Surfactants Monthly New Year 2022

Happy New Year

As promised, we have here our monthly blog for the remaining part of December and an end of year short story. The story is set on New Year’s Eve and starts in the control room of a specialty chemical plant. If you don’t want to be bothered with the story and associated moralizing, you can skip straight to the news section which is clearly marked. OK? So here we go then…

Oh and by the way, the story is fiction. It's not based on any real events or places. Although - you may recognize some characters, thoughts and feelings from your own life. Alright here we go...

The Story

Emerald - A New Year’s Eve Short Story

John gazed at the pale green screen. It yielded nothing of interest. Nothing at all really. No phones. No books or magazines even, allowed in the plant control room at Veritas Chemical, ever. Not even New Year’s Eve, when basically nothing was happening. Well, nothing that the control room cared about. There was some last-minute shipment being drummed off out there for a customer in Thailand or Taiwan or someplace round the world. That’s Karl’s thing, drumming. He liked getting up close and personal with the product out on the plant floor, like a real working man. Couldn't stand the control room for too long - in there with the computers and the other expensive crap that would break if you looked at it the wrong way. John liked it there though. It was high-tech-ish. Everything at his fingertips, under his control, except Karl’s little drumming empire, the last redoubt of true manual labor at Veritas.

Karl burst into the control room with a flourish and sample in his hand.

“OK Johnny boy. Last sample of the last shipment of the year for analysis and then it’s what…. Johnny what is it?” Karl grinned expectantly.

“erm…  a mega piss-up, Karl?”

“No Johnny. The mega-est piss-up of the year with the entire Westside motorcycle club in attendance and their wives and girlfriends and significant others and Lisa, that chick from behind the bar at Murphy’s who will be my arm candy for the evening and maybe more if the lucky lady plays her cards right – know what I mean, Johnny”

“Yes Karl, I believe I do. Good luck then”

“And you Johnny boy – stopping by the club later are ya? Lisa might bring her mate with the boots; you know the one…”

“Erm actually I have a date tonight, Karl, so er probably won’t make it over there this time. Thanks though” hell why did he have to mention the date?

 “A date? Like a proper date with a girl...?” Karl inquired with a rising tone of utter disbelief

“Who is it then?” he challenged before John could respond.

“Just someone I met and er yeah so, we’re going to a movie and dinner and her name’s Kat and… are you going to analyse that sample and get those drums out of here so we can go home?”

Karl loaded the sample into the GC “Kat eh? From in there?” he waved in the general direction of the Veritas offices and smirked “with the green hair – who does accounting and stuff – wow Johnny boy – nicely done buddy. Outta my league for sure. I mean not looks-wise, although she’s very good looking, v-e-r-y and I mean very nicely proportioned if you know what I mean – but you know she’s a bit too intellectual (he almost spelled it out) for me. I think she’s like studying for some business degree at night  - so quite brainy you know” He added in the sort of hushed tones that one might use to mention an unfortunate physical defect.

“Yeah well she seems nice and maybe it’s a bit much to bring her to the club on a first outing, you know, Karl”

“Sure, that’s cool man. You wanna stay on the right side of the tracks with that brainy intellectual one, tonight. I get it”

“Ok then” Karl stared at the display and did his dopey imitation drum-roll thing “ Analysis says….  98.5 .. another award winning batch of H-105 from the Veritas Chemical Company, courtesy of Karl-Heinz Rickenbacker the best drummer this side of the Hudson River”

“There’s not really that much this side of the river Karl, but actually -  did that say 98.5? It looked like a 93 from here man”

“John, John John” Karl intoned as he switched off the GC and filed the sample with the week’s batches “The spec is 98 minimum, as you know, and so the analysis on this new year’s eve, approximately 119 minutes from my ron-day-voo with the lucky and lusty Lisa and approximately 179 minutes from when Interfreight swings by to get this last shipment of 2021 on its way to China, is of course a full 98.5 my boy. No question”

“I thought it was going to Taiwan, Karl”

“Same thing bud. Says it right here on the Commercial Invoice – Republic of China - so just pop that 98.5 on the C of A and we outta here man – time to find out if green is that Kat’s real hair color, eh? know what I mean Johnny eh?” Karl cackled like the 15-year-old trapped in a 40-year old’s body that he was.

“I’m pretty sure that it’s not her real color, Karl and OK I guess 98.5 it is if you are absolutely sure about it?”

“Sure as you are about your girlfriend’s hair”

“She’s just a date, mate, come on. Here’s your C of A then and I’ll see you next year ok? All the best to you er don’t drink too much eh?”

“Planning on it Johnny! Happy New Year mate!”

Shower, new jeans and a splash of Paco later, John is sat across from the green-haired Kat at Murphy’s, Guinness in hand and feeling mildly buzzed after pre-game shots with this brother before heading out. Kat observed her first date for a year since moving across the country to start again, again. And it had to be some guy from work, didn't it – although John didn't really count because he worked over there in the plant with dirt under his fingernails and that coarse skin on his large strong hands. She snapped out of her bodice-ripper moment but not before glancing at John’s nails which were surprisingly well manicured – for a plant guy. Stereotypes aren’t what they used to be, she shrugged inwardly. Just as well. This guy seemed nice enough – certainly better than his buddy out there on the plant who almost had her calling HR in her first week at Veritas.

Some old guy put Thin Lizzy on the jukebox. The dueling Celtic riffs of Emerald ricocheted around the pub.

“Good song” said John

“Great song”

Wow thought John

“How about being black and Irish?” pondered Kat

“Is that a trick question? Erm – I dunno. Guinness - that’s black and Irish”

“Er haha – no. Phil Lynott the lead singer of Thin Lizzy. He was black and Irish and a huge figure in 70’s rock - all over the world. Have you heard the words to this? It’s about the Irish struggle to regain what was rightfully theirs...”

Down from the glen came the marching men, with their shields and their swords

“Sure, I know the words, but you know some of them bother me – this bit coming up”

When they left the town was empty. Children would never play again

John warmed to his theme

“I mean they’re supposed to be singing about the good guys, right? but they have to bring kids into it. It’s pretty sad that lyric – a bit disturbing”

“True John, but that’s life, isn’t it? It’s like the Passover story. Before the Jews could get out of Egypt, all the little first-born boys of the Egyptians had to be killed, didn't they? And it was God did that – so if it’s good enough for God, it’s good enough for the Irish right?”

“Yeah, I guess but, I never liked that story either Kat. I guess the Pharoah had lots of chances to do the right thing, but I suppose things just got out of hand. One mistake compounded on another and pretty soon it’s the ultimate horror”

“Wow look at us being all deep and morose and philosophical. I need another drink and so do you. same..?

Kat returned from the bar with a Guinness, a Cider and two shots of something that looked and smelled like Bushmills. What a first-class young lady, thought John. We need to cheer things up round here, thought Kat. These shots’ll fix it – or not.

Aaah – nice – the golden liquid did its job

“– so, John you from round here originally?”

“Westsider all my life. In fact I reckon I was born in this pub..”

“Conceived maybe” observed Kat wryly with a raised eyebrow.

Funny girl – and yes, kinda clever.

“And you, Kat. Where are you from?”

“New York, then Cali, then New York again. Moved around a bit you know. I’m hoping this is home for a while at least”

“You like it at Veritas?”

“It’s OK. Not bad. It pays the bills and I’m learning – a lot really and I’m getting my MBA at night... so yeah, I guess I like it. And I can more or less be myself as long as the job gets done. The people aren’t bad either – no real jerks that I’ve come across – although do you know the owner, Flannery Jr? They say he’s a piece of work, when he shows up”

“Yeah – the new owner you mean. He’s Flannery’s son. Took it over from Mr. Flannery last year. Stay away from that guy. He’s the opposite of his dad. Basically, a playboy. Only wants money from the company and leaves the running of things to the execs on the 3rd floor. “

“Oooh a single rich playboy then?” Kat did that thing with the twirly hair and pouty lips “maybe I should meet him. Wouldn't need to bother with the MBA then..ha”

“More like a married rich sleazeball. I’d say I feel sorry for the unlucky Stella – Heinz Rickenbacker Flannery, but I hear she gives as good as she gets in the sleaze department, so I guess they’re a perfect match”

“Oh – Rickenbacker – that's your buddy in the plant? No relation though, right?” Kat laughed

“Unfortunately, yes, the relationship is that he’s the idiot step-brother of the the evil step-sister Stella. And look, despite what you might think” Kat untwirled her hair and rolled her eyes “he’s the most decent one of the bunch. He’s a good guy underneath all the macho-talk. He wouldn't hurt anyone – unless he thought they were going to hurt a friend of his – and he’s fundamentally honest. He can’t lie really – which has gotten him into a few fights over the years, but he’s a straight up honest guy who well.. at least I thought so until”… John’s voice trailed off and he gazed into the bottom of his now empty Guinness glass.

A moment passed. Bob Marley filled the dead air.

Exodus… movement of ja people

“Er hello.. John… where’s John? Did he disappear into the Guinness glass, like Alice?” Kat squawked like a cross between the Red Queen and Dame Edna.

“Yeah, no, I’m good. Just something at work earlier. Anyway, no big deal. It’s New Year’s so..”

John offered a far-too-weak smile and stared back into the glass, looking for something.

Open your eyes and look within

“Hey look, if this is your broody-mysterious schtick – it doesn't get you into my jeans. Just so you know...”

“Kat – no. Good grief. I got no schtick, believe me. No it’s stupid. Anyway, I get paid by the hour and right now I’m not on the clock – I’m on your clock – the cute funny smart-girl clock. So, let’s get going or we’ll miss the movie”

He peered uncertainly into her eyes, which he noticed were exactly the same color as her hair, which was weird, but cool. He kept peering.

Are you satisfied with the life you’re livin’

“Ooops I lost you again. You’re behind my eyes now. What are you doing there you naughty boy” Red Queen / Edna asked

“I think… Karl... might have lied to me this afternoon”

“Goodness. Saint Karl told a lie?” Kat’s mock incredulity hit hard

John ploughed on

We know where we’re goin’

“That last batch of H-105. He told me it analyzed at 98.5 but honestly Kat, to me, from where I was sitting, it looked like a 93 and I know he was dead-keen to get out for New Year’s and see that Lisa ‘n all so maybe he just fudged it and, well, I’m the one who put it into the system, so I fudged it as well” John eyes refocused on Kat’s. “What does that H-105 do anyway? You probably see all that with your work in the office. It’s going to Taiwan, which is not China erm...”

“Yeah I know it’s not China, John... H-105 - that batch is going to EVA air. The last shipment I set up before leaving tonight - actually goes into a lubricant – for aerospace. So – basically keeps airplanes flying - so yeah I guess pretty important”

We know where we’re from

“Ooof Kat. We gotta do something. That stuff can’t go out tonight. What if an airplane falls out the sky and … it’s all on me”

“What, John. What are you going to do? Call the nightshift from Murhpy’s on New Years Eve and shout above the pub-noise to tell them not to ship the 105.? It’s getting picked up in an hour from now and I don’t think your boozy phone call would go down well over there”

“Kat – you’re smart and work in the office. What can we do?”

“Oh right, I’m smart-and-work-in-the-office so I can just wave my magic wand right – well… hmmm... maybe – ‘cos I kinda have a magic wand right here on my phone. It’s the ERP app for Veritas. Does the pub-where-you-were-conceived have a wireless network?

“Er... yeah it’s StJamesGate and the password is … er well let me just enter it for you here”

Within seconds, Kat’s fingers were dancing across the glass surface of the phone and in less than a minute...

“Alright then – all relevant boxes are now unchecked which means that it’s physically impossible for those drums to leave the shipment holding area without basically taking out a wall – which I don't think our nightshift is going to do so… so now what John?”

Kat smiled at him but it wasn't an entirely nice smile. There were elements of a grimace to it

“Well, great, I think Kat. Right, I mean we can sort it out next week right? After New Year’s?” he ventured hopefully.

“Well, John, what’s now is that within some number of hours I’m going to catch holy hell which I’ll promptly pass along to you because without that shipment tonight, the year’s sales don't reach the magic number and the execs on the 3rd floor don't get their ridiculous bonuses and Flannery Jr. doesn't get his truly obscene payout and Stella-Heinz-Rickenbacker-Flannery doesn't get her pink Lambo. Actually, I’m kidding about that last bit. It’s probably not pink, but the rest is true and that’s the downside of me having time to read and not enough work to do. I just know this stuff. So – now what John.?”

We’re leaving Babylon

“We get over there Kat, back to Veritas, pull the raw analysis data out of the control room archive and see what that batch really came in at – 93.5 or 98.5. Then er… then we’ll see for sure what happened. Get us an Uber Kat, eh? I know this is maybe not the date you envisioned, but you’re with me, right?

“I guess, John. 5 minutes out front”

And we’re going to our father’s land

Snow had started falling and the Veritas plant parking lot looked quite beautiful, coated a perfect, crisp and even white. Inside the control room John and Kat made an unlikely pair of heroes with green hair and the smell of pubs and Paco offending the sober senses of the night-shift team. Nonetheless, they seemed to be getting somewhere when the sweet odor of champagne, Chanel and cigars invaded the space, followed by a teetering Stella and a Lurching Vincent Flannery Jr.

“What the fuck?” Flannery asked the room in general

Silence ensued, then...

“Hello Mr. Flannery” Kat spoke flatly, guessing correctly that the Bonnie and Clyde in fur, Louboutins, diamonds and tux were the same Flannery’s she’d just learned about from John.

“OK – so who the fuck are you and what the fuck... are you doing with the China shipment?” Flannery menaced.

Kat stared at him. She’d been talked to like that all her life and knew by now that the fight and the flight options were never the best response. Nor was the often-useful crying.  Still, it was hard to control biology and evolution and she felt tears push hard behind her eyes as she clenched her thumbs inside her fists. But the flat voice didn't fail her.

“Mr. Flannery. The ERP system is showing an inconsistency with the analysis for this batch and so the barcoding won’t let it out of the plant. John here, brought me over to determine if this can be addressed this evening. I’m Kat by the way, from accounting”

“Yeah I know” Flannnery seemed a bit put-off by the absence of fight, flight or crying “But you see, Kat-from-accounting, my good customer in China really needs this very important shipment of H-104 to go out tonight. “

“erm It’s going to Taiwan, Mr Flannery and it’s H-105 for Eva Air for airplanes” John tried to interject matter of factly.

“OK right – Tie-fucking-One and they need to keep the fucking planes flying so let’s get this shit outta here now!” Flannery got back into his groove bullying John.

“Right well, I was working here this afternoon with Karl and…”

“Oh – my idiot brother-in-law- why am I not surprised he’s involved” Flannery scoffed.

“and” John continued “I’m concerned that the right analysis for the H-105 was not entered into the C of A by... er… me so I asked my colleague here in accounting to pause the shipment until the uncertainty could be resolved – which is what we’re doing here”

“Smart boy” giggled Stella. Flannery glowered, promptly ignored John, and turned back to Kat.

“Well if the green goddess here can pause the shipment, she can certainly un-pause it, which if she does in the next... hmm... 9 minutes, there’s a very nice year-end bonus in it for her and for you all – if she does what she needs to do. If not, well you’re all fucking fired – so get to it Katey” Flannery stared somewhere off to the left of Kat, not daring to lock eyes.

“Of course, sir. I can easily un-pause the shipment, as you say, by checking and verifying the analysis in the system with the number on the C of A and that should take, oh about 10 – 20 minutes.” An even deeper silence ensued as Flannery’s champagne addled intellect grappled with the seeming fact that, as 10 – 20 was a greater number of minutes than the now, 8 minutes in which the Interfreight pickup window would close, his obscene year-end payout would be significantly less obscene than planned and his wife’s Lamborghini would just have to wait one more year.

“Guys, I don't understand. What happens if you just ship the drums” asked Stella, rather innocently, in John’s opinion.

“Mrs. Flannery” began John “Stella, darling... call me Stella”

“Er... Stella” John looked sideways at Flannery and continued “If the analysis is wrong and we ship the drums and they are used in an airplane lubricant system, something could go wrong with the plane and then it might crash and all those people, mams and dads and kids would be gone –because of us - because of me”

“Vincent darling – this young man and his colleague are trying to save lives so what’s the harm if we wait another few minutes. Daddy will hardly mind if we’re a little late for his party...?”

Flannery couldn't figure out if he’d been checkmated by his wife or the green-bitch or were they working together. Any case…

“Fine. Fuck” he growled. Which everyone took to mean go head and pull the records and make the comparison.

Time passed as it should. Interfreight came and left, without the drums. Flannery’s blood pressure went beyond boiling point and Stella found a fifth of bourbon in the back of the limo which she shared with Kat.  More snow fell. They gathered back in the control room.

“It’s 98.5” said John and he couldn’t decide whether to be elated, because Karl hadn’t lied, or dejected because he, John, was an idiot.

“But the display, I can see it even now, it said 93, I swear. I don't understand” He looked forlornly at Kat.

“Well obviously” said Tommy, lead night operator. “The display’s fucked – sorry Mrs. Flannery – but it is. If you look at it from over there, he waved left, 8’s are 3’s and 0’s are 1’s and from over there, he waved right, it’s just dots. You can only read it from right in front – and even then, you know, you really can’t trust it can you? Should have been replaced months ago but no-one listens to the nightshift so…” he glanced from under his eyelids at Flannery.

“So, I’m not crazy?” concluded John with relief.

“Oh, you’re crazy alright” began Flannery “and…”

“And, darling… these lovely young people, Kat and her boyfriend, did a wonderful thing to avert a potential plane crash and you must be very proud they work for you!”

Boyfriend – John liked the sound of that.

“So let’s celebrate Darling. You’ll buy me that Lambo you promised, and you’ll pay for Kat’s MBA she’s been talking about and erm get John whatever he wants – and these fine nightshift people! Wonderful!”

“That’s OK, Mrs. Flannery. We don’t need anything” Wait what ? I need something, thought John. “I’m just pleased that John here didn't want one mistake to build on top of another and the ultimate horror to result. Just knowing that he thinks that way and acts on it and that now we are still only not even half-way through a date, well that’s more than enough for me.”

Alright. I actually don't need anything because right there, what Kat just said, that’s all I need, thought John

“OK green goddess let’s go then. We’ve got a date to finish. I think we were discussing a Thin Lizzy song…?”

~The End~

The News

First up – do you guys read the Indian Chemical News? (https://www.indianchemicalnews.com/) . I started getting their emails about a year ago and didn’t unsubscribe. You get some decent snippets each day and a fair bit is surfactant related. For example the published recently that :

Indorama Ventures Public Company Limited (IVL) [the new proud owners of Oxiteno – although I don't think the deal has officially closed yet ] has opened its new 10,000-square-foot office and technology center at Marwah Center in Mumbai. The new facility is part of the company’s high-growth Integrated Oxides & Derivatives (IOD) business segment [that’s the part that acquired Oxiteno], serving global customers in India and the Asia-Pacific. Alastair Port, Chief Operating Officer - IOD business, Indorama Ventures said, “IVL is committed to growing our IOD business sustainably in India and Asia-Pacific and this new business and technology center in Mumbai is a key driver. Having support functions as well as an R&D center under one roof in the heart of Mumbai is convenient for customers to collaborate with us to create better solutions.” The new R&D center is the company’s hub for the Indian Subcontinent and SouthEast Asia to develop products supporting downstream markets, such as home, personal and industrial care and cleaning, agrochemicals, energy, lubricants, mining, and coatings. The center will also work closely with IVL’s global R&D team to exchange information and accelerate product development cycles. The business’s commercial and technical functions, including supply chain, finance, sales, and R&D are integrated at the new facility. The integration enables closer collaboration across functions and faster improvements to address changing customer needs. Indorama Ventures Public Company Limited portfolio comprises Combined PET, Integrated Oxides and Derivatives, and Fibers.

Of course, most of our news comes, as always, from the great folks at ICIS Chemical Business. You should subscribe, as I do. That was a not – so – subtle promotion for my conference partners, I know. But I wouldn't have produced 11 years-worth of surfactant conferences with them, if I didn't think they were a quality shop. They are. Join us in May, in person, in Jersey City, in person (did I mention that). The event launches soon, so stay tuned and also let me know if you you would like to present. If you think you could be the next Martin Herrington (hard to imagine, I know), then let me know.

More news, from ICIS. : The year in oleo could not have ended with a more appropriateheadline – “No end in sight for European fatty acids, fatty alcohols tightness”. The article, by the talented and informed Samantha Wright, goes on to report that:

European fatty acids and fatty alcohols are expected to face further shortages and strong demand through the first and second quarters of 2022.  Ongoing logistical issues are likely to continue and players face fresh fears over rising COVID-19 cases.  In the European fatty acids market, the tightness that has plagued the market for most of 2021 looks likely to continue into the first quarter. In the palm-based market, players are already negotiating Q2 contracts amid ongoing shortages.

Palm oleic acid has been very tight throughout 2021 and there are no indications that tightness will ease in the first quarter or even in the second.

Most palm-based producers are already sold out of oleic acid for the first quarter. Supply constraints have been caused by a combination of vessel delays, high freight costs from Asia and stronger demand amid tallow shortages. [interesting – I don’t recall reading about that recently. Although Tallow seems to have gone through the roof along with other commodities]  The vessel delays are expected to last through the first half of 2022 as coronavirus-related logistical issues continue.  Palm stearic acid availability was becoming more balanced towards the end of 2021.  While there may be some tightness at the beginning of the first quarter as demand picks up following the holiday period, overall palm stearic supply is likely to be fairly balanced for the first and second quarters.  Tallow-based material is still very tight, with oleic acid supply shorter than stearic acid.  The tallow-based shortages arose from a lack of meat production combined with strong demand from the biodiesel industry for raw tallow.  While meat production increased slightly in the second half of 2021, there were still low slaughter rates.  This saw some increase in the fourth quarter, with December a typically strong month for meat demand.  However, demand from the biodiesel market remained very firm, and there was very little additional tallow material seen in the fatty acids market during the fourth quarter.  This is likely to continue into the first quarter and even into the second quarter, and could be a structural issue in the tallow market if slaughter rates do not increase to a level where biodiesel and fatty acids demand can both be fulfilled.  Demand for all grades is expected to be stable at firm levels throughout the first and second quarters.

There may be an uptick in buying interest in January as players look to restock following the new year, but overall demand should be steady as all applications in the food, cosmetics and personal care industries are currently healthy.  One source said: “I think production is pretty good… when you look at demand in general it is also very good. I do not see [tightness] easing unless demand reduces, which we do not think will happen.”  Automotive demand is currently set to remain healthy, though there are ongoing concerns that increasing COVID-19 restrictions in Europe could cause a drop in activity again in several industries, including the automotive sector. The European Commission announced in the fourth quarter that it had launched an anti-dumping investigation into fatty acids from Indonesia. The probe is expected to last for the whole of 2022, so it is unlikely there will be any direct impact in the next year, but players will be keeping a close eye on the proceedings.

On Guard Against the Fatty Acid Dumpers

In the European fatty alcohols market, shortages are set to continue through the first quarter.  The market has faced tightness throughout 2021 amid vessel delays from Asia, logistical issues within Europe and high freight costs.  Supply constraints are expected to remain in the first quarter and possibly into the second. Vessel delays are not likely to improve in the first half of 2022.  One source said: “Vessels are supposed to be arriving in February and they are not even on the water yet. There are [still] hiccups in the supply chain, definitely.”  This is compounded by very strong demand from the downstream surfactants and end-use detergents markets.  Players are expected to have firm buying interest in January as they look to build stocks after the year-end destocking.  This is likely to be even stronger than in previous years as some market participants are looking to build stocks in case there are further coronavirus-related issues in 2022.  “I believe people intend to produce whatever they can produce in order to have material ready before wave number five hits and they are forced to lock down again,” said a source.  There are coronavirus-related issues with the palm oil complex in Asia that are causing issues for producers securing feedstock and are expected to continue into 2022.  It is unclear yet if there will be more logistical issues in Europe during the first quarter if COVID-19 restrictions tighten, but ongoing concerns over a lack of truck drivers are likely to continue.

Where are they Now?

After selling its North American surfactant business to Indorama (who soon thereafter gobbled up Oxiteno to form a major surfactants player), Huntsman is back on the deal trail again (as if they are ever really off of the trail). ICIS reports that Huntsman is considering selling its Textile Effects division as part of a strategic review of the business. Huntsman will start the review early in the first quarter of 2022, the company said. The division is based in Singapore. Huntsman does not have a timeline or deadline regarding when it could finish the review.

Huntsman expects the division will report nearly $100m in adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) in 2021, the company said.  The division makes dyes and textile chemicals used in pretreatment, colouration, printing and finishing. Huntsman operates 11 synthesis and formulation production sites in Asia, Europe and the Americas. Raw materials include amines, ethoxylates, acrylics and sulphones.  In 2020, Textile Effects accounted for 10% of the company's revenues and 5% of its adjusted EBITDA. Huntsman's other divisions include Polyurethanes; Performance Products, which makes amines and maleic anhydride (MA); and Advanced Materials, which makes epoxy resins and curing agents.

Textiles on Sale

Meanwhile over in Asia, ICIS reports that The Asian and south Asian linear alkylbenzene (LAB) market actually drifted lower in the fourth quarter of 2021 as demand as a whole failed to ignite. With the new Omicron COVID-19 variant now threatening to disrupt economies once more, sentiment among LAB players remains cautious.  The slump in energy prices towards the end of 2021 and the Chinese government’s efforts to combat inflationary forces and curb power costs also weighed on the LAB market.  Buyers adopted a cautious stance and bought on a need-to basis. Some suppliers held on to their offers but gave discounts for deals, while others focused on their own domestic markets at the year-end, citing soft demand in Asian export markets.  Maintenance shutdowns in China were completed by November, but suppliers mostly continued to focus on the local market, citing tepid buying interest in Asia and India.  However, some Chinese parcels could still find their way into Asia in the weeks ahead, especially after local Chinese appetite has been satiated.

