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!