way, this much is true, there must be sacrifice.

Circling back to where we started the blog. Free speech, intellectual honesty, true engagement. These are good tools at our disposal to deal with professional and personal difficulties and challenges. We’ll do our best to thread these through everything we do at our three days in May.

Remember this one? 1966

Surfactants Monthly March (and Early April)

March 2020 Surfactants Monthly - Abbreviated

This month we have an abbreviated column due to a lot of other things going on.

Let’s see.. tips and tricks for working from home? Nah.. Looking good on zoom calls? Nope.. How it’s really neighborly on our street now.. I think you’ve read all that already. I would, however, like you to consider joining our P2 Science CT Foodbank Fund Drive. Click the link and support folks who, through no fault of their own are out of work and out of money. I read that a third of renters are late paying April’s rent. It’s those people. You’re living paycheck to paycheck and then the government shuts down the economy, so we all don’t get infected. It’s never happened before. Many had their livelihoods taken away. Many were forced to work from home in their PJ’s. The latter should help the former.

Another link to consider: If you want to stay abreast of developments in brand new, renewable, cosmetics polymers, then join the P2 webcast Thursday April 9th at 1 PM Eastern.

And one more, if you’re up for it. The 10th ICIS World Surfactants Conference has been shifted back to September 16th – 18th – still in the same venue in Jersey City.

The News – In brief

Sentiment in Asia’s linear alkylbenzene (LAB) market took a turn for the worse as a result of upstream crude plunge early on Monday March 11. Buyers flocked to their suppliers asking if the latter could provide some relief for them in the wake of a plunge in crude values following Saudi surprise announcement of cut in prices and increase in oil production. However, sellers argued that current upstream movements would only be reflected in the following month.

Several suppliers were already sold out for April-loading cargoes, which did not reflect the lower cost of crude values. As such, they were not under inventory pressure. Following the crash, suppliers and buyers retreated to the sidelines to monitor the market. “This week, we stopped offering prices just to see how the market settles,” said a northeast Asian producer. The market collectively expects that April’s settlement prices for May loading cargoes would definitely be under pressure.

In India, because of a domestic plant’s maintenance, supply was considered short. Demand was stable-to-firm, and customers were still buying their regular volumes, with some asking for more material, according to several market sources in India. Discussions in southeast Asia and India were muted this week, as the market monitored crude’s situation. Buying and selling indications were also scarce as the near term outlook was still uncertain with sentiment turning bearish.

However, the tight supply situation could afford a little support to the bearish market.

US Q2 fatty alcohols contracts were assessed wider early April, but tight supply is expected to countervail throughout the quarter. Contracts for natural mid-cut alcohols among large volume buyers negotiated earlier in the quarter largely settled at a decrease amid the downward correction in feedstock palm kernel oil (PKO) costs and healthier inventory levels at the beginning of the year. Mid-cut contracts settled later in the quarter - including contracts for synthetic volumes - toward the higher end of the range, amid tightening supply in southeast Asia, Europe and the US as a result of the coronavirus, made worse by the March plunge in crude oil futures.

C1618 contracts were mixed amid similar fundamentals, with prices for mixed C1618 and C18 single-cut alcohols settling toward the lower end of the range and prices for C16 single-cut alcohols toward the higher end of the range amid more protracted supply tightness in the global market.

Contracts for premium material settled at a 3-5 cent/lb premium over non-premium volumes. Despite the settlements, supply is tight amid weaker production and sustained shipping and logistics constraints in south and southeast Asia and Europe stemming from coronavirus-related lockdowns and other disruptions. Many Asian oleochemical producers have reduced operating rates and/or declared force majeure as a result of the lockdowns and other coronavirus-related disruptions. Disruptions in Asia are causing a knock-on effect across Europe and the US, which are also facing their own constraints as a result of the virus. As a result, many Q2 shipments are delayed until later in the quarter or Q3, prompting increased demand for spot volumes at higher prices within and above the posted ranges. Ongoing supply tightness is expected to continue to put upward pressure on the market until these constraints ease and the virus subsides.

US Q2 mid-cut alcohols were assessed 3 cents/lb lower on the low end and 3 cents/lb higher on the high end at 63-78 cents/lb delivered (DEL) in the US Gulf. US Q2 C1618 alcohols were assessed 2 cents/lb lower on the low end and 3 cents/lb higher on the high end at 88 cents/lb DEL in the US Gulf.

 Right at the end of March ICIS reported that Stepan completed the acquisition of Logos Technologies' NatSurFact business. Financial terms were not disclosed. NatSurFact is a rhamnolipid-based line of surfactants made from renewable sources. Rhamnolipids are biodegradable, have low toxicity and, in some cases, have antimicrobial properties, Stepan said. "NatSurFact developed a novel fermentation process for rhamnolipids and has achieved high yields at both the bench and pilot scale," said Quinn Stepan, CEO. Stepan plans to bring the surfactants to market in the upcoming years.

That’s it on the news front. Just the top picks. As you know the chemical industry is working like hell to make (and donate in many cases) sanitizer around the world.

One thing I guess I could comment on about the lockdown. If you’re looing for good online workouts, youtube’s got a couple of great ones with many similar exercises but totally different styles.

Check out Has Fit for the man and wife team of Coach Kozak and Claudia. They’re upbeat, constantly motivational and build up a sweat and moan about the pain – just like you.

For a different vibe, check out Heather Robertson She works out to anodyne synth-pop in front of a white background. She never sweats and the form is perfect. Probably not like you. In fact, I’ve done a bit of research and it’s hard to prove her real identity. Who knows, with some CGI, AI and a well drawn avatar, you may have “Heather Robertson” without all that messy human being business.

[caption id="attachment_1733" align="aligncenter" width="749"]Human or not..?[/caption]

And for our outro: A perfectly appropriate musical piece suggested by a long-time reader of the blog. Listen carefully to the opening spoken introduction…..