In India, local demand perked up in November after the Diwali festivities in early November, but buying momentum fizzled at the end of the year.  Buyers anticipated a weaker market from weak upstream energy and benzene markets, and kept mostly to the sidelines.  Supply seems likely to dictate the tone of the market in 2022, as demand appears little changed. Even with Asian economies easing pandemic restrictions and initiating global vaccinated travel lanes, the expected pick-up in usage of cleaning solutions in the hospitality and aviation/transportation sectors is perhaps counter-balanced by people’s acceptance of living in an endemic COVID-19 situation, with appetite for hand sanitizers and cleaning liquids down from the earlier part of this year. Nevertheless, planned turnarounds in the fourth quarter of 2021 and the first quarter of 2022 are expected to keep supply in check across the region, while providing some support to the market.  The wild card could be Chinese supply, which - though limited in late year - could become more abundant in the first quarter as output stays high. This may be especially true post Lunar New Year in early February, when LAB plants in China come back from the holidays in full swing.

Wild Year of the TIger in LAB

Meanwhile, with the new COVID-19 Omicron variant starting to make its way through to Asia as well, a possible re-imposition of restrictions sometime in the first half of the new year will again be a dampener on demand. Potentially lower upstream markets from this deflationary economic bout could exert downward pressure on the LAB sector, as relative demand-supply goes out of balance.  The elevated freight market, which looks likely to prevail into the new year, will continue to hinder a good portion of the arbitrage play of Asia suppliers trying to move volumes to destinations outside the region, such as Europe, in a bid to capture a higher value market. Consequently, any excess cargoes will likely remain within the Asian region and add to overall availability.

Don't See This Often

The year in Fatty Alcohols ended with may supply chain woes as outlined by the great Lucas Hall at ICIS. He notes that : Freely-negotiated US Q1 fatty alcohol contract negotiations have largely been finalised against the backdrop of bullish cost pressures and worsening supply chain constraints.  Freely-negotiated contracts for standard balance material have largely been heard at a 30-50% premium from their Q4 settlements, with Mass Balance (MB) material largely heard at a 30-50% premium over standard balance material.

Short and long chain single-cut alcohols are particularly tight.  Overall production costs remain bullish despite a moderate downward correction in feedstock costs across the oil palm complex in recent days associated with year-end inventory balancing. Vessel space is tightening against the backdrop of soaring freight costs, with shipping companies informing southeast Asian exporters they are no longer taking booking for January. This will defer containers that have amassed in ports throughout the region to February or later, further delaying imports. Current lead times for container shipments are at a minimum of three to six months.

Long chain alcohols are largely imported in containers. Few suppliers have the ability to process and store long chain alcohols in bulk, further supporting the market.

Imports Important

Malaysia's palm oil market remains fundamentally tight, with lower import taxes in India, adverse weather conditions in southeast Asia and the resurgence of the pandemic with the rise of the Omicron variant of the coronavirus all expected to pressure costs in Q1.  The premium on palm kernel oil (PKO) because of the above pressures - in addition to growing concerns regarding the traceability of sustainable volumes in Malaysia - may continue to discourage PKO consumption for oleochemicals production, adding to the pressure.  Increased scrutiny against Malaysian-origin material over forced labour allegations remains a major concern, as the traceability of Roundtable on Sustainable Palm Oil (RSPO) MB-certified material becomes more difficult, supporting higher premiums for MB PKO for oleochemicals production.

The Underpinning

As a result of these cost pressures, many southeast Asian oleochemicals producers are planning maintenance during and after the Lunar New Year, further tightening the market.  Domestic US fatty alcohols production capacity, as we know, is insufficient to make up for the import shortfalls against the backdrop of similar supply chain constraints, further supporting the market.  Downstream demand in many end-markets remains pent-up because of continued supply chain disruptions, with many players working on an as-needed basis to fill backlog demand for the foreseeable future. Downstream surfactants price increases remain on the table with little to no pushback from customers.

Prices have largely been heard at a 30-50% premium from their Q4 settlements, based on market feedback.  Long chain alcohols in containers have been heard much higher, given persistent and worsening supply chain constraints in that market.  Contracts increasingly include terms subject to changes in freight and demurrage costs, given these constraints. Some players have less volume available for their traditional quarterly contract customers, as they prioritise inventory-building and annual contract customers over smaller volume customers ahead of upcoming maintenance and ongoing supply-chain disruptions globally.

Q4 contract ranges*

ProductPrice (cents/lb)INCOLocationC12-C1597-112DELUSGC16lower 110s-140sDELUSGC18lower 110s-140sDELUSGC16-18114-134DELUSG

*The prices in the table represent a range of settlements for standard balance material heard throughout the quarter for the majority of market participants. Prices above and below those listed in the table were heard throughout the quarter but excluded as they were not viewed as representative of the wider market.

Prices for synthetic [petrochemical] alcohols were heard at both ends of the above ranges amid the ongoing force majeure at Shell's Geismar site.  At least one buyer settled its Q4 C16-18 contract below the $1/lb DEL (delivered) US Gulf (USG) range.  The same buyer settled its Q4 C18 contract below the $1/lb DEL USG range.  In the wider market, multiple producers have switched their contract terms from a DEL to an FOB + freight basis or to terms subject to changes in freight and demurrage, given the ongoing shipping logistics constraints.

Hmmm...

US Surfactant bellwether, Stepan [hmm I don't think I’ve used that phrase before. It sounds right though] - So - US Surfactant Bellwether, Stepan announced a full slate of price increases, which it is probably useful to list here. So, as ICIS reported: Although the announcement did not cite a reason for the increases, demand for surfactants into cleaning supplies is expected to increase with the emergence of the Omicron variant of COVID-19.  In addition, demand from oilfield activity remains strong amid elevated crude oil and natural gas prices.  In addition to the product price increases, Stepan seeks a separate 1.5 cent/lb transportation increase.  Transportation costs throughout the US supply chain have risen sharply, due to insufficient trucks, railcars, and containers; high gasoline prices; and labour shortages.

Stepan seeks price increases for surfactants in the following product categories: [Take a look. There are some very wide ranges there – note on the dry products and on some of the smaller volume items like phosphate esters, amides and betaines. ]

 Product Category Price
Increase ($/lb) Alkyl Benzene Sulfonic Acids $0.03Alkyl Benzene Sulfonates and
Dry Sulfonates $0.03-0.11Short Chain Alcohol and
Ether Sulfates $0.075-0.09 Lauryl Alcohol Sulfates and
Dry Sulfates $0.09-0.26 Low Active Alkyl Ether Sulfates $0.07-0.11 High Active Alkyl Ether Sulfates $0.10-0.16 Ether Sulfates - Phenol $0.07 Olefin Sulfonates and
Dry Olefin Sulfonates $0.03-0.10 Sulfonated Methyl Esters $0.11 Hydrotropes $0.04 Amides $0.08 - $1.19 Betaines, Sultaines and other
Amphoterics $0.14 Amine Oxides $0.14 Sulfoacetates $0.26 Sulfosuccinates and
Sulfosuccinate Blends $0.09-0.23 Methyl Esters $0.05-0.84 Biocidal, Industrial and
Cosmetic Quats $0.03–0.21 Softeners $0.06-0.22 Phosphate Esters $0.05-0.57 Alkoxylates $0.015-0.18 Specialty Polyesters $0.02-0.08 Specialty Esters $0.03-0.61 Transportation $0.015*
*Note: Price increase is
independent of and in
addition to any
increase above

Blends and derivatives of these products are also subject to the increases.

Don't be that Surprised!

Finally some news from a bunch of companies that we don't normally talk about here. US specialty chemicals company Polyventive has acquired the surfactants and dyes and pigments businesses of Canada’s Tri-Tex from SK Capital Partners for an undisclosed sum.  The acquired businesses, with plants in Quebec, Canada and Los Angeles, California, produce surfactants, dyes, pigments, and water-based polymers used in textile, personal care, cleaning and industrial applications.  Polyventive is a portfolio company of Arsenal Capital Partners.  In a related deal, another Arsenal company, Meridian Adhesives Group, on Monday acquired Tri-Tex’s adhesives business.

So that’s it. Happy New Year to all my great readers. I love it when I hear from you about something you’ve read here. So please feel free to get in touch. You know how. I will see many of you at ACI in Orlando at the end of the month and of course in May in Jersey City.

I guess, it wouldn't be a surfactant blog if we didn't end the year with some music. So what am I listening to these days? Thin Lizzy of course. Here’s the aforementioned Emerald.

It’s inspiring but still a little disturbing with the lyrics no? Just like the Passover story.

And here’s the gorgeous Parisienne Walkways with the legendary Gary Moore on guitar. Oh man..I really can’t think of anything more French than this.

And check this out. It’s Ted Nugent introducing the band playing live at the Rainbow in 1978. The crazy thing is, if you listen carefully, Nugent introduces this great Irish band as “London Boys” Ugh…They play on regardless.

Of course, we have to include this high-point of the movie Eddie the Eagle

And finally, who hasn't been to an Irish pub and sung along to this one? Wait what -  You haven’t? Get out there man…!

And finally finally, I just listened to this one from the ’73 album Vagabonds of the Western World. Remember this? The Rocker. Serious guitar break..

Happy New Year!

Surfactants Monthly – January 2022

Like many others in our industry, I’ll be marking the end of the pandemic and the beginning of the endemic with a trip to Florida and the American Cleaning Institute Meeting. That may or may not be wishful thinking. Not the going to Florida part. That will have happened as of your reading this. The endemic part. That’s when you stop writing and talking about it except in the historical sense – like “hey do you remember that.. can you believe we were doing … such and such”. Let’s see. By the way, you’ll get no gossip or tittle-tattle from the ACI in this blog. Our motto is, as you know, that “you gotta be there”.  So..

Another place you gotta be is our great ICIS / Neil A Burns LLC World Surfactant Conference, which is back in person in Jersey City, NJ May 9 – 11th. It’s 1.5 day conference and a 1 day optional course. Of course, we also have the great Surfactants Awards for which nominations are now open. After two years of, frankly, unsatisfying meetings over zoom and somewhat nervous get-togethers at various meetings, I am really looking forward to this singular event in the surfactants calendar. I will also add that we have a huge new sponsor that I really can’t say much more about until closer to the time, so that’s enough from me on that. I will say that you should book now. The usual Hyatt venue, although large, has a finite capacity and it looks like we will sell out very quickly. We’ll have some firm favorites speaking and some new and unexpected names. You’ll get information and insights that you just can’t get anywhere else – and the best networking you’ll experience in 2022. You gotta be there, so.. See you there!

We're Back

End of commercial. Beginning of News

Credit for most of the news here goes again to our partners ICIS. Check them out. I’m a subscriber. Maybe you should be too.

A nice piece of news from Locus Performance Ingredients, (Locus PI), well known participants in our conferences. Dow and Locus have struck a deal in which Dow will sell the Locus sophorolipid biosurfactants in global home and personal care markets. The Dow deal sits within the company’s homecare solutions business. Locus PI is part of parent company, Locus Fermentation Solutions. Best of luck to both companies. Teaming up like this, makes a lot of sense.

More biosurfactants news from Evonik, another regular speaker at my conferences.  This courtesy of C&E News: The specialty chemical maker Evonik Industries will spend what it describes as “a three-digit million-euro sum” to build a rhamnolipids plant at its site in Slovakia. Evonik says the plant will be the world’s first commercial-scale facility for the biosurfactant. Rhamnolipids, as readers know, are biodegradable surfactants made via fermentation and feature rhamnose sugar groups with fatty-acid tails. In addition to strong environmental bona fides, rhamnolipids are effective cleaners at lower concentrations than conventional surfactants while being gentler on skin and hair.

Evonik already has customers in mind for the new capacity. “Our initial focus is on applications in personal and home care based on foaming, sensory, and mildness benefits as well as a pressing need to improve the sustainability profile of surfactants in these markets,” the firm says. The investment builds on a partnership between Evonik and the consumer product giant Unilever [about which more at the end of the blog], which launched a dish soap using Evonik’s rhamnolipids in Chile in 2019. Unilever says rhamnolipids are an important part of its push to remove all fossil-derived ingredients from its cleaning products by 2030. Evonik also launched an industrial cleaning ingredient based on rhamnolipids in 2021.

Evonik makes its rhamnolipids by fermenting sugar using a genetically modified Pseudomonas putida bacteria. In February 2021, Stepan bought an idle 20,000 t plant in Louisiana where it plans to make rhamnolipids. The specialty chemical fermenter Jeneil Biotech says it already manufactures rhamnolipids in industrial-sized equipment.

A Next Big Thing

Crazy volatile times in feedstocks, especially oleo. BTW – we’ll have a detailed PhD level explication of all that exclusively at the conference with the legendary Martin Herrington. In the meantime,  ICIS’ Helen Yan reports from Asia that Asia’s fatty alcohols market is likely to find support from elevated upstream crude palm oil (CPO) and palm kernel oil (PKO) values, despite sluggish demand during the Lunar New Year holidays.  Spot offers for the mid-cut C12-14 blend have been revised up to $2,900-3,000/tonne FOB (free on board) southeast (SE) Asia for February and March shipments, due to continued erosion in margins from expensive feedstock PKO costs.

On 19 January 2022, spot prices of C12-14 blend averaged $2,780/tonne FOB SE Asia, up $80/tonne from the previous week, ICIS data showed.

Supported at $2,750 +

“We have no choice but to further increase our offers for the mid-cut C12-14 blend as margins have been severely squeezed from the high raw material costs, with PKO rising to around $2,300/tonne while buyers continue to seek lower prices,” a regional supplier said.  Spot interest has waned due to the upcoming Lunar New Year or Spring Festival holidays.  The Chinese market will shut from 31 January to 6 February for the Spring Festival, but factories have already shut in China in the run-up to the festive holidays.

Market activities in other countries in Asia have also wound down as players have retreated to the sidelines to wait for a clearer outcome post-holidays. South Korea, Indonesia, Malaysia, Singapore and Vietnam also celebrate the Lunar New Year, which falls on 1 February this year.  Demand has also not rebounded as expected due to the economic fallout from the highly infectious Omicron coronavirus variant on the global economy.  Spot appetite for C12-14 has been tepid as the global economic recovery has been hampered by restrictions reinstated to contain the spread of the Omicron coronavirus variant, which emerged in late November 2021.  Lower-than-expected growth in the world’s two largest economies, the US and China, is expected to dent global growth in 2022 sharply, the International Monetary Fund (IMF) said on Tuesday.

Global GDP growth is now expected at 4.4% in 2022, said the IMF, half a percentage point lower than its prior forecast issued in October 2021.  Global GDP growth in 2021 stood at 5.9%.  The IMF, which delayed the publication of its World Economic Outlook by three weeks to assess the impact of the Omicron coronavirus variant, said the world had started the year “in a weaker position” than expected.

By contrast, LAS pricing in South Asia remains weak in line with demand, as reported by ICIS.  In India, domestic LABSA spot market remains at around Indian rupees (Rs) 93/kg, with production staying low. Market participants attributed the low LABSA output to the weak detergent market. “Usually demand for LAB will peak in February, but this year buying interest is very weak,” said a LAB producer in India.  Some participants in this sector cited soaring costs of soda ash in the last quarter for dampening demand of LABSA and detergents.  “Soda ash makes up around 30% with the remainder being LABSA for manufacturing detergents,” said a trader in India.  This resulted in lower demand for detergents as prices (LABSA and soda ash) rose last year. With reduced demand for detergents, there was lower output of LABSA.  Due to weak downstream LABSA market, some local makers of LAB are considering exporting LAB due to an overhang of supply domestically. India is a net importer of LAB.

A rare downtrend in pricing since July

On the other hand, the LABSA/LAS market in Pakistan seems to be faring better with demand overall staying decent, with the spot market for LAB at around $1,700/tonne CFR Pakistan.  Tufail Chemicals, a key LABSA producer in Pakistan, added to its capacity in Q4 2021, bringing its total output to around 110,000 tonnes/year. The company plans to add another line in 2023 with more cargoes available for export.

However, the export destination of SE Asia continues to experience slow demand. The LAS market hovered at around $1,430-1,500/tonne CFR SE Asia, but some participants anticipate some downward pressure if the India market fails to recover in the near term.

“The weak LABSA and LAB market in India is impacting sentiment across the region,” said a producer in northeast Asia.

And another one more markedly so

Back in the US, detergent range alcohol prices follow a familiar trajectory – up – way up.  ICIS’ Lucas Hall reports that bullish feedstock and soaring freight costs against the backdrop of persistent shipping logistics constraints globally continue to underpin US fatty alcohols markets, with demand for multiple fatty alcohols chains continuing to outstrip supply. Short chain C8 and C10 as well as long chain single-cut C18 alcohols are particularly tight, depending on the supplier.  Mid-cut alcohols availability has improved following supply chain disruptions that eased in December.  The majority of these supply chain constraints stem from import disruptions from southeast Asia associated with persistent shipping equipment shortages and tight vessel space against the backdrop of soaring freight costs.  Bullish feedstock costs across the oil palm complex stemming mostly from tighter production in Malaysia because of weather and coronavirus-related labour issues in the country are adding to concerns, with production costs rising faster than producers can pass down increases and forcing some to cut back operating rates.

Steady rises

Tightening availability of mass balance-certified (MB) material in the US because of increased scrutiny against Malaysian-origin material over force labour allegations in the country is also supporting the market, particularly for palm kernel oil (PKO) and PKO-derived material.  Ongoing import bans have heavily increased the demand for MB material outside of Malaysia, supporting premiums in that market.  Rising PKO premiums are sustaining demand for coconut oil (CNO) and CNO-derived material.  Logistics issues also persist in the US, particularly in truck markets, where an ongoing labour shortage is keeping truck availability tight.  Domestic production is insufficient to make up for inconsistent import market, underpinning the wider market.

A reliably volatile folow

Downstream demand remains overall healthy. Demand in the spot market has somewhat waned from 2021 as downstream players increased their contract allotments in an effort to prioritise security of supply.  Demand for mid-cut alcohols in Mexico remains limited because of persistent ethylene oxide (EO) shortages in the country, supporting demand for ethoxylated material instead.

It's been a while since prices this high

An interesting snippet here on the continuing role of private equity in our industry:  US private equity firm OpenGate Capital has acquired Chemsolv, a regional distributor of commodity and specialty chemicals based in Roanoke, Virginia, for an undisclosed sum.  Chemsolv, with distribution centres South Carolina, Tennessee and Virginia, distributes more than 1,000 chemical products to customers in construction, roofing, chemical intermediates, paints and coatings, automotive and other markets.

Its products include solvents, plasticizers, coolants, lubricants, surfactants, diesel exhaust fluid, additives, among many others.  OpenGate acquired Chemsolv from the Austin family.  Glenn Austin founded Chemsolv in 1979, and the family will continue to retain an ownership stake and a role in the company. Regular readers will recall that OpenGate is the investor that bought the, now, Verdant out of Solvay and combined them with Baze and DeForest, last year.

Interestingly, US EO pricing continues to fall. ICIS reports that US December ethylene oxide (EO) contracts fell for the fifth consecutive month, tracking a lower same-month feedstock ethylene settlement.  US December EO fell by 3 cents/lb ($66/tonne).

Feedstock ethylene prices fell due to greater steam cracker production and easing derivative demand. Lower feedstock costs in December hastened this price decline.  As readers know, the majority of EO contracts are formula-based, and price movement comprises 80% of the change in the ethylene price and an additional conversion fee, or adder.

Another downtrend

By contrast, the European picture for EO is a bit different as reported by the hugely talented Melissa Hurley at ICIS. European ethylene oxide (EO) contract market players are awaiting the upstream ethylene contract price settlement for January to inform  formula pricing.  Sellers remain concerned with margin pressure amid continued high energy costs. Stable to double-digit increased adder fees are being discussed for 2022, depending on starting point and account.  Some multiyear EO contracts are also not up for renewal next year so fees are steady in these instances.  According to Alice Casagni, ICIS deputy editor for European Spot Gas Markets, “a tight supply outlook and weather-driven demand will remain the key drivers in control of European natural gas prices in the first half of 2022.”

Not a great time for gas users

High ethylene prices have also dominated the market this year, impacting seller margins.  Downstream demand is mixed depending on sectors, and there was some end-of-year slowdown amid destocking activity.

Feedstock spread - Ethylene and EO Europe

A tight spread means a loose market

Supply was constrained at the end of 2021, but this is expected to improve in January.

There was an unplanned outage at the beginning of December in the Netherlands at Dow's Terneuzen EO facility, which is not expected to be resolved by the end of this year.  Upstream ethylene supply remains balanced-to-tight.  The status of BASF's Antwerp EO and ethylene glycol (EG) facility is also unconfirmed, although glycol sources believe it is back running again at the end of December 2021.  There is a wait-and-see attitude to how demand pans out at the start of 2022.

The peak?

In the downstream monoethylene glycol (MEG) market, there is interest in spot material stemming from the downstream polyethylene terephthalate (PET) market due to good demand.  Most are covered by contractual requirements for the time being but if demand continues to perform well or strengthen, MEG consumption could increase.

PET makers could opt to run production harder, leading to increased interest in the spot market.  For coolants, demand has been impacted by poor automotive industry performance. A buyer added it was covered for material until the end of the year.

There was mention of additives typically used in coolants being placed on allocation from a local European supplier which could impact downstream conditions, depending on how long the situation lasts. This was not confirmed by the company.  There is a planned turnaround  at Lavera, France impacting glycol ethers, according to sources, which is expected to finish by the end 2021. In the ethanolamines market, difficulties concerning the supply chain are widely expected to persist into 2022.  Ethoxylate demand has performed well during the year.

OK – so there’s the main surfactant news. Some interesting things there right? But here’s the really big story of month and my favorite by far. I love a good corporate thriller and this one is shaping up to one of the best and, of course, I’m talking about Unilever. For those of you who have been sleeping under a rock or too absorbed by the Real Housewives of [fill in the blank], here’s the story.

Silicone, botox and extensions. Not real and not even housewives; but still morbidly fascinating right?

The problem is this: Unilever’s moribund stock over the past 3 years, compared to that of peer P&G . In the chart below, P&G is in blue and Unilever in black

Says it all

The solution? Nelson Peltz, activist investor (i.e. one that cares) and, until recently, a board member of P&G, a seat he gained the old-fashioned way, that is via a proxy fight (one of the most expensive and hard-fought ever). During Peltz’s tenure on the P&G board, the stock roughly doubled. He plans now to do the same or better with Unilever.

I really care about your / our stock price

On January 23rd, the Wall Street Journal reported that Trian Fund Management LP, the activist hedge fund run by Nelson Peltz, acquired a stake in Unilever PLC, adding pressure to the packaged food and consumer goods giant in the wake of its failed $68-billion bid for GlaxoSmithKline PLC’s consumer-health business. Apparently, Trian started buying Unilever shares well before its bids for the GSK unit surfaced earlier this month. Unilever’s shares have been under pressure in recent months as it has struggled to boost volumes. Analysts say it has underperformed some rivals during the Covid-19 pandemic in areas such as hygiene and packaged food and hasn’t launched any blockbuster innovations in some time. The company faced strong opposition from investors to its plan to buy the GSK healthcare business, with analysts pointing to its mixed record on several other big acquisitions. Critics said the London-based company would be overpaying for the GSK business, and that it should focus on turning around its existing categories rather than taking on new ones in which it had little experience.

Stick to the knitting

Jefferies [IBank] analyst Martin Deboo said he thinks Trian will push Unilever to sell food brands more quickly or to sell or spin off the unit entirely. “The force and temperature of debate around Unilever now looks set to rise by several notches, with Trian likely to find a sympathetic audience,” among Unilever shareholders, said Mr. Deboo, adding that the episode would increase pressure on [Unilever CEO] Alan Jope.

Interesting right? So what happens next? Well, no coincidence, I’m sure, but a mere 2 days after the Trian story broke, Unilever announced a major reorganization. The company said it would restructure its operations into five stand-alone divisions, reshuffle top executives and cut jobs in a sweeping reorganization aimed at accelerating sales growth.

Let's move things around a bit and see what happens..

The company said it would now run as five, category-focused divisions—beauty and well-being, personal care, home care, nutrition, and ice cream—rather than its three previous units of food and refreshments, beauty and personal care, and home care.

Unilever Chief Executive Alan Jope said the overhaul would allow the company to be more responsive to trends and create more accountability. “Growth remains our top priority and these changes will underpin our pursuit of this,” he said. Still, while the restructuring—particularly separating ice cream as a stand-alone unit—should make it easier for Unilever to sell slower-growing businesses, the overhaul doesn’t go far enough and will likely disappoint investors, some analysts said. Unilever shares traded flat in London in the wake of the announcement [uh..oh]

Reshuffling won't help

Unilever said its beauty and well-being division would include vitamins—an area where the company has been beefing up—as well haircare, skin care and its prestige business, which houses upscale beauty brands. The personal care division will include skin cleansing, deodorants, and oral care brands, and be led by Unilever’s current head of North America, Fabian Garcia.

Vitamins and beauty

The nutrition arm will include ingredients lines such as Knorr, and a group of foods Unilever is describing as healthy snacking such as its Graze brand. Also included in the nutrition business: so-called functional-nutrition products, such as its Horlicks malt drink, plant-based meat alternatives, and its business that sells ingredients to restaurants and offices. It will be led by Unilever’s current head of food and refreshments, Hanneke Faber.

The company said it expects its new operating model to reduce senior management roles by around 15% and more junior management roles by 5%, which it said amounts to around 1,500 roles globally. Unilever employs about 149,000 people. Unilever also said its head of beauty and personal care, Sunny Jain, who joined the company in 2019 from Amazon.comInc., will step down. Its Chief Operating Officer Nitin Paranjpe will take on a new role as chief transformation officer while also heading up human resources.

Analysts have previously said they expect Mr. Peltz to push for Unilever to sell or spin off its food business. Now that that has been split into ice cream and nutrition—with the latter housing some higher-growth categories such as health snacking—RBC analyst James Edwardes Jones said he thinks the company could focus on selling off ice cream. Despite this, Mr. Edwardes Jones said he isn’t convinced the reorganization will work. “The new operating model announced today might make divestments easier, but we would prefer them to focus on reinvesting cost savings behind their brands and categories,” he said. He also criticized the lack of fresh faces, noting that the new divisions are all headed by Unilever incumbents.

Same old...

And so it starts. “You have to change course in a big way now” says Nelson. “We’re doing it already. We’re ahead of you” says Alan “It’s too little and too slow” says Nelson. “You need me on the board and to get rid of the tired old incumbents” “No” says Alan “We got this. We know what we’re doing”. “It hasn’t looked like it for the past 3 years” says Nelson. Does this remind you of anything? It’s a replay of Peltz’s drama with P&G that we blogged about extensively in our year end editorial of 2017 (Check it out here. It’s a classic). It’s early days, but I fully expect Trian to get Unilever in a stranglehold as they did P&G. It hasn’t appeared yet, but watch out for a “white paper” to appear on the Trian Website.  It’s then up to Jope how to proceed. Reach an accommodation, tap out or …

Like Ted and that riff. Nelson's hard to Ignore

Surfactants Monthly – February 2022

It often feels weird writing about surfactants when there are huge other things going on in the world. Then I think, yeah but who wants to hear from me about the affairs of the day. Everyone has their own opinions and the news surrounds us 24/7. I also think that, if the business of surfactants is how you’ve bought (OK still buying) a house and sent (still sending) some kids to college, then that’s a huge thing so.. And I think that, at least folks read this business blog and get something out of it. Some even find the humorous bits funny and one or two enjoy the musical interludes. If I told you what I think about Ukraine, I’m not sure you’d gain anything at all and maybe you’d resent the airspace here being taken up with something that doesn't add to what you get on the telly or your newsfeed. I will say, though, that I have a concern about World War 3. I hear the phrase used at least once a day, these days. Having read and heard enough about WW2, I think 3 would be bad. The technology’s more effective and the people, as a society and individuals seem more fragile. Those people, our parents and grandparents, back in 1939 – 45, they were tough and could put up with a lot. Today, I don't see that so much – in myself and the people I encounter. The technology though. That’s tough, tougher. It gets the job done. Cold. Ruthless. No matter what. Two trends, correlated, different directions. A bit of a concern.

Some lighter fare. Readers enjoyed the Unilever piece last month so I have eagerly tracked the wires for updates on the Trian / Unilever battle and honestly there’s not that much although I think it’s fair to say that the pressure on Uniliever CEO Alan Jope, seems to be building, albeit slowly – and some might say, inexorably. Activist Shareholder, Nelson Peltz has been quiet since last month – actually have you noticed how some people manage to get a prefix permanently attached to their names? When did Nelson transition from just plain old Nelson to Activist Shareholder Nelson. When did Neil Young adopt the prefix Aging rocker  or more recently, Sanctimonious Aging Rocker..Anyway, A.S. Nelson has been quiet but other shareholders of Unilever have not.

From the Financial Times of February 6th:  Bert Flossbach, [by the way, was there ever a name that screamed out for the prefix Old Money?] founder and chief investment officer at Flossbach von Storch [yep], an €80bn Cologne-based asset manager and a top-10 shareholder, said the FTSE 100 consumer group should consider overhauling its structure, which consists of three divisions for beauty, food and household products. “Unilever should seriously think about splitting the company,” he said. “Talk of synergies between different businesses is usually theoretical and designed to keep the status quo, and smaller than the efficiency gains that you would get from a split.” [ouch! Old Money Flossbach makes a point though]. “If you’re a food manager, you’re thinking differently from a household products manager or a beauty manager,” he added. “If you run these businesses under one structure capital allocation can become a problem. And you’re very diverse in a negative sense because you don’t know precisely what you stand for.” Flossbach said one option could be to keep the food business under the Unilever name and spin off other divisions. “You increase efficiency and enhance the spirit of a company when it has a clearer mission. Cost-cutting is not enough on its own.” He added: “The best defence against any kind of hostility is a high enough stock price.”

Another top-20 shareholder [not named by the FT] called for the removal of the Unilever’s chair, Nils Andersen, reflecting concerns that he and the board allowed chief executive Alan Jope to make increasing bids for the GSK division, a potential deal whose size and timing blindsided investors and provoked a backlash. The top-20 shareholder said a new chair should be appointed from outside the board. He added that a replacement for Andersen could then evaluate both Unilever’s strategy and whether Jope and its chief financial officer Graeme Pitkethly were appropriate for their positions [ouch again, right?].

Interesting developments, I think you’ll agree, but I know you, my dear readers. You’re looking for something more. Some other, perhaps orthogonal, information that will keep you thinking and musing the rest of the day. Well, we deliver that here at the blog. For the really interesting stuff, we have to go to another British newspaper with a slightly wider appeal than the FT, although still a serious paper, and that is the Evening Standard. In a February 11th article beautifully headlined “ Who is Nelson Peltz? The Wall Street billionaire stalking Marmite maker Unilever” [see how they use a prefix for Unilever there. Not sure how complimentary that is. You know Marmite. You either love it or hate it.] the paper  goes on to note that  “….Nelson Peltz is used to interesting meetings. Still, the first sit-down with his daughter’s soon-to-be in-laws must have stood out. [Former Spice Girl] Victoria and [Footballer] David Beckham flew out to meet the Peltzes at their 44,000sq-ft Floridian mansion over Christmas. The house will soon host Nicola Peltz’s wedding to Brooklyn Beckham. Of course, the rendezvous took place on the elder Peltz’s territory: the 79-year-old founder of Trian Fund Management is used to getting his way.”

Daddy's most valuable asset

The paper then goes into all the business stuff that we covered above and in last month’s blog. So for a complete detailed exposition of the family angle to this story, we have to go to, where else, to the Inimitable UK Paper The Daily Mail. I encourage you to read the whole article here (published on January 19th) for a master-class on prurient interest journalism served up with a comprehensive raft of detail and diligently sourced visual documentation (i.e. lots of photos). The headline itself says so much and can you spot the 2 prefixes without the suffixes? “Brooklyn's marrying up! Billionaire Trump-loving future father-in-law and his model wife put David and Victoria in the shade - boasting a multi-million dollar property empire, several private jets and ten children between them” Again the whole article is well worth reading for those that are interested in such things. However, I will provide here the Daily Mail’s own 5 bullet point summary of the story. :

• Brooklyn Beckham will be marrying into a family whose net worth dwarves his own parents' £769million fortune, with Nicola's businessman father Nelson Peltz, 79, estimated to be worth £1.3 billion 

• The father-of-ten was born to a Jewish family in Brooklyn, and dropped out of the University of Pennsylvania's Wharton School - later attended by Trump - in 1962 to become a ski instructor, but instead ended up being a delivery truck driver

• Nelson, a former top Trump supporter, shares eight of his ten children with his third model wife of 35 years Claudia Heffner Peltz, and the pair count a 27-bedroom mansion complete with ice hockey rink and a flock of albino peacocks, as well as a £76million, 44,000sq ft home in Palm Beach - the reported wedding venue - as their homes

• Despite being born into wealth, Nicola's siblings have also carved out their own successful careers, with her brother Brad, 32, an ice hockey player, and Will, 35, an American actor, and sister a former figure skater

• Nelson used to commute to work from Bedford to downtown New York in a helicopter until he lost a legal battle with his neighbours about the noise

An Interesting Alliance

So, my finely honed business instincts tell me (plus I really, really hope) that this family angle will continue in some way to play a role in A. S. Nelson’s pursuit of Marmite Maker Unilever. Let’s see. If nothing else, Unilever might think they have Peltz problems but they should consider what it would be like as a young couple to have Nelson Peltz as your father-in-law and Victoria Beckham as mother-in-law. Puts your problems in perspective now, doesn't it? Although, hmm.. maybe they kinda already do.

Tell me what you want, what you really really want!

On to Surfactants News: This month, as always, most of what you read here is provided courtesy of my partners, the great ICIS, with whom I also co-produce the World Surfactants Conference… so..

As things are so volatile today for the obvious reasons, I am starting at the end of February (& early March) and working backwards for the news. If the early February news seems irrelevant or largely superseded, I’ll just skip it.

On March 2nd, the talented and prolific Lucas Hall of ICIS reported in depth on the supply chain situation for US fatty alcohols and fatty acids: US fatty acids and alcohols markets face major upward pressure from higher feedstock costs against the backdrop of supply chain concerns globally.

• US contract survey fatty acid prices held steady pending feedback

• US Q2 fatty alcohols contracts face upward pressure amid bullish feedstock costs

• Prices face upward pressure on bullish costs pressures, supply concerns

• Feedstock prices bullish amid supply chain disruptions globally

Fatty Acids
US contract survey prices were held steady pending further feedback.

March tallow-based acids face upward pressure from higher average bleachable fancy tallow (BFT) costs in February.  March C16 palmitic acid costs face upward pressure from higher feedstock costs across the oil palm complex against the backdrop of balanced supply and demand rationalization/destruction in the market.  February tall oil fatty acid (TOFA) prices face upward pressure from higher feedstock costs, tight supply and strong demand.  Multiple chains of US fatty acids are tight, including C8, C10, C8-10, C14, tallow based C18-oleic and stearic acids, and TOFA.  Tallow-based stearic acid markets are tight following the fire at the packaging facility at PMC Biogenix's US Memphis, Tennessee, site.  The fire has put increased demand on tollers and imports to make up for the shortfalls as PMC Biogenix makes repairs in the short-to-medium term.

TOFA markets are tight alongside tight supply of competitive tallow-based C18 oleic markets in the domestic market.

Clear enough trend for you?

Fatty Alcohols

US Q2 fatty alcohols contracts face upward pressure from higher feedstock costs across the oil palm complex against the backdrop of supply chain concerns globally.

Discussions for Q2 contracts have been heard at a sharp premium from Q1, tracking the above pressures.  Multiple chains of US fatty alcohols are tight, including C8, C10, C8-10, C16-18 blends and C18, depending on the supplier.  Mid-cut alcohol supply has been ample to meet demand following supply chain disruptions in the latter-half of 2021 that prompted some players to increase their volumes for Q1. While some players have carryover volumes heading into Q2, increased uncertainty given increased geopolitical uncertainty is prompting some players to hedge alongside major upward pressure in upstream feedstock markets.

And another one

Feedstocks

Feedstock costs are bullish. A major disruption in Ukrainian sunflower supply to Europe with the Russia-Ukraine conflict has put major upward pressure on global palm, soybean and canola markets in recent days.  Palm markets have been under upward pressure in recent weeks because of new export curbs being implemented in Indonesia to help curb local cooking oil prices.  Coconut oil (CNO) is trading at a discount to palm kernel oil (PKO), encouraging more CNO in the feed-slate. CNO produces about the same amount of C12-C14 and C16 alcohols, but significantly less C18, pushing C18 production tighter.

And another

Supply Concerns

Imports also face further disruptions with the increased crackdown from the US Customs and Border Patrol on Malaysian imports from Sime Darby Plantation Berhad. Reports of imports being detained have been heard but not confirmed.  Feedstock cost pressures are squeezing production margins in southeast Asia, posing further potential import disruptions in the near-to-medium term.

Finally, vessel space may be further constrained with increased demand for energy imports in Europe given the disruptions to supply from Russia. While some importers use carriers that only handle vegetable oils and oleochemical products, increased vessel demand may nonetheless put further upward pressure on freight rates.

Meanwhile in Europe, fatty acids and fatty alcohols second-quarter contract discussions are ongoing, while shortages continue to plague the market.  In the fatty acids market, tallow-based negotiations are off to a slow start as players were waiting for producers to announce available volumes. Initial talks have now begun with early settlements heard for stearic acid.  Palm-based discussions have been ongoing for several weeks and while some market participants were waiting to check tallow prices, most palm fatty acids players are now negotiating final volumes.  Availability has been limited since 2021 due to vessel delays and high freight costs from Asia. Most players do not see these logistical issues easing before the second quarter of 2022.

Fatty acids and fatty alcohols market participants are keeping a close eye on the Russia-Ukraine conflict as this is already driving up crude oil and vegetable oil prices. Any impact on the fatty acids and alcohols markets are as of yet unknown.  In the fatty alcohols market, second-quarter discussions are in very early stages, with no settlements taking place this week.  There have been a lot of enquiries about available volumes for the second quarter, though most negotiations have not progressed to discussing prices yet.  Supply constraints continue to be a concern, with at least one producer already sold out of material for the second quarter.  Some players are focusing on captive use instead of selling on the market due to very high demand for downstream alcohol ethoxylates and other surfactants.  Tightness in the fatty alcohols market is also caused by vessel delays and high freight costs from Asia.  The majority of both fatty acids and fatty alcohols second quarter settlements will have taken place by the end of March or early April.

Also in Asia, Fatty Alcohols follow the same trajectory as reported by ICIS’ Helen Yan: Asia's fatty alcohols offers continue to increase on the back of rising cost of upstream palm oil and supply disruption due to Indonesia’s export restrictions.

• Upstream markets surging amid heightened Russia-Ukraine tensions

• Shipments delayed, limited spot availability in Indonesia

• Market impact of Indonesia export curbs likely short term

Spot offers for mid-cuts C12-14 fatty alcohols climbed this week to $3,050-3,200/tonne FOB (free on board) SE (southeast) Asia, market sources said.  On 16 February, spot C12-14 prices were assessed at an average of $2,835/tonne FOB SE Asia, up $20/tonne from the previous week, ICIS data showed.

Near historic highs

“It is a crazy market now with the escalating Russia-Ukraine tensions impacting the crude and palm oil markets,” a regional producer said.  Brent crude oil breached $99/bbl on 22 February and palm oil spot prices spiked to more than Malaysian ringgit (M$) 6,000/tonne ($1,432/tonne), he said.  But we may see some calm in the market if there is a US-Iran nuclear deal,” the producer added.  Supply of fatty alcohols has tightened as regional major Indonesia has introduced a domestic market obligation (DMO) policy for its producers, thereby curbing exports of palm oil derivatives, market sources said.

“We cannot guarantee any shipment due to the DMO policy. China customers are looking for more cargo[es] and are willing to pay to ensure supply security for April shipments,” the producer said.  Indonesian companies must now show proof of their domestic sales of crude palm oil (CPO) and/or refined, bleached and deodorised palm olein in accordance with the DMO requirements to secure export approvals for palm oil products.  The DMO policy was implemented in late January, under which CPO exporters must allocate 20% of their shipments to the local market, to rein in soaring domestic cooking oil prices in Indonesia.  Cooking oil prices in Indonesia have surged recently due to rising demand ahead of the Muslim Eid-ul-Fitr holidays - which mark the end of the Muslim fasting month of Ramadan - in early May, market sources said.

The DMO policy was subsequently extended to include palm oil derivatives. From 15 February, Indonesian suppliers have to apply for export permits under the new rules.

“Around 1.3m tonnes of fatty alcohols in Indonesia will be impacted by the DMO policy and this will put upward pressure on prices,” a second regional producer said.

A third supplier said: “If the DMO policy lasts more than four weeks it will be very challenging for the market indeed as the disruption in supply will be more severe.”

A major buyer, however, said: “DMO seems to have passed over a little bit as we don’t see any issues with the supplier shipments, and they seem to have got export parcels.”

Demand for fatty alcohols is usually stable, with their main use in the production of detergents and surfactants. They are also components of cosmetics, foods, and industrial solvents.

Domestic Market Obligations

Right at the back end of the supply chain, some not great news for users of palm oil and its derivatives (including many surfactants) from Jim Fry of LMC as published in Indonesia’s Palm Oil Today magazine: The global supply of palm oil will see only "minimal growth" in the 2019-2022 period, due to production issues caused by unfavourable weather and labour disruption in Malaysia, said Jim. "It will take another 12 months before Southeast Asian palm oil output is running ahead of its level at the end of 2019," Fry said, despite improved output expected out of Indonesia in the second half of next year. "In other words, I anticipate three full years with no growth," he told a virtual conference recently. 

No Growth

In LAB markets, ICIS also reports bullish sentiment: Linear AlkylBenzene markets in Asia and India remain firm amid elevated upstream costs. Participants general expected further strength in the market from cost push with offers for March cargoes expected firmer.

• Elevated costs to bolster LAB

• Availability snug from regional maintenance

• Buyers stock up in anticipation of further upside

In southeast Asia, sellers targeted March cargoes at $1,800/tonne CFR (cost & freight) SE (southeast) Asia and above amid eroded margins. Buyers were heard lobbying for parcels in the mid-to-high $1,700s/tonne CFR SE Asia.  “Upstream costs have increased sharply in recent weeks and margins of LAB are squeezed,” said a producer in Asia.  The Chinese market has also revived in earnest as downstream plants ramped up output after the Winter Olympics. Demand for LAB in the local Chinese market was said likely to fully return in March and digest the current length in the market. Meanwhile, scheduled maintenance across Asia, India and the Middle East in the quarter continue to stoke concerns that availability might be curtailed just as demand emerges.

Not as pronounced as on the palm side

In the area of sustainable surfactants, ethylene oxide based on corn-derived ethanol is of continuing and increased interest. An excellent article by the insightful Al Greenwood of ICIS looks into this area. The whole article is worth a deep read, but here’s a few highlights.

ICIS ran a cost analysis that compared Asian naphtha-based ethylene with Asian ethanol-based ethylene. The ethanol route proved costlier, even when ethanol prices were below those for ethylene. The following chart shows the comparison.

Ethanol gets Interesting

Another indication of the costs involved with ethanol dehydration is the decisions taken by chemical companies. In the US, during the advent of shale gas, petrochemical companies built new ethane crackers. They did not build any ethanol dehydration units to take advantage of the nation's bounty of corn-based ethanol.

However, demand for sustainability - and not strictly plastics and chemicals - is what is driving demand for ethanol's use as a chemical intermediate.  In November, Braskem said that global demand for its renewable PE is well above its current production capacity.  Renewable PE is attractive because it can act as a carbon sink. Plants combine atmospheric CO2 and water to produce the sugar that microbes ferment to produce ethanol. Fermenting sugars emits CO2, although this can be used as a product or chemical feedstock.  Synthetic biology company LanzaTech ( a  speaker at one of my recent conferences) addresses the CO2 emissions by gasifying biomass and other wastes. Its bacteria can ferment the resulting carbon monoxide (CO), hydrogen and CO2 and convert the gases into ethanol. Two commercial-scale plants in China are already using LanzaTech's technology and more should start up later this year.

Given the interest in sustainability, companies are evaluating new ethanol-to-chemical projects. Clariant and India Glycols created a joint venture to produce surfactants made from ethanol-based ethylene oxide (EO).  And of course there is the well documented move to Croda into Bio EO at their DE ethoxylation plant. There are many other areas, including aviation fuel where ethanol can be used and this has knock-on effects for chemicals. More news to come in this area for sure.

If you’re a buyer, or seller, of surfactants you are familiar with the across the board rise in prices. Here, for illustration is a recent announcement from Indorama as published by ICIS. No surprises. Indorama is seeking price increases of 3-8 cents/lb ($66-176/tonne) on all grades of ethylene oxide (EO) derivative products in March, according to a customer letter.   Products listed include ethanolamines, alcohol ethoxylates, surfactant blends and others.  US EO production constraints have tightened the availability of downstream products. The global ammonia supply/demand balance is loosening, with prices coming off record highs.  US Q2 fatty alcohols contracts face pressure from soaring feedstock and freight costs.

Quarterly earnings time and supply chain disruptions continue to be felt – particularly at by Stepan where Q4 net income fell 44% year on year to $17m.  Furthermore, the prior-year Q4 benefited from a one-off $13m insurance recovery related to a plant outage at Millsdale, Illinois in 2020, the company noted.

Three months ended 31 December 2021:

(in thousand $)Q4 2021Q4 2020changeSales          610,027              494,73423%Cost of sales          526,774              385,94236%Gross profit            83,253              108,792-23%Operating income            19,997                44,500-55%Net income            16,995                30,350-44%

SURFACTANT BUSINESS
Operating income fell to $32.4m, from $43.3m in Q4 2020, primarily due to supply chain disruptions and lower sales volume.  Global Surfactant sales volume decreased 9% on lower demand for cleaning products in the consumer products business, partially offset by higher demand for products sold into the institutional cleaning and functional product end markets.

POLYMER BUSINESS
Operating income fell to $12.9m, from $22.8m, primarily due to supply chain disruptions and the non-recurrence of two events that benefited Q4 2020: the Millsdale insurance recovery, and a partial settlement received from the Chinese government as compensation for a government-mandated shutdown of Stepan’s China JV in 2012.

SPECIALTY PRODUCT BUSINESS
Operating income fell to $2.1m, from $5.2m, primarily attributable to order timing differences within Stepan’s food and flavour business and lower volume within the medium chain triglycerides (MCT) product line.

OUTLOOK
"Looking forward, we believe that demand for our products will remain strong but that the company will continue to be challenged by the same external factors that impacted us during 2021,” said CEO Quinn Stepan. Surfactant volumes within the institutional cleaning, agricultural and oilfield markets are expected to grow, and “we also remain cautiously optimistic” that consumer consumption of cleaning, disinfection and personal wash products will improve slightly in 2022, after significant de-stocking in 2021, the CEO said.  The Polymer business is expected to grow as well in 2022 as long-term prospects for rigid polyols remain attractive because of energy conservation efforts and more stringent building codes, he said. In the Specialty Product business, results should improve slightly year on year, the CEO added.

In capacity news: Eastman completed the expansion of two plants in Ghent, Belgium, and Pace, Florida, US, that make tertiary amines, the US-based specialty chemicals producer told ICIS earlier in February. Eastman did not disclose the size of the expansions or their costs.  The projects increased capacity at Ghent and improved production flow at Pace, making it the world's largest tertiary amine unit, Eastman said. The projects expanded output of mostly dimethyldodecylamine 1214 (DIMLA 1214).

Demand for tertiary amines had increased because of rising consumer demand that was caused by the coronavirus pandemic, Eastman said.  Tertiary amines are used to make surfactants in liquid dish soap, hard-surface cleaners and antibacterial wipes and sprays.

Cleaning Remains Popular

In other earnings news, a similar story from Galaxy as reported in ICN. Galaxy Surfactants Limited, a leading manufacturer of performance surfactants and specialty care products with over 210 product grades used in the Home and Personal Care industry, has announced its Q3 FY22 revenue of Rs. 930.9 crore, an increase of 37.3% whereas profit was Rs. 45.6, down by 46.5%. 

Commenting on the performance U. Shekhar, Managing Director, Galaxy Surfactants Limited said, “The supply-driven volatility that impacted our Q-2 performance continued in Q-3. Rising input costs along with supply chain constraints, be it in terms of on-time container availability or port congestion severely impinged our ability to service our customers. While Volumes have remained flat Y-o-Y, the decline in EBITDA/MT impacted our overall performance significantly. Both these factors need to be understood in the global context. 

"Rising feedstock prices combined with availability issues and higher lead times impacted our operations. This when combined with the volatility we have been experiencing in the export markets on account of on-time availability of containers and rising freight costs have proved to be the worst possible mix. This has not only impacted our ability to service the underlying demand but also led to significantly higher cost of operations. This, we believe, will continue till H-1 FY 22-23," commented Shekhar.  

"Amidst the gloom, India has been the bright spot for us. Structural uptick in volumes is clearly visible with the current volumes being nearly 10% higher than the pre-COVID average. We have begun operationalizing our new specialty CAPEXs. These should become fully operational by April 1st, 2022," said Shekhar. 

"While the external scenario remains extremely uncertain, internally we are taking the necessary steps to enhance our performance, stability, and delivery. To conclude, we at Galaxy strongly believe the executional challenges we are facing today are in reality laying the foundations for our next decade of growth. While the last two quarters have been challenging, we believe the worst is behind us and we should see better quarters going ahead,” added Shekhar. 

Bright India

And finally, huge personnel news from Stepan. On February 17th the company announced that F. Quinn Stepan, Jr. will retire as Chief Executive Officer of the Company on April 25, 2022. Stepan goes on to note in a press release that - Mr. Stepan will continue to serve as non-executive Chairman of the Board assuring an effective transition. Scott Behrens, currently President and Chief Operating Officer, will succeed him as President and CEO. The Company expects that Mr. Behrens will be nominated for election to the Board of Directors at the 2022 Annual Meeting….. During Mr. Stepan's tenure as CEO, which began on January 1, 2006, the Company has seen significant growth. Sales increased over 50 percent and net income increased from $13 million in 2005 to a record $138 million in 2021. Likewise, shareholder value has grown exponentially from a year-end market capitalization of $142 million in 2005 to $2.8 billion in 2021 and from a Company common stock price of $13.44 per share on December 30, 2005, to a recent 52 week high of $139.30 per share.  Truly a transition between eras at Stepan. Best wishes to Quinn and Scott!

End of News - Begining of some musical musings

Speaking of the Spice Girls..So I was at a wedding a couple of weeks ago. Daughter of friends of ours. Once the wedding band got cracking, the top song for dancing was most likely this one .

It is a classic right? What struck me as how intently and seriously the ladies of all ages danced and mimed to this song, while the hapless husbands (husbands are always hapless on the dance-floor – why is that? ) did their best to .. er .. well,.. be present. As a card-carrying hapless husband myself, I was only able to dodge this one by my rapt interest in the groom’s grandmother’s knitting story, which I simply had to hear the end of. I was not so lucky when the execrable line dances came round. Any case, what made the Spice Girls so great? Depends who you ask I suppose. The tunes are catchy. Voices auto-tuned to perfection. The lasses themselves are comely, let’s say. Appealing to a range of tastes; posh, scary, sporty etc.. a shrewd demographic play by their creators. But there’s more. I’m not sure they invented Girl Power, but the Spice Girls perfected and exemplified it in the popular culture. They weren’t the first for sure. Maggie Thatcher springs to mind as the ultimate expression of 80’s girl-power. And then of course Elizabeth I, 400 hundred and odd years prior. But both of them lacked the sort of laddish boisterousness that  Posh and friends brought to the 90’s girl-culture.

Here’s another classic: See the skyline? I’m guessing then that the video was shot in Jersey City. Well, you can check out the camera angle for yourself in May if you like.

So let’s wrap this up. Is it possible that Nelson finds himself somewhat inspired in his latest endeavour, via his new association with girl-power icon Victoria? It’s possible, sure. Right now, Nelson and Alan are in the “Tell me what you want / I’ll tell you what I want” stage of the relationship as the circle each other, trying to get a sense of strengths and weaknesses. Then pretty soon, Nelson will deliver the demand for shareholder value “If you wanna be my lover, you have got to give, Takin' is too easy, but that's the way it is”. Then we’ll see. To be continued....

A lot of work to justify a couple of videos? True. So here’s a couple more.

Here - the ultimate girls-next-door on a generic Northern (British) street (note the flat cap in case you didn’t get it)

And now for quintessential American (note the cowboy hat, Caddy and Nascar in case you didn't get it) scene. No audience went uncatered for. Marketing genius no?

That's it. Thanks for indulging!

Surfactants Monthly - March 2022

Before we jump straight into the news: Please consider registering for our surfactants in-person event in May (10 – 11) in Jersey City, NJ. If you missed ACI in Orlando this year, now’s the chance to get back on the circuit, to meet old friends and new, to talk shop, to make deals, to learn a heck of a lot, to see who won the awards, to have a laugh and a joke and listen to some great music and just generally get back to normal. Everyone else will be there, pretty much, so.. yeah you should register, I think – Here's the link. https://events.icis.com/ehome/worldsurfactants/home/

News: I know most of you have been waiting on literal tenterhooks (not sure what tenterhooks are but I think you get it) to hear the next installment of the Activist Shareholder / Marmite Maker – Nelson Peltz / Unilever corporate thriller. Well, nothing much has happened in the past month as far as I can see from my searching of the financial press. So, OK, we can seek solace in the pages of the Daily Mail which can be relied upon to write about (and picture) Peltz daughter Nicola at least once every 48 hours. We are not disappointed. According to the one of the world’s most visited English language news websites (Not kidding. #4 behind the NY Times and ahead of the Grauniad[1].) Brooklyn Beckham and his fiancée Nicola Peltz looked sensational as they starred as the faces of Pepe Jeans' Spring/Summer 2022 campaign.

The article is, as always well sourced and illustrated. The happy, soon to be wed, couple struck a 60’s note in the black and white photoset. Anyhow that’s all I have from the house of Peltz this month. We can only hope for whatever is happening behind the scenes with Unilever to be made public in the financial or tabloid press next month. Let’s see.

Love Peltz Style

Great news from Holiferm and Sasol on the last day of this month as reported by ICIS.  Sasol has agreed a partnership with UK company Holiferm to develop new biosurfactants.  Under the partnership, Sasol will purchase the majority of sophorolipids produced at a new Holiferm manufacturing facility that is due to start up in early 2023 in the UK. Sophorolipids are biosurfactants made through fermentation, using yeast to convert vegetable oils and glucose. “The Holiferm expertise in the area of fermentation technology and production is a perfect fit with Sasol’s position as a global leader in the supply of surfactants and surfactant intermediates into the fabric and home care, personal care as well as industrial and institutional cleaning markets,” Silke Hoppe, vice president,  Essential Care Chemicals, at Sasol Chemicals, said in a statement.

Financial or other terms were not disclosed.  Holiferm is a developer of fermentation technology to make biosurfactants. It has research and development facilities in Manchester and a commercial plant and a pilot project in the Liverpool area. [so this is great news from 2 companies that I know and respect greatly. Kudos to both and I look forward to hearing a great deal more about this collaboration.]

Tidying up news from a while back: Brazil’s competition authority, the Administrative Council of Economic Defense (CADE), has green-lit Indorama Ventures' (IVL's) acquisition of Ultrapar’s surfactants business, the Brazilian company said.  IVL is to acquire the business for $1.3bn, the two companies announced in 2021.  Thailand-headquartered IVL produces polyester, glycols and surfactants.  “CADE [has] approved the sale of Oxiteno S.A. – Industria e Comercio [surfactants subsidiary] to Indorama Ventures PLC without restrictions,” said Ultrapar’s CFO, Rodrigo de Almeida Pizzinatto.  “Provided there are no appeals by third-parties or by the CADE Court, the approval will become final within 15 days of the publication of the SG's recommendation.”  With the Oxiteno acquisition, Indorama said it would become the largest nonionic producer of surfactants in the Americas.

BIg force in the surfactants ring

AFPM had their annual meeting again in person in San Antonio last month and there were some interesting reports filed by ICIS from there. My policy of “you gotta be there” remains firmly in place. It’s not just for my own conferences. So, you won’t get a lot of detail about the event, however, some general news filed by ICIS from there is allowable. Here goes.

The great Lucas Hall of ICIS noted that the US oleochemicals demand outlook is mixed as economic concerns continue to mount against the backdrop of the Russia-Ukraine conflict..  While oleochemical markets are somewhat more resilient to economic fluctuations, given their role as building block chemicals in products consumed as part of everyday life, rising inflation and increased economic concerns will impact consumer spending habits.  The personal care sector is the largest end market for oleochemicals, including cosmetics, fragrances, hair care and coloring products, sunscreen, toothpaste, and products for bathing, nail care, and shaving.  Rising inflation is likely to lead to less consumer spending in segments like cosmetics, fragrances, hair dye and nail care. Consumers are also likely to choose lower-cost brands when deciding on products like soap, shampoos, conditioners and body wash, as well as toothpaste.

Similar trends are expected in cleaning and food markets, where consumers are expected to choose lower-cost options for cleaning products, grocery store food and pet food, especially as costs for other raw materials drives the price of premium products higher relative to in-house brands.  Some market players see this as a potentially delayed impact, as continued raw material shortages globally continue to displace demand and production already on the forward books.  Lead times for some oleochemical shipments from southeast Asia are as long as four-to-five months.

Longer-term, sustained economic pressures could prompt players to consider reformulating products such as toothpaste to use sorbitol instead of glycerine.

Derived from animal fats and greases like tallow or vegetable oils like palm and coconut, fatty acids are mainly used in cosmetics and toiletries, as well as for the production of lubricants and plasticizers in rubber and polymer processing.

The US is a major net-importer of natural fatty alcohols and a key production region for synthetic (petrochemical) alcohols.

Maybe only 1 Chanel bag per week now

Additional dynamics in the feedstocks markets are the result of additions of capacity in petrochemicals as the great Lucas Hall also reports: Expanding US synthetic (petrochemical) alcohols capacity with the anticipated commercial startup of ExxonMobil's new linear alpha olefins (LAO) unit in Baytown, Texas, targeted for mid-2023 could create increased competition in the downstream alcohol ethoxylates market, said sources on the sidelines of this year's International Petrochemical Conference (IPC).  The Baytown unit will have capacity to produce 350,000 tonnes/year and will produce 10 products that will be sold under the ELEVEXX brand name.

LAOs are used in plastic packaging, engine and industrial oils, surfactants and other specialty chemicals.  C12, C14 and C16 LAOs are commonly used in the production of surfactants.  Alcohol ethoxylates are largely used in the production of detergents.

Synthetic alcohols producers Sasol and Shell each have internal ethoxylation capacity in the US, while ExxonMobil currently does not.  Indorama is poised to close its acquisition of Oxiteno from the Brazilian conglomerate Ultrapar in Q1 2022,

Stepan in October announced plans to build a new alkoxylation plant at its site in Pasadena, Texas.  The new plant will provide “a flexible capacity” of 75,000 tonnes/year, capable of both ethoxylation and propoxylation.  The plant is expected to come online in late 2023.  When operational it will bring Stepan's alkoxylation network to three plants and position the company with a footprint in the US Gulf Coast. The US is a major net-importer of natural fatty alcohols and a key production region for synthetic alcohols.

Downstream competition is fierce

Further detailed analysis of the US market by Lucas Hall shows further supply chain constraint and volatility: Increasing alcohol supply chain volatility is expected to underpin US fatty acids and alcohols markets into H2 2022, as demand for numerous carbon fractions continues to outpace supply against the backdrop of soaring feedstock costs and import disruptions globally, heading into this year’s International Petrochemical Conference (IPC).  Crude oil and energy markets in general are also soaring alongside the Russia-Ukraine war.

Crude oil prices indirectly pressure feedstock fats and oils markets, as renewable fuels like biodiesel compete with petroleum-based fuels in the global market.

FEEDSTOCKS
Malaysian palm oil stocks remain historically tight because of labour shortages in the first two years of the pandemic, with stock levels largely remaining below the 1.75-2.00m tonne threshold the market considers to be balanced. Malaysia supplies about one-third of global palm oil demand.

Source: Malaysian Palm Oil Board (MPOB)

Stock levels were beginning to find more balance in H2 2021 following the peak summer palm harvest.  However, stock levels fell alongside a move from the Indonesian government in late January to curb rising cooking oil prices by introducing export curbs on palm oil and palm products, further supporting the uptrend in vegetable oil costs.  The government briefly expanded the export curbs in March before scrapping the policy in favour of an export tax, after the previous policy failed to reduce inflation. Soybean oil (SBO) markets are also historically tight because of drought conditions impacting production in both Argentina and Brazil. Argentina supplies a significant chunk of global SBO demand.  Rapeseed oil has also been historically tight because of drought conditions in Canada in 2021. Canada supplies more than half of global rapeseed oil demand.  The Russian invasion of Ukraine effectively slashed global sunflowerseed oil supply. Combined, the region supplies roughly 80% of global sunflowerseed oil demand. Sunflowerseed oil accounts for only 12% of global food oil consumption and 9% of total vegetable oil consumption - including biofuels and other industrial uses - according to the US Department of Agriculture (USDA).  This sudden supply shortage against the backdrop of preexisting tight vegetable oil supply globally sent vegetable oil prices soaring even higher, as global players were forced to look elsewhere to satisfy demand.

Source: CME Group, Matthes & Porton, WSJ Cash Markets

While vegetable oil prices have entered a downward correction in recent days now that Indonesia has removed the export curbs from the market, soaring energy and feedstock costs continue to squeeze production margins in southeast Asia.  Squeezed production margins in southeast Asia have caused players in the region to reduce operating rates against the backdrop of preexisting cost pressures like high shipping equipment and freight costs.  The Russia-Ukraine conflict threatens to further weigh on imports as shipping equipment and vessel space further tightens because of the supply chain disruptions from eastern Europe.

FATTY ACIDS
The combination of these issues is further increasing demand from the domestic market to satisfy the import shortfalls.  Sustained import disruptions continue to support demand for domestic fatty acids.  Multiple carbon fractions remain tight, including C8, C10, C8-10, C14, tallow based C18-oleic and stearic acids, and tall oil fatty acids (TOFA).  Oleochemicals producers are running as hard as they can, as demand for fatty acids largely continues to outpace supply, but overall domestic oleochemical capacity is insufficient to make up for import shortfalls alone, keeping the market historically tight.

Domestic oleochemicals players are also facing supply chain disruptions, including raw material disruptions and higher shipping equipment and freight costs.

Beaded and flaked stearic acids from PMC Biogenix's US Memphis, Tennessee, site are expected to remain disrupted into H2 2022 as the company continues to make repairs following a fire at the site's packaging facility in January.

Price increase announcements (separately announced)

ProducerProductProposed IncreaseTargeted DateIngevityPine chemical-based productsUpwards of 50%1 AprilKratonCTO refinery products, derivativesUp to 15%1 April



FATTY ALCOHOLS
Multiple carbon fractions remain tight, including C8, C10, C8-10, C16-18 blends and C18, depending on the supplier.  C18 alcohols have grown increasingly tight in recent weeks as bullish feedstock palm kernel oil (PKO) costs encourage an increase in coconut oil (CNO) in the feedslate, inherently producing less C18 alcohol in the process.

The downward correction across the oil palm complex following the removal of Indonesia's export curbs may encourage more players to increase their consumption of palm oil and PKO in the weeks to come.  Mid-cut alcohol supply is relatively more balanced, but increasingly volatile supply chain conditions are also increasing demand in that market.  Domestic natural and synthetic C18 alcohol availability is also tight, given the overarching supply tightness in southeast Asia.  Freely negotiated US Q2 fatty alcohols contract negotiations have largely been heard at a sharp increase from Q1, tracking the above cost pressures and increasingly volatile supply chain conditions globally.  Freely negotiated contracts for mid-cut alcohols have largely been heard in the low-to-high $1.60/lb DEL (delivered) US Gulf range. Discussions have been heard as high as $2.00/lb.  Discussions for long-chain alcohols have largely been heard above $2.00/lb for both single-chain and blended C16-18 volumes.  One supplier was heard lower than $2.00/lb on C16 alcohols, given their competitive supply position in the market.  Few suppliers have the capability to ship and store long chain alcohols in bulk. Most suppliers ship by container, exerting pressure on the wider market the last several quarters.

In the wider market, concerns regarding US Customs and Border Protection's (CBP's) increased scrutiny on Malaysian-origin product persists, with isolated instances of imports being rejected or detained continuing to be heard in the market.

Meanwhile over in Asia, markets are trending in a somewhat different direction as reported by the prolific and insightful Helen Yan: Asia’s fatty alcohol ethoxylates (FAE) market is likely to soften in the near term, due to declining feedstock fatty alcohol C12-14 costs and a slowing Chinese economy.

• Indonesia increases CPO and PKO levies

• Lockdowns in China to weigh on demand

• Supply of fatty alcohols C12-14 to ease

The removal of Indonesia’s domestic market obligation (DMO) export curbs, replaced with an increase in levies on crude palm oil (CPO) and palm kernel oil (PKO), has eased feedstock fatty alcohols C12-14 supply from Indonesia at the same time that the coronavirus spike in China weighs on demand.  China’s zero-COVID-19 strategy has seen full and partial lockdowns being imposed in numerous cities in the provinces of Jilin, Hebei, Shandong, and Guangdong, as well as in some communities in Shanghai.

Factories in China have been shut or are running at lower rates, while logistics and transportation issues have delayed shipments and deliveries following fresh lockdown restrictions to contain the highly infectious coronavirus Omicron variant. Spot prices of FAE mols 7, 9 fell by $50/tonne to $1,850-1,900/tonne CIF (cost, freight and insurance) China for drummed shipments in the week ended 24 March, ICIS data showed.

“Indonesian cargoes will be cheaper and more competitive with higher CPO and PKO levies and removal of the DMO policy,” a trader said.

In place of the DMO policy, Indonesia has raised its export levies on CPO and PKO.

The maximum levy rate has now been set at $375/tonne when the reference price for the edible oil hits $1,500 a tonne, up from $175 previously.  CPO and PKO exports are subject to both levies and duties. The duties remain unchanged at $200/tonne for CPO and $245/tonne for PKO.  Under the DMO policy, Indonesian companies had to show proof of their domestic sales of crude palm oil (CPO) and/or refined, bleached and deodorised palm olein to secure export approvals for oleochemicals including fatty acids, fatty alcohols, and soap noodles.  On 10 March, Indonesian companies were required to sell 30% of their planned exports of CPO and olein in the domestic market, up from 20% previously.  The DMO policy was initiated in late January to rein in soaring domestic cooking oil prices.  Demand for cooking oil, derived mainly from palm oil, has surged ahead of the Muslim fasting month of Ramadan, which starts a month ahead of the upcoming Eid-ul-Fitr festive holiday in early May.  The Indonesian government recently lifted the cap on retail prices of branded cooking oil and subsidized bulk domestic cooking oil.  Indonesia is the world’s largest palm oil producer, followed by Malaysia. Indonesia produced 47 million tonnes of CPO in 2021, according to the Indonesian Palm Oil Association (GAPKI).

No longer obliged to shop domestically

In contrast, the Asian linear alky benzene (LAB) market has been bolstered by rebounding crude oil prices. However, buyers remain slow to accept lofty offers by suppliers amid heightened uncertainty from the recent crude volatility. With crude markets likely to remain in a flux in the near term, the buy and sell gap between LAB buyers and sellers might need time to bridge.

• Volatile crude market causes hesitancy among buyers

• Suppliers’ margins eroded by buoyant upstream markets

• Chinese market dampened by lockdowns and logistics issues

Buyers remain mostly cautious after last week’s tumble in the crude oil market while sellers cited lofty selling indications amid eroded margins.  “Costs are rising quickly and we need to reflect that in the LAB market,” said a supplier in Asia.

However, some sellers concede that buyers are slow to follow as uncertainty remains elevated.  “Buyers are hesitant to commit to large price increments and will need some time to reconcile that cost push has lifted the market,” said another seller in Asia.

Offers were cited largely at around $2,000/tonne CFR (cost & freight) Asia and above, while buying indications were heard below $1,900/tonne CFR Asia.  In China, the lockdowns across cities from the recent surge in COVID-19 cases weighed on demand and resulted in logistical issues inland.  “Demand is a bit soft as the lockdowns affected trade; hopefully the restrictions can be lifted soon,” said a producer in China.

Over in India, local producers have sold out of March cargoes and are preparing to offer April lots from next week.  Some sellers talked of hefty increments for April material, citing rapidly rising upstream costs.  “Customers have snatched up March cargoes with much bargaining as they anticipate further increases for April,” said a producer in India.

Domestic India prices rebounded to the Indian rupees (Rs) 150s/kg ex-tank in March, from around Rs130/kg ex-tank in January.  LAB is an organic compound used almost wholly as an intermediate in the production of surfactant linear alkyl benzene sulphonate (LAS), also known as linear alkyl benzene sulphonic acid (LABSA). LAB’s main end market is the biodegradable detergents and other cleaners.

Still a gap between buyer and sellers

Splitting is in the news again. And while Unilever is somewhat hesitant, Solvay has embraced this time-honored method of boosting shareholder value. ICIS reported thtast Solvay’s plan to split into two independent listed entities next year is driven by a push to unlock additional value in the business through intensified strategic focus and attracting different classes of investor, the CEO of the Belgium-based firm said on Tuesday.  Solvay announced on Tuesday plans to break up the 159-year-old company into a lower-growth, cash-strong business containing more commoditised assets including its soda ash operations, and a more innovation-focused entity that could deliver higher returns. [so what side did surfactants end up on? Read on]

The process is expected to be complete in the second half of 2023.

Referred to for the time being as EssentialCo, the more commoditised business will house Solvay’s soda ash and derivatives operations, as well as peroxides and silica assets, with total annual 2021 sales of €4.1bn.  The other arm, currently known as SpecialtyCo, houses two sub-divisions focused around materials, including composites and specialty polymers, and consumer and resources operations, including oil and gas service chemicals fragrances, and surfactants. [OK then, this seems like a reversal of the Solvay / Rhodia merger with some minor adjustments] The businesses generated revenues of €6bn last year.

The separation is to be achieved through a partial demerger of Solvay that will see the specialties assets spun off to SpecialtyCo.  With an emphasis on unlocking value in the company beyond its current market valuation, the split allows for more precise targeting of specific parts of the investor landscape, according to Solvay CEO Ilhan Kadri.

“There are value stock owners,” she said, speaking at a press conference on Tuesday. “They like dividends, they like resilient cash cows over the cycle, and this is exactly what's EssentialCo is.”  “There are other investors that like growth stocks, businesses and entities which are investing heavily in their top-line growth, and this is exactly the SpecialtyCo type of business model,” she added.

Solvay had already started work on carving out its soda ash operations, which produce strong cashflows but also heavy carbon output, and the other assets that are slated to go along with it into that new business have similar operational profiles, according to Kadri.  “[These] are commodity-like businesses, they need to focus on operational excellence of cost effectiveness, or lean manufacturing,” she said.  “They will have between medium to low type of growth, close to GDP, although some of them will do more. They will manage the energy transition specifically… they have a high cash delivery and are able to cover their needs with resilient cash generation,” she added.

The specialty operations will stand as more growth-focused, less bulk production businesses, Kadri said.  “The SpecialtyCo… [businesses have] the same operating model very much concentrated on innovation, customer intimacy and meeting those unmet needs, with strategic flexibility,” she added.

The split companies will be better-positioned to provide stronger growth in the long term according to Kadri, with Solvay to continue to report as a single entity in the run-up to the break-up. The company declined to comment on the intended management for the two businesses, but stated that pro-forma updates would be issued throughout the process.  No stone was left unturned in the plans to reorganise the business, according to Kadri, with the soda ash carve-out preparations giving the firm the opportunity to take a stronger look at Solvay’s fundamentals.  Despite the work that preparing to break the business apart, the process does not preclude further divestments in the meantime.

“There are no sacred cows,” Kadri said. ] The shares of each company are expected to be listed on Euronext Brussels and Euronext Paris. Solvay shares were trading down 2.2% as of 13:28 GMT compared with Monday’s close, following the announcement of the split.

There really is nothing that can't be split it seems

And speaking of splits, the some-time split-off (from Akzo) Nouryon’s adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) rose 10% year on year in 2021 on the back of strong growth for its surfactants and ethylene and sulphur derivatives operations, the Netherlands-based firm said earlier in March.

 ($m)20202021ChangeRevenue4,2074,91717%Adjusted EBITDA9841,08110%Adjusted EBITDA margin (%)23.4%22.0%



Key points

- EBITDA at its performance formulations division rose 15% year on year, driven by strong demand from agriculture, hygiene, packaging, pharmaceuticals and oil and gas end markets.

- 2021 earning for technology solutions operations fell 3% due to higher energy and raw materials pricing.

- The company passed through 11% in price hikes in Q4 as energy cost increases accelerated.

- The company, which spun out its base chemicals operations into a separate business, Nobion, [are you following this?] under the ownership of Nouryon’s equity investors Carlyle and GIC, announced that it is looking at an initial public offering in September last year.

An easy charge to make these days

No blog is complete without a look at EO: ICIS notes that Ethylene oxide (EO) suppliers are dealing with high production costs and are increasingly concerned about the next ethylene contract price settlement for April.

Gains in naphtha this week have eaten into cracker margins, causing operating rates to be trimmed.

• High production costs lead to reduced operating rates
• Naphtha gains cause concern over April ethylene contract
• MEG margins under immense pressure from feedstocks

Like everything else isn't it?

EO prices are at record highs, since ICIS started recording prices in 2004.

Now with the upstream developments, there is even more uncertainty for April.

The following graph shows the EO and ethylene spread has continued to decrease in 2022.

Money harder to make

High production costs throughout 2022 have been eating away at downstream ethylene glycol margins. With another historically high ethylene contract price settlement on the cards, the situation is set to worsen, according to market sources.  Previously, European MEG contract prices struggled to keep up with the increasing ethylene prices in 2021. MEG contract prices increased 33% in 12 months, while ethylene contract prices rose by 44%.  In March, MEG contract prices increased by around 7% month on month, mirroring the ethylene increase. Some market participants were surprised, as it has been previously challenging from a supplier perspective to pass on the feedstock increases downstream. A settler added that it was needed to help the EU to continue operating. In the week to 4 March, European MEG margins fell further on stronger naphtha, LPG costs.

Also in MEG

Certain EO derivatives are performing better such as surfactants and polyethylene glycol (PEG), leading suppliers to adjust EO production accordingly.  End user demand could weaken in the face of higher inflation rates seen across Europe.

As if you needed reminding

An interesting snippet from Reuters regarding sustainable palm oil: Malaysian tech firm DiBiz launched the world's first online marketplace for sustainable palm oil last month to encourage sales of products certified as environmentally compliant as buyers have avoided the more expensive goods. The trading platform, called Trustparent Marketplace, will link palm oil buyers and sellers across the supply chain and has additional measures for traceability to ensure the industry's commitment to "No Deforestation, No Peat and No Exploitation". "What this means is just like you go to Amazon to buy your products, now, every stakeholder in palm oil can come on to the Dibiz marketplace," said DiBiz co-founder and Chief Executive Officer U.R. Unnithan, who is also president of the Malaysian Biodiesel Association, told Reuters at the sidelines of an industry conference.

Critics blame the rapid expansion of palm plantations for rainforest deforestation and human rights abuses, prompting consumer boycotts against the edible oil.

But palm oil industry officials say such campaigns are hindering efforts to achieve sustainability certification and develop a market for certified sustainable palm oil (CSPO). About 14.6 million tonnes, or 19.3% of global palm oil produced is certified by the Roundtable of Sustainable Palm Oil (RSPO), which is seen as a global standard for sustainability claims. However, planters in Indonesia and Malaysia, the world's two largest palm oil producers, have complained that demand for the more expensive oil with CSPO certification is lacking despite investing millions to meet the requirements.

Kudos to our good friends at Galaxy Surfactants who announced last month that they gained distinct recognition as Supplier Engagement Leader 2021 awarded by a globally acclaimed body on environment impact measurement, Carbon Disclosure Project (CDP).   The company earned the distinct ‘A’ rating as granted by CDP basis its deep sustainability focus across its business value chain ecosystem. Galaxy Surfactants has been recognized for successful engagement with their suppliers on climate change and played a crucial role in the transition towards the net-zero sustainable economy.

The Supplier Engagement Rating (SER) by the CDP evaluates corporate supply chain engagement on climate issues and helps companies identify as well as respond to environmental risk and opportunities through CDP’s industry-leading disclosure framework. K Natarajan, Chief Operating Officer, Galaxy Surfactants, said, “At Galaxy Surfactants, we pursue sustainability holistically by involving our value chain partners in our joint journey to mitigate environmental impact. Under this approach, one key focus is to reduce carbon footprint. Our constant endeavor is to decarbonize our value chain, accelerate climate solutions and improve our overall sustainability quotient. This recognition by CDP further strengthens our resolve to continue our environment-friendly pursuits and bring about a positive impact”.

And finally: Distributors are a key channel to market for surfactants manufacturers – and can be high-growth and profitable. That’s why we have Eric Byer, head of the NACD speaking at our upcoming conference in Jersey City (one more plug? Thanks). The world’s biggest chemical distributor, Brenntag has reported record results for financial year 2021 which was characterized by exceptional market conditions. Both global divisions, Brenntag Essentials and Brenntag Specialties, delivered excellent results in their first reported year within the new operating model.

Dr. Christian Kohlpaintner, Chief Executive Officer of Brenntag SE: “In 2021, Brenntag managed to maintain supply under very challenging conditions and continued to provide products and services to our customers throughout the year. We achieved this mainly due to the long-lasting relationships with our supply partners as well as the exceptional efforts and expertise of our Brenntag employees. Our unique global presence in 78 countries, our strong position in our industry segments and our intimate product knowledge were decisive to navigate well through 2021.”

In 2021, Brenntag generated sales of 14,383 million EUR. Operating gross profit rose by 19.6% to 3,379 million EUR compared to 2,869 million EUR in the previous year. Brenntag accomplished to translate the positive gross profit growth into an over proportional growth (+29.5%) of operating EBITDA to 1,345 million EUR. Profit after tax remained largely stable with a total of 461 million EUR despite EBIT being impacted mainly by extraordinary expenses due to excise tax payments and provisions. Earnings per share ended at 2.90 EUR.

The implementation of Project Brenntag, the first step of Brenntag’s comprehensive transformation journey, was started at the beginning of 2021. The transformation is ahead of plan and continues to make very good progress in achieving additional operating EBITDA of 220 million EUR annually by the end of 2023. Since its inception, Project Brenntag has generated around 120 million EUR delivering already more than 50% of the expected uplift. Additionally, the optimization of Brenntag's global site network is ongoing. Of the around 100 planned site closures across all regions by 2023, 72 have been completed to date. Furthermore, since the initiation of the program, 925 jobs have been reduced structurally and in a socially responsible manner out of approximately 1,300 planned in total by 2023. The new Go-to-market approach is now fully implemented globally with dedicated sales organizations for the two global divisions, Brenntag Essentials and Brenntag Specialties. Project Brenntag is designed to build the strong basis for sustainable organic earnings growth in the coming years. It will expand Brenntag’s global market leading position through an increased focus, reduced complexity, and even stronger partnerships with customers and suppliers.

Brenntag can look back on a long-standing history of strategic Mergers & Acquisitions activities and an impressive track record of successful transactions. In 2021, Brenntag acquired six companies with a cumulative enterprise value of 440 million EUR, the highest investment amount in M&A since 2015. Around 80% of this M&A spend was related to the highly attractive Life Science segment, and here especially to the nutrition industry. Highlights included the acquisitions of Zhongbai Xingye in mainland China and of JM Swank in North America. As a result of those two acquisitions, Brenntag’s 2021 global nutrition business grew to around 2 billion EUR in sales. Overall, acquisitions contributed 33 million EUR to Brenntag’s operating EBITDA in 2021, of which the majority was attributable to the deals closed in 2021.

Dr. Christian Kohlpaintner, Chief Executive Officer of Brenntag SE, said: “Brenntag’s business model again proved its resilience in particularly difficult times of severe pressure on global supply chains. We expect the overall macro-economic, geopolitical, and the associated operational conditions to remain challenging. Supply chains have been and still are under severe pressure, further impacting production and supply. We only expect some normalization of market conditions later in the year. Against this background, we currently expect a positive performance at operating EBITDA in 2022 with both divisions contributing to this growth.”

In light of current economic conditions, Brenntag Group expects the operating EBITDA for financial year 2022 to be between 1,450 million and 1,550 million EUR. This forecast considers a normalizing market environment later in the year, includes the potential efficiency improvement driven by the measures of Project Brenntag as well as the contributions to earnings from acquisitions already closed and assumes that exchange rates will remain stable on the level at the time of the guidance publication. The global economy is expected to continue to be severely impacted by exceptional influencing factors that cannot be reliably forecast, such as the COVID-19 pandemic, current geopolitical developments, pressure on global supply chains, inflationary tendencies, and price volatility.

At the General Shareholders’ Meeting on June 9, 2022, the Board of Management together with the Supervisory Board will propose a dividend increase of 7.4%, which translates into a dividend of 1.45 EUR per share (2020: 1.35 EUR). This is the 11th consecutive dividend increase since the IPO in 2010. The payout ratio of 50% from profits after tax attributable to Brenntag shareholders follows Brenntag’s dividend policy.

Connecting Chemists - for many decades

End of the news: Beginning of the music section: Occasionally, Spotify does a good thing for me and recommends a decent playlist. This month, the Blues playlist really hit the mark and got me digging into Youtube for more detailed research. Why? Maybe the news has got us all in that frame of mind.  I can’t say blues is the answer to our troubles but there were some great songs from 40 – 50 years ago or so that have clearly influenced thousands of musicians since. Here’s a few, I’ve been listening too.

First; check out this quivering slice of red meat for hard-blues lovers from English band Spooky Tooth; Evil Woman (1969). The Hammond organ, grinding guitar riff, insane vocals. And that solo – Wow! Is it possible that this one song sent both Black Sabbath and Deep Purple in the right direction to the benefit of literally billions of music fans. Yes. It’s possible. Honestly, it’s likely.

Not convinced? Here’s 1971 Sweetleaf from the Sabs

OK so on to a related band, Humble Pie with Steve Marriott on vocals in 1971 – Black Coffee, a Robert Plant influence do you think?

Here’s Zep themselves. How many more times from a ’71 live performance

How about Robin Trower? This is a 1974 performance of Bridge of Sighs. It’s blues. It’s psychedelic. It’s Gorgeous..

How about one of the progenitors – John Mayall’s Blues Breakers – this one from 1966 with EC (who many claimed at the time was G)

Let’s wrap it up with Mr. Big by Free performed at the Isle of Wight in 1970. Now here’s something you might not know. Paul Rodgers on Vocals (who went on to headline Bad Company) is from Middlesborough in the Northeast of England. So, now you know. Demography is not destiny.

Ah lovely right? See you all in May.

Surfactants Monthly April (& early May) 2023

Greetings from Jersey City. We were back,on the top floor of the Hyatt with stunning views all round of the skylines of Manhattan and Jersey City.  Our conference concluded on Friday May 5th, and, while we generally eschew event summaries here, I do feel motivated to relay some of what the ICIS reporters said about the proceedings. Joe Chang, Melissa Wheeler and Lucas Hall each reported on and spoke at the conference. A gathering of the masters of the surfactant universe if ever there was one.

Masters of the Surfactant Universe

On Thursday afternoon, we heard from IP Specialities’, Martin Herrington, a master of the oleochemical universe, who said that global oleochemicals markets face short- and long-term challenges as players grapple with high-cost inventories in a weak demand environment alongside expanding  biofuels policies and trade regulations..  While oleochemical prices are down alongside depressed demand conditions globally, many companies continue to sit on high-cost inventories, increasing their risk of insolvency.  Longer-term, supply chain reliability remains a concern following several unexpected plant disruptions within close proximity to one another.  Expanding biofuels policies, namely the expansion of renewable diesel capacity in the US market, raise concerns over the viability of traditional biofuels like biodiesel as well as the availability and cost of so-called "low carbon intensive" feedstocks like tallow, traditionally used for domestic fatty acids production. At least one producer has transitioned towards a majority vegetable-based platform, with others looking at palm and other feedstocks as a substitute for tallow as these concerns grow.  Trade barriers also pose a concern, namely in the EU, as sustainability concerns increase traceability and logistics challenges for players in the region.

A keynote address  by BASF senior vice president of Care Chemicals Marcelo Lu discussed, among other things, the New York bill limiting 1,4-dioxane. 1,4-dioxane forms as a byproduct during the process of certain surfactants and other ingredients made with ethylene oxide (EO).  The Department of Environmental Conservation in consultation with the Department of Health can determine, by rule, if the “trace concentration threshold shall be lowered to better protect human health and the environment”.  This new regulation could potentially decrease EO consumption in the surfactants industry as companies begin to find alternatives to 1,4-dioxane.  Currently, the restrictions are only in the state of New York, but with EO already in the Environmental Protection Agency’s (EPA's) crosshairs (see below article), this could mean decreases for EO consumption on a wider scope.

Lu went on to note that the 12.5m tonnes of surfactants consumed globally in 2021 to produce household detergents and cleaners accounted for around 40m tonnes of carbon dioxide (CO2) equivalents emitted. This is about the same amount that the 200m square kilometres of forest area disappearing from the planet every year can absorb.  “The 2030 targets [for CO2 emissions reductions] are starting to make people very uncomfortable. When it comes to Scope 3 emissions, this is a real challenge,” said Lu.  A large part of a company’s Scope 3 emissions comes from the raw materials it buys.

BASF’s journey to a fossil carbon-free portfolio for Care Chemicals includes Avoidance, or reduction, which entails the use of high-performance ingredients and enzymes to make formulations more efficient; Replacement which involves use of bio-based feedstocks; and Recycling which involves chemical recycling or using CO2 as a feedstock, the executive said.  As hydrogenation is a key process for producing certain surfactants, low carbon or green hydrogen will likely play a bigger role in the future, said Lu.  BASF is building a methane pyrolysis pilot plant at its site in Ludwigshafen, Germany, which would produce hydrogen without CO2 emissions. The company expects this technology for large-scale production to be available by 2030 at the latest.

Bio-based feedstocks can be used to produce surfactants directly, or through a biomass balance approach where it is used in the early stage of production - such as in a cracker - along with petroleum-based feedstocks.  Using this approach, liquid laundry detergents formulated in the US can result in about a 35% reduction in CO2 equivalent emissions versus conventional products, and dishwashing liquids around a 45% reduction, certified with RSPO (Roundtable on Sustainable Palm Oil) standards, Lu pointed out.  In BASF’s Care Chemicals business, around 60-70% of feedstocks are bio-based or bio-derived, and the company has a goal of bringing this to over 90%, said Lu.

There is also a big trend towards greater transparency in cleaning products. A survey by the American Cleaning Institute (ACI) in 2020 had 82% of respondents saying it is important to know the ingredients in these products, and 70% seeking information on cleaning product ingredients. Another survey by cleaning products producer Seventh Generation showed that 90% of respondents want to know all the ingredients in such products - not just the active ones.  “This is not a blip but a trend that will continue,” said Lu.

Sasol aims to scale up production of bio-based sophorolipids surfactants to up to 20,000 tonnes/year by 2025,  said Edwin Habers , business manager, Personal Care & Health at Sasol at the conference. The sustainability benefit of sophorolipids is that it can be made from local feedstocks such as rapeseed oil and sugar rather than tropical oils. On the performance, side, it is “ultra mild” with multi-functional benefits to skin and scalp, he noted.  Sophorolipids also have a much lower carbon footprint than SLES (sodium lauryl ether sulphate) surfactants – 80% lower greenhouse gas (GHG) emissions than PKO (palm kernel oil)-based SLES and 66% less than fossil-based SLES, he pointed out.  Sasol produces sophorolipids through a partnership with UK-based Holiferm. The Holiferm process uses fermentation of plant oils with minimal processing and no solvent usage.  This year, Sasol expects to produce just around 1,100 tonnes of sophorolipids, but Haber sees a market potential of 400,000 tonnes/year.  Sasol plans to increase production to up to 3,000 tonnes in 2024 and scale this to up to 20,000 tonnes by 2025, said Haber. “We would like to go for the potential of hundreds of kilotons,” said Haber.  The Holiferm manufacturing process is also continuous rather than batch, and uses at least 50% less energy than the traditional SLES process, he noted.

A highlight of our events is always Kevin Swift’s paper on the macroeconomic picture. A combination of several factors including restrictive interest rates, tightening credit from the regional banking turmoil and weakness in several leading indicators are pointing to a mild US recession starting in Q3/Q4 2023, noted Kevin.  The ICIS US Leading Business Barometer (LBB) has been signaling recessionary conditions for many months, along with the inverted yield curve - 10 year Treasury yield lower than the 2 year Treasury yield - while money supply has declined. “All these factors tend to suggest a mild recession in the US,” said Swift, who noted that consensus among economists is for a recession to start in Q3 or Q4 2023.  While goods inflation has come down, services inflation remains elevated and sticky, as this is tied to the labour market which remains very tight. While demographic effects tend to move very slowly, COVID-19 accelerated the retirement of Baby Boomers, compressing a typical six-to-eight-year period of retirements to about two to three years.  “The upper end of experienced talent has left the workforce, and the three generations following the Baby Boomers has gotten smaller and smaller,” said Swift.  “Colleges are facing crisis, as there are 15-20% less students than a decade ago. Companies recruiting for jobs ask - when is this going to end? It won’t,” he added.

The tight labour market has prevented a recession so far, but also has kept inflation elevated, he noted.  However, restrictive Fed policy should lead to inflation easing to an average of 4.3% in 2023 and 2.5% in 2024, said the ICIS economist.  The Fed Funds rate of 5-5.25% is considered restrictive given that the Fed’s preferred measure of inflation - the core Personal Consumption Expenditures (PCE) price index - is running at a three-month average of 4% year on year, said Swift.  Surfactants demand is tied to consumer spending and confidence, the latter of which fell in the US April reading on persistent inflation as well as an uncertain employment outlook, he noted.

Overall, ICIS projects US GDP growth of just 1.0% in 2023 and 0.4% in 2024, and global GDP growth of 1.8% in 2023 and 2.7% in 2024 with China, India and southeast Asian countries leading the recovery.  For the US Fed and other central banks, there is a risk of policy mistakes, if interest rates remain too high for too long while inflation eases, the economist noted.  “Risks of a global recession are still present. Risks are shifting from supply chain to geopolitical,” said Swift.  “And given underlying demographics, debt is a real threat around the world,” he added.

A threat indeed

Main News Section

As noted above, the EPA’s tentacles continue to reach toward surfactants. In early April, Joe Chang reported that The US Environmental Protection Agency (EPA) has announced a proposal to significantly reduce hazardous air pollutants from chemical plants, including ethylene oxide (EO), chloroprene, benzene, butadiene (BD), ethylene dichloride (EDC) and vinyl chloride monomer (VCM). Under the proposal, facilities that make, store, use or emit these chemicals would be required to monitor levels of these pollutants entering the air at the fenceline of the facility. If annual average air concentrations of the chemicals are higher than an action level at the fenceline, owners and operators would have to find the source and make repairs, according to the EPA.

The proposed action levels would vary depending on the chemical. For EO, the EPA is proposing an action level of 0.2 micrograms per cubic metre of air. For chloroprene, the proposed action level is 0.3 micrograms per cubic metre.  The EPA would make the monitoring data public through its WebFiRE database tool.  The reductions would dramatically reduce the number of people with elevated air toxics-related cancer risks in communities surrounding the plants that use EO and chloroprene, and cut more than 6,000 tons of toxic air pollution annually, according to the EPA.  

The long arms of the EPA

EPA Administrator Michael Regan made the announcement at an event in St John the Baptist Parish, Louisiana.  “For generations, our most vulnerable communities have unjustly borne the burden of breathing unsafe, polluted air,” said Regan.

“When I visited St John the Baptist Parish during my first Journey to Justice tour [in November 2021], I pledged to prioritise and protect the health and safety of this community and so many others that live in the shadows of chemical plants,” he added.

The American Chemistry Council (ACC) said it recognises the concerns in communities and supports increased access to “accurate, up-to-date and scientifically robust” air monitoring data. It also noted that from 2010-2020, Responsible Care facilities within its membership have reduced Hazardous Air Pollutants (HAP) emissions by around 24%.

An EPA voice in the wilderness

The ACC said it will review the EPA proposals before commenting in detail. However, it expressed particular concern about proposals on EO.  “Ethylene oxide is a versatile compound that’s used to help make countless everyday products,” the ACC said, pointing to its role in the development of electric vehicle (EV) batteries, and use in agriculture, the oil and gas industry and sterilisation of medical equipment.  “We oppose any rulemaking that uses the EPA’s flawed IRIS (Integrated Risk Information System) value for EO. ACC and others have detailed the severe science-based flaws with the IRIS value that resulted in an overly conservative value that is below background levels of EO,” said the ACC, which noted that the IRIS programme’s proposed toxicity value is 19,000 times lower than naturally occurring levels of EO found in the human body. “Overly conservative regulations on EO could threaten access to products ranging from EV batteries to sterilised medical equipment,” said the ACC.  In the coming weeks, the EPA expects to announce proposed updates to its regulations for commercial sterilisation facilities that emit EO. The agency is also working to develop proposed rules for other sources of EO, including polyether polyols production, hospital sterilisers and smaller chemical manufacturers known as “area sources”.  The EPA will accept written comments for 60 days after the proposal is published in the Federal Register and will hold a virtual public hearing. It will also hold a training programme for communities on 13 April 2023 to review the proposal and answer questions.

The EPA said its proposal would update several regulations that apply to chemical plants, including plants that make synthetic organic chemicals, and regulations that apply to plants that make polymers such as neoprene.  The proposed updates would reduce 6,053 tons of air toxics emissions each year which are known or suspected to cause cancer and other serious health effects, according to the EPA.  Those reductions include a 58 ton/year reduction in EO and a reduction of 14 tons/year in chloroprene. The proposal would also reduce emissions of smog-forming volatile organic compounds (VOCs) by more than 23,000 tons/year, the EPA said.  The ACC said it supports strong, science-based regulations for the industry but is “concerned that EPA may be rushing its work on significant rulemaking packages that reach across multiple source categories and could set important precedents”.  “We will be engaging closely throughout the comment and review process,” it added.

More tox-related news, this time from Germany: The country has submitted a restriction of 1,4 dioxane to the European Chemicals Agency (ECHA), the authority announced on Wednesday.  The application to restrict 1,4 dioxane in surfactants was submitted as the substance is categorised as carcinogenic. Its persistence in aquatic environments makes it difficult to remove from drinking water resources.  “Without taking action, the concentration of 1,4-dioxane will continue to increase, leading to adverse effects which will be difficult to reverse. The manufacture of surfactants has been identified as the major source of 1,4-dioxane emissions into the environment,” the ECHA document states.  The restriction proposal aims at minimising emissions from surfactants manufacturers including emissions caused by the discharge of 1,4-dioxane residues from purification processes of surfactants in treatment plants.  Stakeholders are requested to provide relevant information to the Dossier Submitter, which can then decide if there are any exemptions to the restriction based on risk and socio-economic bases.  If the Dossier Submitter does not provide a derogation to the restriction, then relevant stakeholders will need to provide a full risk and socio-economic justification for use of the material in any consultation process.  The start of the second call for evidence will begin on Thursday, and will be open until the deadline of 20 June 2023, with the expected date of submission of the restriction scheduled for 12 April 2024.

German shampoo not quite as attractive as it was

Early May, the great Helen Yan reported that Asia’s fatty alcohols producers are facing another hurdle in the current tough market conditions, as India imposes countervailing duties (CVDs) on imports to protect its domestic market.

•  Countervailing duties imposed on fatty alcohols imports into India

• Weak macroeconomics and geopolitical tensions weigh on demand

• Purchases mostly in smaller hand-to-mouth parcels, buyers cautious

Countervailing duties (CVDs) ranging from 3-30% will be imposed on fatty alcohols imports from Indonesia, Malaysia and Thailand, according to a notification dated 4 May issued by India’s Ministry of Finance.  According to India’s Ministry of Finance, “the domestic industry has suffered material injury which was caused by the subsidized imports.”  “It is bad news for us,” a regional fatty alcohols producer said.  Regional producers may have to seek other markets in Asia, Africa and Latin America, given the trade barriers put up by India, market sources said.  Regional fatty alcohols producers have been grappling with sluggish demand amid the global economic downturn and weak macroeconomic environment.  Uncertainties due to geopolitical tensions between China and the US and the ongoing Ukraine-Russia conflict have also dampened sentiment and weighed on demand.  Inflationary pressures, a looming global recession and the banking sector crisis in the US have eroded investor and consumer confidence and hampered trade.  “Demand is low and there are not many enquiries. Seems like the EU and the US are already in recession,” another supplier said.

Getting ready to declare any fatty alcohols they might be traveling with

Demand has also been stymied by the change in buyers’ purchasing behaviour as well, market sources said.  Buyers have adopted a prudent stance, restricting their purchases to mostly smaller parcels on a hand-to-mouth and staggered delivery basis rather than large bulk orders.  This change in buyers’ behaviour to one of caution and prudence has largely curbed spot interest and trades and has inevitably weighed on demand.

“The weak demand is making trading difficult,” a third supplier said.

Stymied demand

Meanwhile, China’s rebound in demand has been slower than expected despite reopening its borders in early January this year after nearly three years of pandemic-induced lockdown restrictions.  Caixin’s China manufacturing purchasing managers’ index (PMI) for April slipped to 49.5 from the neutral 50.0 mark in March amid subdued domestic demand conditions, the Chinese media firm said on Thursday, 4 May.

A PMI reading above 50 indicates expansion in the manufacturing economy, while a lower number denotes contraction.  The weaker Caixin PMI mirrors China’s official manufacturing PMI released earlier this week, which hit its lowest level since January 2023, contracting to 49.2 in April from 51.9 in March.  

Meanwhile (again), Asia’s fatty alcohols ethoxylates (FAE) market is likely to see a pick-up in activities in second-half (H2) May following the holiday lull.

• Thin discussions amid holiday lull

• Activities likely to pick up in H2 May

• Feedstock C12-14 mid-cuts prices decline

Trading activities had been winding down due to the spate of holidays in April and early May in this diverse and multicultural region.  “We expect discussions to pick up in mid-May. The market is quiet due to the holiday season in this region,“ a regional producer said.

Quiet and a bit depressed (like your average tiktok user?)

Chinese players have just returned from the Labour Day holidays on 29 April-3 May while Japan’s market is shut for the Golden Week holidays in early May.

Indonesia and Malaysia observed the recent Muslim Eid-ul-Fitr holidays in late April and Labour Day holidays earlier this week.  Meanwhile, Thailand’s market is shut on 4 May due to Coronation Day, while Malaysia is on holiday on 4 May due to Vesak Day, and South Korea will be closed for Children’s Day on 5 May.  Apart from the holiday lull, uncertainties and declining prices in the feedstock fatty alcohols C12-14 mid-cuts have also dampened sentiment and slowed down demand.  China’s official manufacturing purchasing managers’ index (PMI) hit its lowest level since January 2023, contracting to 49.2 in April from 51.9 in March, official data showed.  A PMI reading above 50 indicates expansion, while a lower number denotes contraction.  Demand for consumer products such as detergents, cosmetic and shampoos has fallen due to the erosion in consumer confidence, amid inflationary pressures and fears of a global recession.

The geopolitical tensions between China and the US and the ongoing Ukraine-Russia conflict in Europe had disrupted trades and weighed on demand.  FAE is used mainly in sodium lauryl ether sulphate (SLES), a surfactant found in many home and personal care products such as soaps, shampoos, shower gels and detergents.

US April ethylene oxide (EO) contracts were assessed at 57.55-59.55 cents/lb ($1,268.75-1,312.84/tonne).  EO contract prices have declined for six consecutive months, tracking an ongoing drop in ethylene prices. This is the lowest ethylene contract price since November 2020.  Demand for EO and its derivatives remains weak due to ongoing recession fears, which has decreased discretionary spending. Additionally, rising interest rates and mortgage rates has hampered demand from the housing and construction industries.

US EO. Where would we be without it?

In more EO news: North America ethylene oxide (EO) operating rates are poised to recover with new derivatives capacity starting up in the coming years and a recovery in China, a Chemical Data (CDI) analyst said in April.  Major new capacity additions in 2019-2022 were tied with ethylene glycols (EG) production, which suffered low demand from the key China market during the pandemic and China’s COVID lockdowns, said Antulio Borneo, vice president, PET chain at Chemical Data (CDI), part of ICIS.

However, a potential China recovery after the reopening, plus increased consumption of EO from more derivatives capacity and production should drive operating rates as well as prices higher, he added.  Borneo spoke at a meeting of the Racemics Group in Monclair, New Jersey.  EG, which is produced from EO, is a key feedstock for polyester. In North America, EG accounts for around two-thirds of EO consumption, with surfactants representing about a quarter of demand, according to the ICIS Supply and Demand Database.  Other EO derivatives include ethanolamines and glycol ethers.

Through 2024, there should be a substantial increase in consumption with increased productivity from the integration by Indorama of its Oxiteno and Huntsman surfactants assets, Dow’s start-up of 60,000 tonnes/year of surfactants capacity in Plaquemine, Louisiana and Stepan’s upcoming 75,000 tonne/year surfactants project in Pasadena, Texas slated for start-up in 2024, said Borneo.  Altogether, these factors could increase consumption of EO by 130,000-150,000 tonnes/year between 2022-2025, he pointed out.  North America EO operating rates should rise from the low-70% range in 2022, to nearly 80% by 2025, according to the ICIS Supply and Demand Database.

Meanwhile, the only potential EO expansion project in North America is Mitsui & Co’s planned bio-EO/EG project, which could bring on 400,000 tonnes/year of renewable polyethylene terephthalate (PET) by 2025-2026, the CDI analyst noted.

Renewable paraxylene (PX) feedstock for PET could come from Origin Materials, he added. As noted in Decmeber Mitsui & Co and Petron Scientech are evaluating the production of ethylene from ethanol in the US, with several downstream projects, including EO, EG and PET.

More details on the Mitsui project: Mitsui & Co and Petron Scientech will evaluate producing ethylene from ethanol in the US as well as downstream plants that will produce ethylene derivatives.  The two reached the agreement under a memorandum of understanding (MoU).  Petron Scientech licenses ethanol to ethylene technology. Some of the derivatives mentioned by Petron include ethylene oxide (EO), ethylene glycol (EG) and polyethylene terephthalate (PET).  Petron Scientech said it and Mitsui will evaluate carbon intensity (CI), life-cycle analysis (LCA), engineering design, supply chains and marketing opportunities.  If the feasibility studies are approved and the two companies can reach a mutual agreement, then the first plant will be built in the southeastern US.

Interesting things come from the cornfield

Big update from ExxonMobil this month: ExxonMobil remains on track for a mid-2023 startup for its new Vistamaxxand linear alpha olefins (LAO) plants in Baytown, Texas, the US-based energy and chemicals producer said in early May.  Vistamaxx is a semi-crystalline copolymer of propylene and ethylene. The new plant will have a capacity of 400,000 tonnes/year.  The LAO plant will be ExxonMobil's first, and it will have a capacity of 350,000 tonnes/year.  The LAO plant will produce 10 products, the company said in October 2022. More than half of the nameplate capacity of the LAO plant will likely be for captive use, the company said at the time.  The rest will be marketed externally under the ELEVEXX brand name, marking ExxonMobil's entry into the LAO market.  LAOs are used in plastic packaging, surfactants and other specialty chemicals. They are also used to make polyalphaolefins (PAOs), which are used to make synthetic lubricants.  During the first quarter, ExxonMobil completed the expansion of its refinery in Beaumont, Texas, adding 250,000 bbl/day of crude processing capacity. The expansion project raised the total processing capacity of the refinery to more than 630,000 bbl/day, making it one of the largest refineries in the US.

Big in Texas

Stepan released Q1 results in April. Stepan’s Q1 operating income fell nearly 67% year on year to $21m as sales volumes in the surfactants and polymers segments fell amid softening demand, the US-based chemicals company reported.  Also hurting results were delays in the startup of new low 1,4 dioxane production assets and continued customer and channel destocking, the company said.

Stepan, three months ended 31 March 2023:

(in thousand $)Q1 2023Q1 2022 +/- %Net sales651,436675,276-3.5%Costs of sales577,876566,0572.1%Gross profit73,560109,219-32.6%Operating expenses52,34645,82114.2%Operating income21,05763,346-66.8%Net income16,14244,809-64.0%

• Surfactant operating income fell to $27.1m, from $53.8m in Q1 2022, primarily due to a 13% decline in global sales volume;

• Polymer operating income was $10.0m, down from $14.1m in Q1 2022, primarily due to an 18% decline in global sales volume, including a 19% volume decline in rigid polyols and lower demand in the specialty polyols and phthalic anhydride businesses.

“Looking forward, we believe second quarter volumes will remain depressed as markets continue to reconcile forward demand with inventory levels throughout the channel,” said CEO Scott Behrens.  “We expect second half year over year volume growth driven by modest recovery in demand for rigid polyols, growth in surfactant volumes associated with new contracted business, and a low comparable base," he said.

The Asian linear alkylbenzene (LAB) market was bolstered in April by elevated upstream sectors, with suppliers keen to achieve higher values in a bid to maintain workable margins.

• Suppliers push for higher offers on increased upstream market

• Demand in Asia and India remains slow

• Weak economic outlook dampens sentiment

While suppliers pushed for higher numbers in recent weeks, they conceded that demand remains weak with buyers slow to increase buying indications.  Nonetheless, sellers continue to push for higher numbers as current margins remain narrow. Elevated crude oil markets have propped up upstream sectors such as benzene, which has crimped margins of LAB makers.  “We have to try to achieve better prices as feedstock costs have increased,” said a producer in northeast Asia.  Spot prices of LAB in southeast Asia have declined under $1,600/tonne CFR (cost & freight) SE (southeast) Asia in March, from the low-$1,600s/tonne CFR SE Asia previously, ICIS data showed.

The Chinese market slowed down in April with sales volume tapering off. Producers in China conceded that the market is currently in a lull season but constrained supply from maintenance at a plant and persistent output issues at another help keep the domestic market prices stable.

Continued downtrend

Over in India, with the implementation of the certification of producers selling into the subcontinent by the Bureau of Industry Standards (BIS) in the first half of April, spot imports into the country have dwindled as only a handful of producers have obtained the certification so far.  However, the import market and domestic market of India remain stable with buying momentum still weak. Some participants believed that the ample stocks in the country still needed to be digested before the market could firm.

“It will take some weeks before inventories draw down sufficiently to engender renewed demand,” said a trader in India.  With the key India market out of bounds for some still without the necessary certification, cargoes from these sellers were directed to other markets in south Asia such as Pakistan and Bangladesh. Others also pivoted to Africa to move some volumes but demand in these areas appear largely tepid, while buyers continue to ask for low numbers.

And so finally, Alcohols – the great hydrophobe; the US market as reported by Lucas Hall. Q2 fatty alcohols contractswere assessed mixed from Q1, tracking mixed feedstock and supply/demand fundamentals.

• Q2 contracts settle mixed from Q1

• Mid-cut contracts edge higher with PKO but volume limited

• Long-chain contracts drop on supply imbalance, lower freights

• Wilmar declares force majeure on fatty alcohols after mechanical failure in Rotterdam

Q2 mid-cut alcohols contracts increased slightly from Q1, tracking higher feedstock palm kernel oil (PKO) costs. Long supply and below-average demand alongside continued macroeconomic concerns globally offset the upward pressure, including in the core consumer cleaning segment.

Convergence

Q2 long-chain alcohols contracts extended their losses from Q1 as a return to more historical container freight costs alongside supply chain imbalances put downward pressure on the wider market. Long-chain markets are segmented, based on shipping capability and the feedstock used to produce the material. C16-18 contracts largely fell, owing to the length in the C16 market. C16 contracts plunged on the high end, tracking long supply in the wider market. C18 contracts fell at varying degrees, depending on supply and shipping capabilities.  Only a handful of suppliers of long-chain material ship material in bulk. Others ship in containers, so a drop in container freights puts downward pressure on the wider bulk market. PKO produces far less long-chain material than crude palm oil (CPO) and other feedstocks like rapeseed and mustard seed.  Sasol said it is progressing through the restart process of the offline section of its plant in Lake Charles, Louisiana, after a 15 October fire damaged the facility. The plant previously restarted production at 50% during November, as the fire impacted an area of the site in which Sasol has redundancies.  The outage and force majeure at Wilmar's European facility is not expected to impact US availability given the prevailing supply length in the market.

Q2 contract ranges*

ProductPrice (cents/lb)INCOLocationC12-C1575-87DELUSGC1690-105DELUSGC18120-140DELUSGC16-18120-140DELUSG

*The prices in the table represent a range of settlements for standard balance material heard throughout the quarter for the majority of market participants. Prices heard outside those listed in the table were excluded from the quarterly assessment as they were not viewed as representative of the wider market.

For mid-cut alcohols, the low end largely represents synthetic material and the high end natural material.

Not necessarily the norm

Mass balance premiums were largely heard in the 10.0-13.5 cents/lb range.

Demand concerns continue to put downward pressure on premiums in the short-to-medium term.  Increased consumer demand for sustainable material supports long-term demand.  The US is a major net-importer of natural fatty alcohols and a key production region for synthetic alcohols.  The key end-use for mid-cut alcohols is surfactants. This class of chemical products comprise numerous cleaning and detergent uses, ranging from household agents to oilfield applications.

And the music section:

I played a snippet of this at the conference. Here's the whole thing, recorded before the album came out. Has to be one of the greatest versions of the iconic song. Bill Ward's drumming is ridiculous! Do you think these four 20 / 21 year olds imagined that in over 50 years time, this song would remain as intensely relevant as it was back then?

I get three different reactions to the music here and at the conferences: i) "Great. I love it. Keep it up" - O ye of impeccable taste, thanks. ii) "Ugh how much of this do we have to sit through to get to the actual information" - Well, erm, you have to eat your vegetables first. iii) "I like some of that different stuff, like choral music that you worked in there" - Maybe you're being polite but this is for you. ..

Apparently, YouTube informs me, there is a whole genre of stairwell singing. Think about it. Have you ever done that? Here's some amazing examples of stairwell paens to the BVM.

And a quartet with the same song. Wow! Right?

This lady doesn't have the greatest voice but I love the way she just launches into the chant as she walks up the stairs and gets a shooutout from a fellow stairwell traveler.

Gotta be one of my favorite prayers. Clocking in at easily under a minute, it's a sort of safety in numbers prayer. Pray for us siners Not just me. But you know, all those other guys as well. I'm not the only one sinning here. When? Uh now, would be good. And when else ? Er well, at the hour of our death would cover it. Ora pro nobis peccatoribus, nunc et in hora mortis nostrae amen. Give it a shot next time you're heading up to the 3rd floor of a parking garage.!

Surfactants Monthly – May (and a chunk of June) 2023

Greetings from Rome! Welcome to our CESIO edition. If you’re looking for a summary of the presentations and discussions at CESIO, sorry, we don’t do that here. You should have bought a ticket and shown up. It was an outstanding event, well produced and organized. Kudos to CESIO president, Tony Gough. Alex, Chantal and the rest of the team.

I’ll tell you about my experience there if you’re interested. I had the usual crazy title for my talk and once again the organizers kindly indulged me with a speaking slot to kick off the business track on Wednesday morning. Dinosaur eats Unicorn was the paper title that got folks in the room at 8.30AM after a late night prior at the gala dinner. Session chair, Felix Mueller, reminded me that he introduced me on my first occasion as a CESIO speaker in 2011. He also reminded the audience that, according to my last talk in Munich, 2019, I was friends with Debbie Harry (Blondie) and that my talks are invariably interesting, thought provoking and entertaining. So.. no pressure then. We kicked off with a snippet of Blue Öyster Cult (Godzilla – Dinosaur – geddit?) to ramp up the dopamine in the room and then got right into it. I won’t give you the whole talk here, because, again, you shoulda been there, but I’ll tell you that an early shock for the audience was the revelation that unicorns  are mythical and in fact do not exist. Nonetheless, they got a good sense of how, P2, as a venture-backed startup was navigating the so-called valley of death with the aid of several large dinosaur companions. Fun stuff.  

Dinosaur on way to meeting with Unicorn

So – next section – the news. If you’re only here for the music, that’s all the way down at the bottom.

The News

So – as noted in prior blogs: Biomass Balance is all over the surfacants and ingredients industry. Simply; taking in a renewable feed to your cracker, instead of taking in oil or gas, is a de-fossilization (de-carbonization) of the supply chain more or less proportional to the mass of oil or gas input displaced by the renewable input. Nothing wrong with that right? The Balance part of it comes when you allocate a certain part of the input against a certain product output from the downstream chain that is sold to a certain customer. That customer then is seucre in the knowledge that his purchase of the product has caused a certain proportional mass of renewable input to be used and thus brought about real, measurable and traceable de-carbonization. Nice.

Getting the Good Stuff in the Front End

My other favorite publication (other than ICIS News of course, my partners and collaborators in conferences, blog and whatnot) is Cosmetics & Toiletries. They had this to say recently about a new entrant to the biosurfactants field. :

Indorama Ventures has unveiled Surfonic Bio, a line of biosurfactants that offers low toxicity, mildness and biodegradability benefits and is obtained by a sustainable process.According to the company, the line synergizes with other classes of surfactants and can be used as a primary or secondary surfactant in formulations. The Surfonic line contains specialty wetting agents, emulsifiers and dispersants.

Applications of products in the line, including Surfonic Bio 5000 (INCI: Not Provided) include:

• Facial cleansers, makeup removal, anti-acne products;

• Shower gel, liquid soaps and intimate hygiene soaps;

• Moisturizing skin care products; and

• Shampoos, conditioners, scalp care and deodorants products.

So, there you have it. No word on if another company is making the products. If readers know, then please get in touch.

It’s been a while since we had news from Unilever, once the tussle with Nelson Peltz was settled. Now, however we learn that they have a new CEO, Hein Schumacher. The UL website has the following to say about him:

Hein Schumacher was appointed as a Non-Executive Director of Unilever PLC in June 2022 and his appointment took effect in October 2022.Hein was announced as CEO of Unilever in January 2023, and he will take on the role on 1 July 2023. Hein is a global business leader with an excellent track record in the consumer goods industry. He was CEO of Royal FrieslandCampina, an €11bn business operating in over 40 countries – and with products sold in over 100 - from January 2018 to May 2023. During that time, Hein delivered significant portfolio and organisation change as part of transforming it into a more focused, growth-driven and sustainable business. Prior to his appointment as CEO, Hein was Royal Friesland Campinas’s Chief Financial Officer for three years.

Prior to joining Royal FrieslandCampina, Hein worked for H.J. Heinz for over a decade. In 2008 he was appointed Chief Strategy Officer, before moving to Heinz China in 2011 as its President and CEO. In 2013, he was appointed Executive Vice President of Kraft Heinz’s Asia Pacific Zone and led a successful turnaround of the business, which spanned China, Indonesia, India, Japan and Oceania. Earlier in his career, Hein worked in finance as Corporate Controller, Asia and Central America for Royal Ahold NV. He began his career at Unilever. Hein also has previous board experience, having served as Supervisory Board member of C&A AG up to October 2022. Hein holds a Masters degree in Political Science and International Relations from University of Amsterdam.

He is married, with three children. OK, so not a bad resume.

Shall we take advantage of this UL news, to feature one more photograph of Nicola Peltz, apple of UL gadfly Nelson’s eye? Yes, we shall.  Here courtesy of Tatler, in garb somewhat in the theme of the first part of our music section below..

Late 60's ... 70's....?

News from BASF regarding APG’s. You may remember at our 2022 Jersey City conference, the company touted the many benefits of this class of compounds, in a bit of a re-launth talk. Now comes the investment news excerpted below, from a press release the company sent to me recently.

BASF will expand its global alkyl polyglucosides production capacity with two expansions at its sites in Bangpakong, Thailand, and Cincinnati, Ohio. By expanding in two regions in parallel, BASF, the global market leader for APGs, can strengthen its position and serve customers even faster and more flexible from the regional supply points, while at the same time reducing cross-regional volume flows. The additional capacities are expected to come on stream in 2025. “With this investment, we will solidify our position as a leading supplier of APGs in all relevant industries”, said Mary Kurian, President Care Chemicals. “Both our customers and consumers around the world are aware of the importance of sustainable formulations. At BASF, we are committed to providing sustainable products with strong performance. This expansion will enable the future of bio-based and biodegradable surfactants worldwide by offering diverse applications for personal care and home care, as well as industrial and institutional cleaning and industrial formulations.”

“As the sole producer of APGs in North America, this expansion demonstrates our unwavering commitment to deliver innovative bio-based and biodegradable surfactants to our customers”, said Marcelo Lu, Senior Vice President, Care Chemicals, North America. “With this additional capacity we stand ready to help customers reformulate and meet the increasing consumer and regulatory demand for more sustainable solutions across the Care Chemicals portfolio.”

“The Bangpakong site in Thailand is an important production hub for BASF in Asia already. This new APG line, together with our existing APG plant in Jinshan, China, will enable short delivery times and business continuity for our customers to support the growth and the increasing consumer demand for bio-based surfactants across the continent”, said Agus Ciputra, Senior Vice President, Care Chemicals, Asia Pacific.

BASF currently produces APGs in Duesseldorf, Germany; Cincinnati, Ohio; and Jinshan, China. The investment to expand regional production capacities in Asia and North America is triggered by a growing global demand and complements the existing facilities.

[No word on the capacity; so maybe I should guess? My dim recollection is that the original Cincinnati capacity for APG was about 25,000 MT per year and this was subsequently replicated at two other sites, one in Dusseldorf and one in Jinshan, China. My guess then is that maybe they will add another 25,000 MT in Thailand and perhaps a 10,000 MT expansion in Cincinatti? A complete guess, which, if wrong, perhaps someone can correct me?]

Big in Thailand

Our friends at Galaxy Surfactants in India published recent financial results:  They posted net profit of Rs. 90.53 crores for the period ended March 31, 2023 as against net profit of Rs. 106.21 crores for the period ended December 31, 2022. The company posted net profit of Rs.98.40 crores for the period ended March 31, 2022. The company has reported total income of Rs. 981.50 crores during the period ended March 31, 2023 as compared to Rs. 1084 crores during the period ended December 31, 2022. Galaxy Surfactants reported total income of Rs.1054.13 crores during the period ended March 31, 2022. For the Financial Year ended March 31, 2023, Galaxy Surfactants has reported total income of Rs.4455.09 crores as compared to Rs.3698.22 crores during the Financial Year ended March 31, 2022. The company has posted net profit of Rs.380.98 crores for the Financial Year ended March 31, 2023 as against net profit of Rs.262.78 crores for the Financial Year ended March 31, 2022.

And just as CESIO kicked off, ICIS reported that - - starting this quarter, BASF is gradually bringing additional alkoxylation capacity on stream at Antwerp, Belgium, and Ludwigshafen, Germany, to meet growing demand in Europe. The capacity increase, totalling more than 150,000 tonnes/year, is mostly part of the expansion of BASF’s ethylene oxide (EO) and EO derivatives capacity at Antwerp, announced back in 2019.  In addition to alkoxylation, the expansion includes a second world-scale EO production line, including purified EO capacity.  "With this expansion, we are strengthening our position in Europe and opening up important growth opportunities in the European market through a wide range of applications such as in the detergents and cleaners, automotive and construction industries," said Mary Kurian, president, Care Chemicals, at BASF.  Financial details were not disclosed.

[Given market conditions, I would say this is needed]

BASF bulks up in EODs

US May ethylene oxide (EO) contracts were assessed at 55.75-57.75 cents/lb ($1,229.06-1,273.16/tonne) end of May as upstream ethylene contracts continue to fall.

EO contract prices have declined for seven consecutive months, tracking an ongoing decline in ethylene contract prices as a result of lower production costs and spot prices. This is the lowest ethylene contract price since November 2020.  Demand for EO and its derivatives continues to be weak as rising recession fears and ongoing elevated interest rates continue to deter discretionary spending. Additionally, consumers are spending more money on experiences, like travel, rather than on durable goods.

Weak - ish

As expected, Swiss-based Clariant announced it has completed the sale of its global Quats business to Global Amines Company Pte Ltd.  The agreement will be a 50/50 joint venture owned by Clariant and Asia's Wilmar.  The transaction was signed 31 August 2022, and the sale of the business includes certain assets in Germany, Indonesia and Brazil.  Quats are quaternary ammonium compounds, chemicals used for purposes including as preservatives, surfactants and as antistatic agents. Quats are used in a wide range of commercial, industrial and consumer products.

This happened

Similarly ICIS reports that, European ethylene oxide (EO) contract prices fall by double-digits in June, on the back of ethylene losses upstream. EO June contract prices were assessed at a €66/tonne decrease on both ends of the range, bringing prices to €1,383/tonne-1,521/tonne free delivered (FD) northwest Europe (NWE).

Much Weaker..

The European ethylene contract reference price for June has been set at €1,160/tonne, down €80/tonne from May. Upstream EO prices fell because of naphtha losses and continued low demand  Demand remains low for EO derivatives as it failed to pick up as market sources hoped last month.  Nonetheless, the pricing relief is likely to be welcome news for consumers particularly. Additionally, gas prices have also fallen to pre-war levels.

Meanwhile in Turkey, Univar Solutions has completed its previously announced acquisition of Turkish specialty chemicals distributor Kale Kimya, the global chemical and ingredients distributor said in an update on Thursday. Istanbul-based Kale Kimya offers a portfolio of beauty and personal care products, and home and industrial cleaning products, including surfactants, actives, emulsifiers, preservatives, UV filters, fragrances, polymers, conditioners, esters and emollients. The acquisition price or other financial terms were not disclosed.

More market weakness: ICIS notes that the Asian linear alkylbenzene (LAB) market remains weak with demand still in a low ebb. Buyers continue to expect further weakness in the near term and have pegged buying indications at a low level.

• Chinese domestic market declines

• Demand continues to sag

• Buyers expect weaker prices on raw material cost decline

The decline in Chinese domestic prices to yuan (CNY) 11,900/tonne DEL (delivered) this week, from CNY12,200/tonne DEL previously further dented sentiment across Asia.

“The Chinese LAB market looks likely to remain weak in June,” said a producer in China.  Participants in Asia continue to expect a potential increase in Chinese exports should demand in the mainland fail to revive.  Chinese suppliers have reduced export offers but lamented the weak buying interest in the region. Offers for spot cargoes were quoted at $1,450-1,500/tonne FOB (free on board) China but response from customers was lukewarm.  Some buyers pegged buying ideas at around $1,450/tonne CFR (cost & freight) NE (northeast) Asia but sellers thought these prices too low, given the narrow margins they are experiencing now. LAB is an organic compound used almost wholly as an intermediate in the production of surfactant linear alkylbenzene sulphonate (LAS), also known as linear alkylbenzene sulphonic acid (LABSA). LAB’s main end market is the biodegradable detergents and other cleaners.  In Southeast Asia, demand was also lacklutre with buyers citing low buying indications at under $1,500/tonne CFR SE (southeast) Asia.  The recent availability of European lots at competitive prices took the wind out of the sails for the LAB market. Buyers started to ask for lower numbers, thwarting suppliers' attempts to sell material at around $1,550/tonne CFR SE Asia.

“Buyers’ sentiment is soft and they believe the market will grow weaker and hence their reluctance to buy,” said a trader in SE Asia.  At the same time, the decline in raw material costs further dampened sentiment of players, with buyers pressing for even lower numbers for LAB.  The wide buy-sell gap hampered trade although some sellers did lower offers in a bid to draw customers forward. Buyers, however, remain unconvinced and kept to the sidelines.  Some sellers believe that buyers will continue to wait for the market to bottom out before stepping back in to pick up material.

Weaker still...

Good news from Sasol. They lifted their force majeure on US linear alcohols and linear alcohol-based surfactants on 1 June.  Sasol will maintain a sales control on some alcohol homologs until inventories are fully restored.  Sasol declared force majeure on US Ziegler alcohols and derivatives following a 15 October fire at its US Lake Charles, Louisiana, plant. The company restarted production at 50% during November, as the fire impacted an area of the plant in which Sasol has redundancies.

Recovery in Louisiana

Finally, In other Sasol news, this interesting article was published about their ventures group collaboration with Emerald Ventures. Worth a read as it’s relevant to their activities with Holiferm in Manchester.

The Music

If you’re new to the blog, this part comes at no-extra-charge and is completely voluntary reading and listening. On those rare occasions where a piece of music is compulsory listening for blog readers, it will be placed at the top, above the news section.

So, I’ve been impressed with both the quality and quantity of the output of French instrumental psychedelic group, King Weed. The album art (as it were) is redolent of a certain early 70’s ambience and is of a piece with the music, together pleasing two out of five senses. I found these guys, again, courtesy of the ever-helpful Youtube algorithm.

Come down this rabbit hole with me:

There is a lot more from them on the Tube. Let me know what you think..

Separately, I’ve been listening to a lot of Robin Trower. Great British blues guitarist. I remember, getting up early to watch Saturday morning re-runs of the Old Grey Whistle Test, back in England, which invariably featured interesting music, like this:

Is that not the absolute definition of a blues riff? Not sure what else to say..

And this

And this – the great Day of the Eagle

And then, I can’t wait much longer. Is there a more quintessential heavy rock blues song than this ? Two luscious guitar solos. Lyrics to break the hardest of hearts.

Lets’ end up with something a little more upbeat. One of our CESIO colleagues mentioned his fondness for The Stranglers and so this track I think is appropriate as it could indeed have been a soundtrack for the conference itself. I always liked the bit at the end. What was I hoping would change in 1977? Probably nothing more the endless pressure of O levels and A levels and tests and exams and such. Some revolutionary!

I really have to go now. This blog’s late enough already. If you are not satisfied with our service this summer, you can get in touch with your customer service representative and ask for a refund of your blog subscription price……

Until next month.  

Surfactants Monthly – June 2023

My first American fireworks: Princeton, NJ, July 4th 1985. We sit on the bonnet (hood) of the car, leaning back on the windscreen (windshield) looking up, waiting for something to happen. A crummy high-school band starts up and a choir or whatever gets going – Oh-oh say can you see, by the dawn’s early light. Makes no sense. Apparently the Yanks have an even more boring national anthem than we do. What so proudly we hailed at the twilight’s last.. More nonsense. How much of this do we have to sit through before the fireworks? Whose broad stripes and bright stars. Good grief. This is bollocks. Shoulda brought more beer. O’er the ramparts.. Ramparts eh.. there’s that wine in the boot but it’s probably warm by now – anyway it’s a work day tomorrow, flying out 6AM so.. better just make this one last.

And the rockets’ red glaaaaare… BOOM BOOM WHOOSH.. Wow ****! The bombs bursting in aaaiiiiirr… BANG, BANG, B A N G Bloody ******’ ‘ell… BANG ! Now that’s fireworks, baby!

“Is that the national anthem?”

“Er.. yeah..”

“Oh – Frickin’ Wild. Is it always like this?”

“Erm .. yeah, well on July 4th.. you don’t have fireworks in England?”

“It’s not really the same”

The aerial assault continues and the band with choir also continues, albeit inaudibly and the home of the brave. Martial mayhem for ten more minutes to the delight of the assembled citizens. Finish the can. A few more lungfuls of gunpowder smoke and then back inside the car and we’re off home. A bloody crazy country. Their national anthem is literally a reenactment of a rocket attack – with actual rockets and bombs. And everyone loves it. Makes God Save the Queen seem a little… timid maybe?  I get to learn later that the folks doing the attacking with the rockets that is commemorated each year, were the Brits, in 1812. A bit embarrassing really, but no-one seems to care. All water under the bridge ‘n all.

So to the present day and July 4th is still a little scary, honestly. Eardrums calloused from an early age by repeated exposure to heavy metal still get a shock from the bombs bursting in air. Even the reading of the declaration calls to mind the violence behind the founding of a modern, civilized society. The signers pledged to each other their lives, fortunes and sacred honor and that was no empty phrase. They were playing for keeps. Are we..?

Bursting in Air

Now to the News:

Thanks and appreciation to the great ICIS, from whom most of this news is abstracted. I encourage my readers to subscribe, like I do. Each subscriber from this blog earns me precisely nothing, but I think it will earn you some good market insights. End of commercial.

One of our regular readers, kindly brought to my attention that I failed to mention the Croda profit warning (the first in a long long while) in last month’s blog. My excuse hinged around the fact that the blog was late anyway and so.. and so on June 9th Croda issued something cutely named a Trading Update (gotta remember that) which copped to sales being off by double digit percent in the first 5 months of ’23. This due to customers de-stocking after building up huge inventories. Morningstar went on to note that Croda CRDA shares were down around 12%-15% intraday, June 9th after the company released a profit warning due to unexpected customer destocking. Referencing the first five months of the fiscal year, volumes in consumer care were down by double digits. In life sciences, the crop protection business was described as now experiencing rapid customer destocking plus the mix is weaker compared with the prior-year period due to lower sales for COVID-19 applications. Destocking is expected to continue in the second half of the year whereas the company was previously expecting a stronger demand environment in that period. Consequently, fiscal 2023 profit before tax is now expected to be between GBP 370 million and GBP 400 million, well below company-compiled consensus of GBP 452 million. Morningstar noted that they have been more bearish than consensus for quite some time and were already forecasting 2023 profit before tax of GBP 397 million. Croda shares have been overvalued for years in their opinion, especially during the pandemic due to rapid growth in its business supporting the COVID-19 vaccines. [hmm ok – so there you have it. Reversion to the mean maybe?]

Inevitable Reversion to the Mean (I hope you get this one..)

Interestingly, a few other companies have followed suit. For Example as reported by ICIS, Ashland issued a profit warning for its upcoming fiscal third-quarter earnings also because of customer destocking.  Ashland's fiscal third quarter runs through June.  It expects Q3 sales to be $545m-550m, down 15% year on year. Sales fell for all of the company's segments. Ashland attributed the declines to rapid customer destocking, which caused volumes to drop. The decrease was partially offset by favourable pricing.  Ashland expects to report $130m-135m in Q3 adjusted earnings before interest, tax, depreciation and amortisation (EBITDA), down 22-25% year on year.  It attributed the decline to much lower sales volumes and reduced cost absorption from the steps the company took to control inventories. Those internal inventory-control measures resulted in $15m of reduced cost absorption, Ashland said.

Over in Asia, ICIS’ great Helen Yan reports that Asia’s fatty alcohols market is expected to remain tepid in Q3 because of the slump in demand from the EU and a weak global macro-economic environment.

• Inflation woes and  recession fears to weigh on demand

• Uncertainties to cloud Q3 outlook, buyers remain cautious

• Purchases mostly on hand-to-mouth basis, few bulk enquiries

Demand from Europe has slumped due to the recession in the Eurozone economies.

Inflation woes and recession amid the prolonged Ukraine-Russia conflict have derailed the global economy and weighed on demand, market sources said.  “We are getting fewer enquiries for July-August shipments from the EU,  with enquiries down about 50% from the usual purchasing volumes,” a regional fatty alcohols producer said.

“We used to export in bulk but purchases are now mostly on a hand-to-mouth basis for smaller isotank parcels,” he added.  Buyers have been adopting a cautious and prudent stance in view of the uncertain and gloomy outlook amid the ongoing geopolitical tensions between China and the US, the two largest economies in the world, market sources said.  Several fatty alcohols producers in southeast Asia have been grappling with shrinking demand by running their plants at reduced rates of 70-80% capacity.

Downward demand and pricing

Despite the slump in EU demand, there are expectations that demand in Asia may rebound in Q4.  “The EU demand is still not back yet, but we continue to get enquiries from China, India, Japan, South Korea, Vietnam and the US,” another supplier said.

A little further downstream, Asia’s fatty alcohol ethoxylates (FAE) demand is expected to remain tepid in the near term as buyers continue to adopt a cautious stance amid weak macroeconomics and eroded consumer confidence.

• Buyers cautious and purchase mostly on need-to basis

• Consumer confidence eroded by weak macroeconomics

• Falling feedstock fatty alcohols mid-cuts C12-14 curb demand

Enquiries were few and far between for fresh spot shipments, with the buyers mostly adequately covered by term shipments.  Spot trades, if any, were mostly confined to smaller parcels on a need-to basis.  “Demand is slow as buyers are cautious and holding back any large forward spot shipments, given the bearish market sentiment and uncertainties,” a supplier said.  Buyers were closely monitoring the feedstock fatty alcohols mid-cuts C12-14 and ethylene oxide (EO) markets.  The feedstock fatty alcohols mid-cuts C12-14 prices had continued to fall, down by about $100/tonne from the previous month. Similarly, the other feedstock EO price had remained soft despite limited spot availability.  A regional 136,000 tonne/year EO plant had been shut since February and is only expected to resume production in early July.

Now that is soft pricing!

Meanwhile, the rebound in the Chinese market had been slower than expected despite its borders reopening in early January this year following a near three-year pandemic-induced lockdown restrictions.  China's total exports in May dropped by 7.5% year on year to around $283.5bn, according to the nation’s official preliminary data released on Wednesday, 7 June.  Meanwhile, the eurozone is now in recession as GDP in the first quarter was weaker than initial data suggested, according to the latest release from the EU’s statistical agency Eurostat on Thursday, 8 June.

Softer in Europe

ICIS’ Nurluqman Suratman reports on dealmaking in the world of LAB. Saudi Arabia’s Farabi Petrochemicals Co has acquired a 50% stake in China’s Great Orient Chemical Taicang (GOCT) for an undisclosed amount.  Farabi, the world’s leading linear alkylbenene (LAB) producer, is acquiring the stake from South Korea’s specialty chemical maker ISU Chemical Co, according to an official statement sent to ICIS.  On 16 June, Farabi signed in Singapore a share purchase agreement with ISU, and a new shareholders’ agreement with GOCT and Trevose International - a subsidiary of Indonesian conglomerate Salim Group. Trevose International is an investment holding company based in Singapore which will retain its 50% in GOCT.  GOCT has an annual output of around 100,000 tonnes of LAB, according to the ICIS Supply & Demand Database.  “I am confident that Farabi Petrochemicals and SALIM group will present a great fit,” Farabi Group CEO Mohammed Al-Wadaey said.  The new JV will retain GOCT’s existing partnerships and agreements with suppliers and customers.

Farabi has a total of 320,000 tonne/year LAB capacity at two sites in Saudi Arabia - a 200,000 tonne/year plant in Al Jubail and a 120,000 tonne/year plant in Yanbu, ICIS data show.  South Korea’s ISU Chemical, on the other hand, has a smaller LAB capacity of 180,000 tonnes/year at its Ulsan complex, the data show.  The new partnership of Farabi and Salim Group aims to capitalise on the synergistic strengths of Farabi as a major supplier of n-paraffin, a major feedstock consumed by GOCT.

High Stakes in LAB World

Asia’s LAB market remains under downward pressure because of persisting weak demand. China and southeast Asia are major markets for LAB.  “The Chinese domestic market equilibrium could be impacted with a major Middle Eastern producer now having access to it,” said a LAB producer in China.  The Chinese market has been dominated by domestic Chinese makers Fushun Petrochemical, Jinling Petrochemical and Jintung Petrochemical.  With competitively priced feedstock n-paraffin from the Middle East, some Chinese players anticipate that GOCT might be able to out compete domestic producers with the feedstock advantage.  At the same time, GOCT would be able to tap into the Salim Group’s network in southeast Asia should the company chooses to compete there.  Other advantages perceived by Chinese players for Farabi include earnings in the Chinese yuan  (CNY) from LAB sales that it could utilize to settle trades with other Chinese entities.

Staying with Asia LAB: The linear alkylbenzene (LAB) market in Asia remains under downward pressure from persisting weak demand.  Suppliers in Asia and China concede that buying momentum remains weak with some mulling lower offers to keep buyers engaged.  In the week ended 14 June, the Chinese domestic market hovered around yuan (CNY) 11,900/tonne DEL (delivered), but sellers concede that with demand in a low ebb, the local market remains under downward pressure which could see further price slippages in July.  The weak domestic market has also prompted Chinese suppliers to look towards export destinations but these locations are similarly mired in weakness.  “The east and south Asian destinations are all seeing poor demand and prices are not attractive,” said a producer in China.  In the week ended 14 June, spot prices in southeast Asia slipped under $1,500/tonne CFR (cost & freight) SE (southeast) Asia, to as low as $1,450/tonne CFR SE Asia, ICIS data showed.  However, buyers lobbied for even lower prices as supply in the region remains ample but sellers are hesitant to dish out further discounts amid narrow margins.  “Buyers kept seeking lower numbers but we decided to withdraw as margins are bad,” said a trader in Asia.

Uncertain economic outlook continues to weigh on sentiment, prompting buyers to be unhurried. At the same time, the recent weak performance in upstream markets such as benzene also fueled expectations of lower LAB prices among buyers.  Spot benzene prices in Asia fell under $800/tonne FOB (free on board) Korea in June from the recent peak of $1,020/tonne FOB Korea in mid April.  “The weak upstream markets [are] unable to bolster LAB markets in India and Asia,” said a trader in the Middle East.

Weak upstream and down

And in India: The linear alkylbenzene (LAB) domestic market in India remains under downward pressure with no pickup in demand.  Suppliers cited June offers in the mid-to-high rupees (Rs) 130s/kg ex-tank but buying indications remain under Rs130/kg ex-tank.  Spot deals were heard around Rs125-126/kg ex-tank, according to several sources in the trade. Prices were trading largely in the mid-Rs130s/kg ex-tank in May.

Similar Story

“The summer demand this year has been a letdown,” said a trader in India.  May and June are typically strong months for LAB in India with demand petering out from July onwards.  Despite the implementation of a certification program for suppliers of LAB into India by the Bureau of Indian Standards (BIS) in April, the market remains under downward pressure from soft demand.  This is despite seeing less imports as those suppliers without the certification were unable to sell into the subcontinent.  On the import front, prices were similarly under downward pressure with buying indications heard lower each week. Some suppliers caved in and dished out discounts to keep buyers engaged.  However, deals remain limited as buyers continue to lower buying indications resulting in a buy-sell gap.  Offers of spot material were in the $1,400s/tonne CFR India but buying indications have slipped to $1,300s/tonne CFR India.

“A supplier in the Middle East has offered in the low $1,400s/tonne CFR India but buyers are thinking under $1,400/tonne CFR India,” said a buyer in India.

Meanwhile in Europe, fatty alcohols Q3 contract prices face downward pressure due to lacklustre demand being surpassed by healthy supply.  Healthy domestic stock levels, competitive imports from Asia, low demand and falling palm kernel oil (PKO) values have all contributed to market weakness for fatty alcohols in late-Q2.  Q3 contract discussions are still in their early stages, largely due to limited buying interest and expectations that prices could fall further in the coming weeks.  So far, price ideas for Q3 have been heard at triple-digit decreases versus Q2.  Demand over the summer is likely to be reduced due to seasonal shutdowns downstream.  The downstream ethoxylates market so far shows no signs of increased demand for the second half (H2) of the year. More progress in the negotiations is expected in late-June and early-July.

No sign of increased demand

Finally, news from Solvay. Remember a while back we reported the company was splitting up into 2 parts, and I got ChatGPT to write a clever analysis, which readers far preferred to the regular blog. So we’ve fired ChatGPT and replaced it with a human, who are generally more expensive but less annoying. Anyhow, we now hear from ICIS that Solvay announced the name of its specialties spin-off business on Friday.

Its commodities business, referred to as EssentialCo [I kinda liked that name] since the split was first announced, will remain as Solvay, while the specialties segment (‘SpecialtyCo’) will now be called SYENSQO.

Completion of the separation of the two business units is expected in December 2023, subject to satisfactory conditions. Solvay will comprise the mono-technology businesses including soda ash, peroxides, silica, solvents and rare earths, which generated €5.6bn in net sales in 2022.  SYENSQO will cover specialty polymers, composites, surfactants, aroma, technology solutions, and oil and gas, as well as the four growth platforms in batteries, green hydrogen, thermoplastic composites and renewable materials, and biotechnology.  In 2022, SYNESQO generated net sales of around €7.9bn.  

[So readers, what do you think of the new name? In the interest of journalistic integrity and the vast amounts of money that Solvay pays the blog in advertising and sponsorship, I’ll abstain from comment – I’m kidding ! I have no journalistic integrity… oops, I mean – I have no advertising. I don’t know which is worse.. Anywaywhat do you think of the name?]

Your thoughts..?

And now to Music. I think some patriotic songs are in order don’t you. It is July 4th after all. Let’s get all unselfconscious and hand-on-heart shall we?

Joe Satriani kicks us off..

Madison Rising. I know nothing about them, but this is  nice.

We may have featured this one before, but it never gets old.

Then there’s this one. A lot of people have read a lot into it. The flag was still there.

And apparently this is Florida Man, in what many commenters are saying is the most American thing ever. Hmmm

We like a bit of a capella here at the blog so..

And..Pentatonix

And because we like a bit of stairwell singing…

OK so that’s that. Now, obviously I have issues with the YouTube. Not just the de-platforming of Jordan Peterson but also the deletion of what seem like they would have been fascinating, North Korean propaganda videos. I am quite sure that I could consume both types of fare without rushing out into the streets and setting fire to cars or rubbish bins or whatnot. But despite all that, the algorithm continues to delight, intrigue and educate in the field of music. And, I don’t know about you, but it often seems to be the recommendation about a third of the way down the right hand side that is the real gem. The first 1 or 2 are a bit too obvious but keep going down the list and it starts to get interesting. And so it was that, during the intensive research for this blog, the following morsel was dangled just at the edge of my peripheral vision. Jazz Sabbath. A complete jazz album of Sabbs songs. This is not parody. It is real, in my uneducated opinion, jazz, built on the doom-laden songwriting of Osborne, Iommi, Ward and Butler. At first listen, it’s tricky to pick out the Sabbath riffs, then it hits. Wow. Here’s the album, first and then for comparison a couple of Sabbath originals.

Calls to mind a time a couple of years back, I was holding a meeting offsite at a WeWork type space and the college student running it, after explaining how to work  the coffee machine, leaned in and said,

“you know you can request whatever music you like for us to play in afternoon”

-  and then obviously mistaking me for someone with sophisticated taste -  

“We have all the jazz greats…”

“Well I’m more of a 70’s heavy rock guy, you know”

“Yeah me too.. not allowed to play it though…”

“You’re  a bit young for that  type music aren’t you?”

“Me? No.. all the freaks like Black Sabbath, Judas Priest... I love that stuff”

“Freaks? Don’t sell yourself short.. got any Rush back there..?

“Thelonious Monk. That’s what we have for you, sir..” 😏

“That’s fine. I’m sure one of my colleagues will request it..”

Surfactants Monthly – January 2022

Surfactants Monthly – January 2022

Back In Person

Like many others in our industry, I’ll be marking the end of the pandemic and the beginning of the endemic with a trip to Florida and the American Cleaning Institute Meeting. That may or may not be wishful thinking. Not the going to Florida part. That will have happened as of your reading this. The endemic part. That’s when you stop writing and talking about it except in the historical sense – like “hey do you remember that.. can you believe we were doing … such and such”. Let’s see. By the way, you’ll get no gossip or tittle-tattle from the ACI in this blog. Our motto is, as you know, that “you gotta be there”.  So..

Another place you gotta be is our great ICIS / Neil A Burns LLC World Surfactant Conference, which is back in person in Jersey City, NJ May 9 – 11th. It’s 1.5 day conference and a 1 day optional course. Of course, we also have the great Surfactants Awards for which nominations are now open. After two years of, frankly, unsatisfying meetings over zoom and somewhat nervous get-togethers at various meetings, I am really looking forward to this singular event in the surfactants calendar. I will also add that we have a huge new sponsor that I really can’t say much more about until closer to the time, so that’s enough from me on that. I will say that you should book now. The usual Hyatt venue, although large, has a finite capacity and it looks like we will sell out very quickly. We’ll have some firm favorites speaking and some new and unexpected names. You’ll get information and insights that you just can’t get anywhere else – and the best networking you’ll experience in 2022. You gotta be there, so.. See you there!

We're Back

End of commercial. Beginning of News

Credit for most of the news here goes again to our partners ICIS. Check them out. I’m a subscriber. Maybe you should be too.

A nice piece of news from Locus Performance Ingredients, (Locus PI), well known participants in our conferences. Dow and Locus have struck a deal in which Dow will sell the Locus sophorolipid biosurfactants in global home and personal care markets. The Dow deal sits within the company’s homecare solutions business. Locus PI is part of parent company, Locus Fermentation Solutions. Best of luck to both companies. Teaming up like this, makes a lot of sense.

More biosurfactants news from Evonik, another regular speaker at my conferences.  This courtesy of C&E News: The specialty chemical maker Evonik Industries will spend what it describes as “a three-digit million-euro sum” to build a rhamnolipids plant at its site in Slovakia. Evonik says the plant will be the world’s first commercial-scale facility for the biosurfactant. Rhamnolipids, as readers know, are biodegradable surfactants made via fermentation and feature rhamnose sugar groups with fatty-acid tails. In addition to strong environmental bona fides, rhamnolipids are effective cleaners at lower concentrations than conventional surfactants while being gentler on skin and hair.

Evonik already has customers in mind for the new capacity. “Our initial focus is on applications in personal and home care based on foaming, sensory, and mildness benefits as well as a pressing need to improve the sustainability profile of surfactants in these markets,” the firm says. The investment builds on a partnership between Evonik and the consumer product giant Unilever [about which more at the end of the blog], which launched a dish soap using Evonik’s rhamnolipids in Chile in 2019. Unilever says rhamnolipids are an important part of its push to remove all fossil-derived ingredients from its cleaning products by 2030. Evonik also launched an industrial cleaning ingredient based on rhamnolipids in 2021.

Evonik makes its rhamnolipids by fermenting sugar using a genetically modified Pseudomonas putida bacteria. In February 2021, Stepan bought an idle 20,000 t plant in Louisiana where it plans to make rhamnolipids. The specialty chemical fermenter Jeneil Biotech says it already manufactures rhamnolipids in industrial-sized equipment.

A Next Big Thing

Crazy volatile times in feedstocks, especially oleo. BTW – we’ll have a detailed PhD level explication of all that exclusively at the conference with the legendary Martin Herrington. In the meantime,  ICIS’ Helen Yan reports from Asia that Asia’s fatty alcohols market is likely to find support from elevated upstream crude palm oil (CPO) and palm kernel oil (PKO) values, despite sluggish demand during the Lunar New Year holidays.  Spot offers for the mid-cut C12-14 blend have been revised up to $2,900-3,000/tonne FOB (free on board) southeast (SE) Asia for February and March shipments, due to continued erosion in margins from expensive feedstock PKO costs.

On 19 January 2022, spot prices of C12-14 blend averaged $2,780/tonne FOB SE Asia, up $80/tonne from the previous week, ICIS data showed.

Supported at $2,750 +

“We have no choice but to further increase our offers for the mid-cut C12-14 blend as margins have been severely squeezed from the high raw material costs, with PKO rising to around $2,300/tonne while buyers continue to seek lower prices,” a regional supplier said.  Spot interest has waned due to the upcoming Lunar New Year or Spring Festival holidays.  The Chinese market will shut from 31 January to 6 February for the Spring Festival, but factories have already shut in China in the run-up to the festive holidays.

Market activities in other countries in Asia have also wound down as players have retreated to the sidelines to wait for a clearer outcome post-holidays. South Korea, Indonesia, Malaysia, Singapore and Vietnam also celebrate the Lunar New Year, which falls on 1 February this year.  Demand has also not rebounded as expected due to the economic fallout from the highly infectious Omicron coronavirus variant on the global economy.  Spot appetite for C12-14 has been tepid as the global economic recovery has been hampered by restrictions reinstated to contain the spread of the Omicron coronavirus variant, which emerged in late November 2021.  Lower-than-expected growth in the world’s two largest economies, the US and China, is expected to dent global growth in 2022 sharply, the International Monetary Fund (IMF) said on Tuesday.

Global GDP growth is now expected at 4.4% in 2022, said the IMF, half a percentage point lower than its prior forecast issued in October 2021.  Global GDP growth in 2021 stood at 5.9%.  The IMF, which delayed the publication of its World Economic Outlook by three weeks to assess the impact of the Omicron coronavirus variant, said the world had started the year “in a weaker position” than expected.

By contrast, LAS pricing in South Asia remains weak in line with demand, as reported by ICIS.  In India, domestic LABSA spot market remains at around Indian rupees (Rs) 93/kg, with production staying low. Market participants attributed the low LABSA output to the weak detergent market. “Usually demand for LAB will peak in February, but this year buying interest is very weak,” said a LAB producer in India.  Some participants in this sector cited soaring costs of soda ash in the last quarter for dampening demand of LABSA and detergents.  “Soda ash makes up around 30% with the remainder being LABSA for manufacturing detergents,” said a trader in India.  This resulted in lower demand for detergents as prices (LABSA and soda ash) rose last year. With reduced demand for detergents, there was lower output of LABSA.  Due to weak downstream LABSA market, some local makers of LAB are considering exporting LAB due to an overhang of supply domestically. India is a net importer of LAB.

A rare downtrend in pricing since July

On the other hand, the LABSA/LAS market in Pakistan seems to be faring better with demand overall staying decent, with the spot market for LAB at around $1,700/tonne CFR Pakistan.  Tufail Chemicals, a key LABSA producer in Pakistan, added to its capacity in Q4 2021, bringing its total output to around 110,000 tonnes/year. The company plans to add another line in 2023 with more cargoes available for export.

However, the export destination of SE Asia continues to experience slow demand. The LAS market hovered at around $1,430-1,500/tonne CFR SE Asia, but some participants anticipate some downward pressure if the India market fails to recover in the near term.

“The weak LABSA and LAB market in India is impacting sentiment across the region,” said a producer in northeast Asia.

And another one more markedly so

Back in the US, detergent range alcohol prices follow a familiar trajectory – up – way up.  ICIS’ Lucas Hall reports that bullish feedstock and soaring freight costs against the backdrop of persistent shipping logistics constraints globally continue to underpin US fatty alcohols markets, with demand for multiple fatty alcohols chains continuing to outstrip supply. Short chain C8 and C10 as well as long chain single-cut C18 alcohols are particularly tight, depending on the supplier.  Mid-cut alcohols availability has improved following supply chain disruptions that eased in December.  The majority of these supply chain constraints stem from import disruptions from southeast Asia associated with persistent shipping equipment shortages and tight vessel space against the backdrop of soaring freight costs.  Bullish feedstock costs across the oil palm complex stemming mostly from tighter production in Malaysia because of weather and coronavirus-related labour issues in the country are adding to concerns, with production costs rising faster than producers can pass down increases and forcing some to cut back operating rates.

Steady rises

Tightening availability of mass balance-certified (MB) material in the US because of increased scrutiny against Malaysian-origin material over force labour allegations in the country is also supporting the market, particularly for palm kernel oil (PKO) and PKO-derived material.  Ongoing import bans have heavily increased the demand for MB material outside of Malaysia, supporting premiums in that market.  Rising PKO premiums are sustaining demand for coconut oil (CNO) and CNO-derived material.  Logistics issues also persist in the US, particularly in truck markets, where an ongoing labour shortage is keeping truck availability tight.  Domestic production is insufficient to make up for inconsistent import market, underpinning the wider market.

A reliably volatile folow

Downstream demand remains overall healthy. Demand in the spot market has somewhat waned from 2021 as downstream players increased their contract allotments in an effort to prioritise security of supply.  Demand for mid-cut alcohols in Mexico remains limited because of persistent ethylene oxide (EO) shortages in the country, supporting demand for ethoxylated material instead.

It's been a while since prices this high

An interesting snippet here on the continuing role of private equity in our industry:  US private equity firm OpenGate Capital has acquired Chemsolv, a regional distributor of commodity and specialty chemicals based in Roanoke, Virginia, for an undisclosed sum.  Chemsolv, with distribution centres South Carolina, Tennessee and Virginia, distributes more than 1,000 chemical products to customers in construction, roofing, chemical intermediates, paints and coatings, automotive and other markets.

Its products include solvents, plasticizers, coolants, lubricants, surfactants, diesel exhaust fluid, additives, among many others.  OpenGate acquired Chemsolv from the Austin family.  Glenn Austin founded Chemsolv in 1979, and the family will continue to retain an ownership stake and a role in the company. Regular readers will recall that OpenGate is the investor that bought the, now, Verdant out of Solvay and combined them with Baze and DeForest, last year.

Interestingly, US EO pricing continues to fall. ICIS reports that US December ethylene oxide (EO) contracts fell for the fifth consecutive month, tracking a lower same-month feedstock ethylene settlement.  US December EO fell by 3 cents/lb ($66/tonne).

Feedstock ethylene prices fell due to greater steam cracker production and easing derivative demand. Lower feedstock costs in December hastened this price decline.  As readers know, the majority of EO contracts are formula-based, and price movement comprises 80% of the change in the ethylene price and an additional conversion fee, or adder.

Another downtrend

By contrast, the European picture for EO is a bit different as reported by the hugely talented Melissa Hurley at ICIS. European ethylene oxide (EO) contract market players are awaiting the upstream ethylene contract price settlement for January to inform  formula pricing.  Sellers remain concerned with margin pressure amid continued high energy costs. Stable to double-digit increased adder fees are being discussed for 2022, depending on starting point and account.  Some multiyear EO contracts are also not up for renewal next year so fees are steady in these instances.  According to Alice Casagni, ICIS deputy editor for European Spot Gas Markets, “a tight supply outlook and weather-driven demand will remain the key drivers in control of European natural gas prices in the first half of 2022.”

Not a great time for gas users

High ethylene prices have also dominated the market this year, impacting seller margins.  Downstream demand is mixed depending on sectors, and there was some end-of-year slowdown amid destocking activity.

Feedstock spread - Ethylene and EO Europe

A tight spread means a loose market

Supply was constrained at the end of 2021, but this is expected to improve in January.

There was an unplanned outage at the beginning of December in the Netherlands at Dow's Terneuzen EO facility, which is not expected to be resolved by the end of this year.  Upstream ethylene supply remains balanced-to-tight.  The status of BASF's Antwerp EO and ethylene glycol (EG) facility is also unconfirmed, although glycol sources believe it is back running again at the end of December 2021.  There is a wait-and-see attitude to how demand pans out at the start of 2022.

The peak?

In the downstream monoethylene glycol (MEG) market, there is interest in spot material stemming from the downstream polyethylene terephthalate (PET) market due to good demand.  Most are covered by contractual requirements for the time being but if demand continues to perform well or strengthen, MEG consumption could increase.

PET makers could opt to run production harder, leading to increased interest in the spot market.  For coolants, demand has been impacted by poor automotive industry performance. A buyer added it was covered for material until the end of the year.

There was mention of additives typically used in coolants being placed on allocation from a local European supplier which could impact downstream conditions, depending on how long the situation lasts. This was not confirmed by the company.  There is a planned turnaround  at Lavera, France impacting glycol ethers, according to sources, which is expected to finish by the end 2021. In the ethanolamines market, difficulties concerning the supply chain are widely expected to persist into 2022.  Ethoxylate demand has performed well during the year.

OK – so there’s the main surfactant news. Some interesting things there right? But here’s the really big story of month and my favorite by far. I love a good corporate thriller and this one is shaping up to one of the best and, of course, I’m talking about Unilever. For those of you who have been sleeping under a rock or too absorbed by the Real Housewives of [fill in the blank], here’s the story.

Silicone, botox and extensions. Not real and not even housewives; but still morbidly fascinating right?

The problem is this: Unilever’s moribund stock over the past 3 years, compared to that of peer P&G . In the chart below, P&G is in blue and Unilever in black

Says it all

The solution? Nelson Peltz, activist investor (i.e. one that cares) and, until recently, a board member of P&G, a seat he gained the old-fashioned way, that is via a proxy fight (one of the most expensive and hard-fought ever). During Peltz’s tenure on the P&G board, the stock roughly doubled. He plans now to do the same or better with Unilever.

I really care about your / our stock price

On January 23rd, the Wall Street Journal reported that Trian Fund Management LP, the activist hedge fund run by Nelson Peltz, acquired a stake in Unilever PLC, adding pressure to the packaged food and consumer goods giant in the wake of its failed $68-billion bid for GlaxoSmithKline PLC’s consumer-health business. Apparently, Trian started buying Unilever shares well before its bids for the GSK unit surfaced earlier this month. Unilever’s shares have been under pressure in recent months as it has struggled to boost volumes. Analysts say it has underperformed some rivals during the Covid-19 pandemic in areas such as hygiene and packaged food and hasn’t launched any blockbuster innovations in some time. The company faced strong opposition from investors to its plan to buy the GSK healthcare business, with analysts pointing to its mixed record on several other big acquisitions. Critics said the London-based company would be overpaying for the GSK business, and that it should focus on turning around its existing categories rather than taking on new ones in which it had little experience.

Stick to the knitting

Jefferies [IBank] analyst Martin Deboo said he thinks Trian will push Unilever to sell food brands more quickly or to sell or spin off the unit entirely. “The force and temperature of debate around Unilever now looks set to rise by several notches, with Trian likely to find a sympathetic audience,” among Unilever shareholders, said Mr. Deboo, adding that the episode would increase pressure on [Unilever CEO] Alan Jope.

Interesting right? So what happens next? Well, no coincidence, I’m sure, but a mere 2 days after the Trian story broke, Unilever announced a major reorganization. The company said it would restructure its operations into five stand-alone divisions, reshuffle top executives and cut jobs in a sweeping reorganization aimed at accelerating sales growth.

Let's move things around a bit and see what happens..

The company said it would now run as five, category-focused divisions—beauty and well-being, personal care, home care, nutrition, and ice cream—rather than its three previous units of food and refreshments, beauty and personal care, and home care.

Unilever Chief Executive Alan Jope said the overhaul would allow the company to be more responsive to trends and create more accountability. “Growth remains our top priority and these changes will underpin our pursuit of this,” he said. Still, while the restructuring—particularly separating ice cream as a stand-alone unit—should make it easier for Unilever to sell slower-growing businesses, the overhaul doesn’t go far enough and will likely disappoint investors, some analysts said. Unilever shares traded flat in London in the wake of the announcement [uh..oh]

Reshuffling won't help

Unilever said its beauty and well-being division would include vitamins—an area where the company has been beefing up—as well haircare, skin care and its prestige business, which houses upscale beauty brands. The personal care division will include skin cleansing, deodorants, and oral care brands, and be led by Unilever’s current head of North America, Fabian Garcia .

Vitamins and beauty

The nutrition arm will include ingredients lines such as Knorr, and a group of foods Unilever is describing as healthy snacking such as its Graze brand. Also included in the nutrition business: so-called functional-nutrition products, such as its Horlicks malt drink, plant-based meat alternatives, and its business that sells ingredients to restaurants and offices. It will be led by Unilever’s current head of food and refreshments, Hanneke Faber.

The company said it expects its new operating model to reduce senior management roles by around 15% and more junior management roles by 5%, which it said amounts to around 1,500 roles globally. Unilever employs about 149,000 people. Unilever also said its head of beauty and personal care, Sunny Jain, who joined the company in 2019 from Amazon.com Inc., will step down. Its Chief Operating Officer Nitin Paranjpe will take on a new role as chief transformation officer while also heading up human resources.

Analysts have previously said they expect Mr. Peltz to push for Unilever to sell or spin off its food business. Now that that has been split into ice cream and nutrition—with the latter housing some higher-growth categories such as health snacking—RBC analyst James Edwardes Jones said he thinks the company could focus on selling off ice cream. Despite this, Mr. Edwardes Jones said he isn’t convinced the reorganization will work. “The new operating model announced today might make divestments easier, but we would prefer them to focus on reinvesting cost savings behind their brands and categories,” he said. He also criticized the lack of fresh faces, noting that the new divisions are all headed by Unilever incumbents.

Same old...

And so it starts. “You have to change course in a big way now” says Nelson. “We’re doing it already. We’re ahead of you” says Alan “It’s too little and too slow” says Nelson. “You need me on the board and to get rid of the tired old incumbents” “No” says Alan “We got this. We know what we’re doing”. “It hasn’t looked like it for the past 3 years” says Nelson. Does this remind you of anything? It’s a replay of Peltz’s drama with P&G that we blogged about extensively in our year end editorial of 2017 (Check it out here. It’s a classic). It’s early days, but I fully expect Trian to get Unilever in a stranglehold as they did P&G. It hasn’t appeared yet, but watch out for a “white paper” to appear on the Trian Website.  It’s then up to Jope how to proceed. Reach an accommodation, tap out or …

Like Ted and that riff. Nelson's hard to Ignore

Surfactants Monthly New Year 2022

December 2021 / New Year – Monthly Surfactants

Happy New Year

As promised, we have here our monthly blog for the remaining part of December and an end of year short story. The story is set on New Year’s Eve and starts in the control room of a specialty chemical plant. If you don’t want to be bothered with the story and associated moralizing, you can skip straight to the news section which is clearly marked. OK? So here we go then…

Oh and by the way, the story is fiction. It's not based on any real events or places. Although - you may recognize some characters, thoughts and feelings from your own life. Alright here we go...

The Story

Emerald - A New Year’s Eve Short Story

John gazed at the pale green screen. It yielded nothing of interest. Nothing at all really. No phones. No books or magazines even, allowed in the plant control room at Veritas Chemical, ever. Not even New Year’s Eve, when basically nothing was happening. Well, nothing that the control room cared about. There was some last-minute shipment being drummed off out there for a customer in Thailand or Taiwan or someplace round the world. That’s Karl’s thing, drumming. He liked getting up close and personal with the product out on the plant floor, like a real working man. Couldn't stand the control room for too long - in there with the computers and the other expensive crap that would break if you looked at it the wrong way. John liked it there though. It was high-tech-ish. Everything at his fingertips, under his control, except Karl’s little drumming empire, the last redoubt of true manual labor at Veritas.

Karl burst into the control room with a flourish and sample in his hand.

“OK Johnny boy. Last sample of the last shipment of the year for analysis and then it’s what…. Johnny what is it?” Karl grinned expectantly.

“erm…  a mega piss-up, Karl?”

“No Johnny. The mega-est piss-up of the year with the entire Westside motorcycle club in attendance and their wives and girlfriends and significant others and Lisa, that chick from behind the bar at Murphy’s who will be my arm candy for the evening and maybe more if the lucky lady plays her cards right – know what I mean, Johnny”

“Yes Karl, I believe I do. Good luck then”

“And you Johnny boy – stopping by the club later are ya? Lisa might bring her mate with the boots; you know the one…”

“Erm actually I have a date tonight, Karl, so er probably won’t make it over there this time. Thanks though” hell why did he have to mention the date?

 “A date? Like a proper date with a girl...?” Karl inquired with a rising tone of utter disbelief

“Who is it then?” he challenged before John could respond.

“Just someone I met and er yeah so, we’re going to a movie and dinner and her name’s Kat and… are you going to analyse that sample and get those drums out of here so we can go home?”

Karl loaded the sample into the GC “Kat eh? From in there?” he waved in the general direction of the Veritas offices and smirked “with the green hair – who does accounting and stuff – wow Johnny boy – nicely done buddy. Outta my league for sure. I mean not looks-wise, although she’s very good looking, v-e-r-y and I mean very nicely proportioned if you know what I mean – but you know she’s a bit too intellectual (he almost spelled it out) for me. I think she’s like studying for some business degree at night  - so quite brainy you know” He added in the sort of hushed tones that one might use to mention an unfortunate physical defect.

“Yeah well she seems nice and maybe it’s a bit much to bring her to the club on a first outing, you know, Karl”

“Sure, that’s cool man. You wanna stay on the right side of the tracks with that brainy intellectual one, tonight. I get it”

“Ok then” Karl stared at the display and did his dopey imitation drum-roll thing “ Analysis says….  98.5 .. another award winning batch of H-105 from the Veritas Chemical Company, courtesy of Karl-Heinz Rickenbacker the best drummer this side of the Hudson River”

“There’s not really that much this side of the river Karl, but actually -  did that say 98.5? It looked like a 93 from here man”

“John, John John” Karl intoned as he switched off the GC and filed the sample with the week’s batches “The spec is 98 minimum, as you know, and so the analysis on this new year’s eve, approximately 119 minutes from my ron-day-voo with the lucky and lusty Lisa and approximately 179 minutes from when Interfreight swings by to get this last shipment of 2021 on its way to China, is of course a full 98.5 my boy. No question”

“I thought it was going to Taiwan, Karl”

“Same thing bud. Says it right here on the Commercial Invoice – Republic of China - so just pop that 98.5 on the C of A and we outta here man – time to find out if green is that Kat’s real hair color, eh? know what I mean Johnny eh?” Karl cackled like the 15-year-old trapped in a 40-year old’s body that he was.

“I’m pretty sure that it’s not her real color, Karl and OK I guess 98.5 it is if you are absolutely sure about it?”

“Sure as you are about your girlfriend’s hair”

“She’s just a date, mate, come on. Here’s your C of A then and I’ll see you next year ok? All the best to you er don’t drink too much eh?”

“Planning on it Johnny! Happy New Year mate!”

Shower, new jeans and a splash of Paco later, John is sat across from the green-haired Kat at Murphy’s, Guinness in hand and feeling mildly buzzed after pre-game shots with this brother before heading out. Kat observed her first date for a year since moving across the country to start again, again. And it had to be some guy from work, didn't it – although John didn't really count because he worked over there in the plant with dirt under his fingernails and that coarse skin on his large strong hands. She snapped out of her bodice-ripper moment but not before glancing at John’s nails which were surprisingly well manicured – for a plant guy. Stereotypes aren’t what they used to be, she shrugged inwardly. Just as well. This guy seemed nice enough – certainly better than his buddy out there on the plant who almost had her calling HR in her first week at Veritas.

Some old guy put Thin Lizzy on the jukebox. The dueling Celtic riffs of Emerald ricocheted around the pub.

“Good song” said John

“Great song”

Wow thought John

“How about being black and Irish?” pondered Kat

“Is that a trick question? Erm – I dunno. Guinness - that’s black and Irish”

“Er haha – no. Phil Lynott the lead singer of Thin Lizzy. He was black and Irish and a huge figure in 70’s rock - all over the world. Have you heard the words to this? It’s about the Irish struggle to regain what was rightfully theirs...”

Down from the glen came the marching men, with their shields and their swords

“Sure, I know the words, but you know some of them bother me – this bit coming up”

When they left the town was empty. Children would never play again

John warmed to his theme

“I mean they’re supposed to be singing about the good guys, right? but they have to bring kids into it. It’s pretty sad that lyric – a bit disturbing”

“True John, but that’s life, isn’t it? It’s like the Passover story. Before the Jews could get out of Egypt, all the little first-born boys of the Egyptians had to be killed, didn't they? And it was God did that – so if it’s good enough for God, it’s good enough for the Irish right?”

“Yeah, I guess but, I never liked that story either Kat. I guess the Pharoah had lots of chances to do the right thing, but I suppose things just got out of hand. One mistake compounded on another and pretty soon it’s the ultimate horror”

“Wow look at us being all deep and morose and philosophical. I need another drink and so do you. same..?

Kat returned from the bar with a Guinness, a Cider and two shots of something that looked and smelled like Bushmills. What a first-class young lady, thought John. We need to cheer things up round here, thought Kat. These shots’ll fix it – or not.

Aaah – nice – the golden liquid did its job

“– so, John you from round here originally?”

“Westsider all my life. In fact I reckon I was born in this pub..”

“Conceived maybe” observed Kat wryly with a raised eyebrow.

Funny girl – and yes, kinda clever.

“And you, Kat. Where are you from?”

“New York, then Cali, then New York again. Moved around a bit you know. I’m hoping this is home for a while at least”

“You like it at Veritas?”

“It’s OK. Not bad. It pays the bills and I’m learning – a lot really and I’m getting my MBA at night... so yeah, I guess I like it. And I can more or less be myself as long as the job gets done. The people aren’t bad either – no real jerks that I’ve come across – although do you know the owner, Flannery Jr? They say he’s a piece of work, when he shows up”

“Yeah – the new owner you mean. He’s Flannery’s son. Took it over from Mr. Flannery last year. Stay away from that guy. He’s the opposite of his dad. Basically, a playboy. Only wants money from the company and leaves the running of things to the execs on the 3rd floor. “

“Oooh a single rich playboy then?” Kat did that thing with the twirly hair and pouty lips “maybe I should meet him. Wouldn't need to bother with the MBA then..ha”

“More like a married rich sleazeball. I’d say I feel sorry for the unlucky Stella – Heinz Rickenbacker Flannery, but I hear she gives as good as she gets in the sleaze department, so I guess they’re a perfect match”

“Oh – Rickenbacker – that's your buddy in the plant? No relation though, right?” Kat laughed

“Unfortunately, yes, the relationship is that he’s the idiot step-brother of the the evil step-sister Stella. And look, despite what you might think” Kat untwirled her hair and rolled her eyes “he’s the most decent one of the bunch. He’s a good guy underneath all the macho-talk. He wouldn't hurt anyone – unless he thought they were going to hurt a friend of his – and he’s fundamentally honest. He can’t lie really – which has gotten him into a few fights over the years, but he’s a straight up honest guy who well.. at least I thought so until”… John’s voice trailed off and he gazed into the bottom of his now empty Guinness glass.

A moment passed. Bob Marley filled the dead air.

Exodus… movement of ja people

“Er hello.. John… where’s John? Did he disappear into the Guinness glass, like Alice?” Kat squawked like a cross between the Red Queen and Dame Edna.

“Yeah, no, I’m good. Just something at work earlier. Anyway, no big deal. It’s New Year’s so..”

John offered a far-too-weak smile and stared back into the glass, looking for something.

Open your eyes and look within

“Hey look, if this is your broody-mysterious schtick – it doesn't get you into my jeans. Just so you know...”

“Kat – no. Good grief. I got no schtick, believe me. No it’s stupid. Anyway, I get paid by the hour and right now I’m not on the clock – I’m on your clock – the cute funny smart-girl clock. So, let’s get going or we’ll miss the movie”

He peered uncertainly into her eyes, which he noticed were exactly the same color as her hair, which was weird, but cool. He kept peering.

Are you satisfied with the life you’re livin’

“Ooops I lost you again. You’re behind my eyes now. What are you doing there you naughty boy” Red Queen / Edna asked

“I think… Karl... might have lied to me this afternoon”

“Goodness. Saint Karl told a lie?” Kat’s mock incredulity hit hard

John ploughed on

We know where we’re goin’

“That last batch of H-105. He told me it analyzed at 98.5 but honestly Kat, to me, from where I was sitting, it looked like a 93 and I know he was dead-keen to get out for New Year’s and see that Lisa ‘n all so maybe he just fudged it and, well, I’m the one who put it into the system, so I fudged it as well” John eyes refocused on Kat’s. “What does that H-105 do anyway? You probably see all that with your work in the office. It’s going to Taiwan, which is not China erm...”

“Yeah I know it’s not China, John... H-105 - that batch is going to EVA air. The last shipment I set up before leaving tonight - actually goes into a lubricant – for aerospace. So – basically keeps airplanes flying - so yeah I guess pretty important”

We know where we’re from

“Ooof Kat. We gotta do something. That stuff can’t go out tonight. What if an airplane falls out the sky and … it’s all on me”

“What, John. What are you going to do? Call the nightshift from Murhpy’s on New Years Eve and shout above the pub-noise to tell them not to ship the 105.? It’s getting picked up in an hour from now and I don’t think your boozy phone call would go down well over there”

“Kat – you’re smart and work in the office. What can we do?”

“Oh right, I’m smart-and-work-in-the-office so I can just wave my magic wand right – well… hmmm... maybe – ‘cos I kinda have a magic wand right here on my phone. It’s the ERP app for Veritas. Does the pub-where-you-were-conceived have a wireless network?

“Er... yeah it’s StJamesGate and the password is … er well let me just enter it for you here”

Within seconds, Kat’s fingers were dancing across the glass surface of the phone and in less than a minute...

“Alright then – all relevant boxes are now unchecked which means that it’s physically impossible for those drums to leave the shipment holding area without basically taking out a wall – which I don't think our nightshift is going to do so… so now what John?”

Kat smiled at him but it wasn't an entirely nice smile. There were elements of a grimace to it

“Well, great, I think Kat. Right, I mean we can sort it out next week right? After New Year’s?” he ventured hopefully.

“Well, John, what’s now is that within some number of hours I’m going to catch holy hell which I’ll promptly pass along to you because without that shipment tonight, the year’s sales don't reach the magic number and the execs on the 3rd floor don't get their ridiculous bonuses and Flannery Jr. doesn't get his truly obscene payout and Stella-Heinz-Rickenbacker-Flannery doesn't get her pink Lambo. Actually, I’m kidding about that last bit. It’s probably not pink, but the rest is true and that’s the downside of me having time to read and not enough work to do. I just know this stuff. So – now what John.?”

We’re leaving Babylon

“We get over there Kat, back to Veritas, pull the raw analysis data out of the control room archive and see what that batch really came in at – 93.5 or 98.5. Then er… then we’ll see for sure what happened. Get us an Uber Kat, eh? I know this is maybe not the date you envisioned, but you’re with me, right?

“I guess, John. 5 minutes out front”

And we’re going to our father’s land

Snow had started falling and the Veritas plant parking lot looked quite beautiful, coated a perfect, crisp and even white. Inside the control room John and Kat made an unlikely pair of heroes with green hair and the smell of pubs and Paco offending the sober senses of the night-shift team. Nonetheless, they seemed to be getting somewhere when the sweet odor of champagne, Chanel and cigars invaded the space, followed by a teetering Stella and a Lurching Vincent Flannery Jr.

“What the fuck?” Flannery asked the room in general

Silence ensued, then...

“Hello Mr. Flannery” Kat spoke flatly, guessing correctly that the Bonnie and Clyde in fur, Louboutins, diamonds and tux were the same Flannery’s she’d just learned about from John.

“OK – so who the fuck are you and what the fuck... are you doing with the China shipment?” Flannery menaced.

Kat stared at him. She’d been talked to like that all her life and knew by now that the fight and the flight options were never the best response. Nor was the often-useful crying.  Still, it was hard to control biology and evolution and she felt tears push hard behind her eyes as she clenched her thumbs inside her fists. But the flat voice didn't fail her.

“Mr. Flannery. The ERP system is showing an inconsistency with the analysis for this batch and so the barcoding won’t let it out of the plant. John here, brought me over to determine if this can be addressed this evening. I’m Kat by the way, from accounting”

“Yeah I know” Flannnery seemed a bit put-off by the absence of fight, flight or crying “But you see, Kat-from-accounting, my good customer in China really needs this very important shipment of H-104 to go out tonight. “

“erm It’s going to Taiwan, Mr Flannery and it’s H-105 for Eva Air for airplanes” John tried to interject matter of factly.

“OK right – Tie-fucking-One and they need to keep the fucking planes flying so let’s get this shit outta here now!” Flannery got back into his groove bullying John.

“Right well, I was working here this afternoon with Karl and…”

“Oh – my idiot brother-in-law- why am I not surprised he’s involved” Flannery scoffed.

“and” John continued “I’m concerned that the right analysis for the H-105 was not entered into the C of A by... er… me so I asked my colleague here in accounting to pause the shipment until the uncertainty could be resolved – which is what we’re doing here”

“Smart boy” giggled Stella. Flannery glowered, promptly ignored John, and turned back to Kat.

“Well if the green goddess here can pause the shipment, she can certainly un-pause it, which if she does in the next... hmm... 9 minutes, there’s a very nice year-end bonus in it for her and for you all – if she does what she needs to do. If not, well you’re all fucking fired – so get to it Katey” Flannery stared somewhere off to the left of Kat, not daring to lock eyes.

“Of course, sir. I can easily un-pause the shipment, as you say, by checking and verifying the analysis in the system with the number on the C of A and that should take, oh about 10 – 20 minutes.” An even deeper silence ensued as Flannery’s champagne addled intellect grappled with the seeming fact that, as 10 – 20 was a greater number of minutes than the now, 8 minutes in which the Interfreight pickup window would close, his obscene year-end payout would be significantly less obscene than planned and his wife’s Lamborghini would just have to wait one more year.

“Guys, I don't understand. What happens if you just ship the drums” asked Stella, rather innocently, in John’s opinion.

“Mrs. Flannery” began John “Stella, darling... call me Stella”

“Er... Stella” John looked sideways at Flannery and continued “If the analysis is wrong and we ship the drums and they are used in an airplane lubricant system, something could go wrong with the plane and then it might crash and all those people, mams and dads and kids would be gone –because of us - because of me”

“Vincent darling – this young man and his colleague are trying to save lives so what’s the harm if we wait another few minutes. Daddy will hardly mind if we’re a little late for his party...?”

Flannery couldn't figure out if he’d been checkmated by his wife or the green-bitch or were they working together. Any case…

“Fine. Fuck” he growled. Which everyone took to mean go head and pull the records and make the comparison.

Time passed as it should. Interfreight came and left, without the drums. Flannery’s blood pressure went beyond boiling point and Stella found a fifth of bourbon in the back of the limo which she shared with Kat.  More snow fell. They gathered back in the control room.

“It’s 98.5” said John and he couldn’t decide whether to be elated, because Karl hadn’t lied, or dejected because he, John, was an idiot.

“But the display, I can see it even now, it said 93, I swear. I don't understand” He looked forlornly at Kat.

“Well obviously” said Tommy, lead night operator. “The display’s fucked – sorry Mrs. Flannery – but it is. If you look at it from over there, he waved left, 8’s are 3’s and 0’s are 1’s and from over there, he waved right, it’s just dots. You can only read it from right in front – and even then, you know, you really can’t trust it can you? Should have been replaced months ago but no-one listens to the nightshift so…” he glanced from under his eyelids at Flannery.

“So, I’m not crazy?” concluded John with relief.

“Oh, you’re crazy alright” began Flannery “and…”

“And, darling… these lovely young people, Kat and her boyfriend, did a wonderful thing to avert a potential plane crash and you must be very proud they work for you!”

Boyfriend – John liked the sound of that.

“So let’s celebrate Darling. You’ll buy me that Lambo you promised, and you’ll pay for Kat’s MBA she’s been talking about and erm get John whatever he wants – and these fine nightshift people! Wonderful!”

“That’s OK, Mrs. Flannery. We don’t need anything” Wait what ? I need something, thought John. “I’m just pleased that John here didn't want one mistake to build on top of another and the ultimate horror to result. Just knowing that he thinks that way and acts on it and that now we are still only not even half-way through a date, well that’s more than enough for me.”

Alright. I actually don't need anything because right there, what Kat just said, that’s all I need, thought John

“OK green goddess let’s go then. We’ve got a date to finish. I think we were discussing a Thin Lizzy song…?”

~The End~

The News

First up – do you guys read the Indian Chemical News? (https://www.indianchemicalnews.com/) . I started getting their emails about a year ago and didn’t unsubscribe. You get some decent snippets each day and a fair bit is surfactant related. For example the published recently that :

Indorama Ventures Public Company Limited (IVL) [the new proud owners of Oxiteno – although I don't think the deal has officially closed yet ] has opened its new 10,000-square-foot office and technology center at Marwah Center in Mumbai. The new facility is part of the company’s high-growth Integrated Oxides & Derivatives (IOD) business segment [that’s the part that acquired Oxiteno], serving global customers in India and the Asia-Pacific. Alastair Port, Chief Operating Officer - IOD business, Indorama Ventures said, “IVL is committed to growing our IOD business sustainably in India and Asia-Pacific and this new business and technology center in Mumbai is a key driver. Having support functions as well as an R&D center under one roof in the heart of Mumbai is convenient for customers to collaborate with us to create better solutions.” The new R&D center is the company’s hub for the Indian Subcontinent and SouthEast Asia to develop products supporting downstream markets, such as home, personal and industrial care and cleaning, agrochemicals, energy, lubricants, mining, and coatings. The center will also work closely with IVL’s global R&D team to exchange information and accelerate product development cycles. The business’s commercial and technical functions, including supply chain, finance, sales, and R&D are integrated at the new facility. The integration enables closer collaboration across functions and faster improvements to address changing customer needs. Indorama Ventures Public Company Limited portfolio comprises Combined PET, Integrated Oxides and Derivatives, and Fibers.

Of course, most of our news comes, as always, from the great folks at ICIS Chemical Business. You should subscribe, as I do. That was a not – so – subtle promotion for my conference partners, I know. But I wouldn't have produced 11 years-worth of surfactant conferences with them, if I didn't think they were a quality shop. They are. Join us in May, in person, in Jersey City, in person (did I mention that). The event launches soon, so stay tuned and also let me know if you you would like to present. If you think you could be the next Martin Herrington (hard to imagine, I know), then let me know.

More news, from ICIS. : The year in oleo could not have ended with a more appropriateheadline – “No end in sight for European fatty acids, fatty alcohols tightness”. The article, by the talented and informed Samantha Wright, goes on to report that:

European fatty acids and fatty alcohols are expected to face further shortages and strong demand through the first and second quarters of 2022.  Ongoing logistical issues are likely to continue and players face fresh fears over rising COVID-19 cases.  In the European fatty acids market, the tightness that has plagued the market for most of 2021 looks likely to continue into the first quarter. In the palm-based market, players are already negotiating Q2 contracts amid ongoing shortages.

Palm oleic acid has been very tight throughout 2021 and there are no indications that tightness will ease in the first quarter or even in the second.

Most palm-based producers are already sold out of oleic acid for the first quarter. Supply constraints have been caused by a combination of vessel delays, high freight costs from Asia and stronger demand amid tallow shortages. [interesting – I don’t recall reading about that recently. Although Tallow seems to have gone through the roof along with other commodities]  The vessel delays are expected to last through the first half of 2022 as coronavirus-related logistical issues continue.  Palm stearic acid availability was becoming more balanced towards the end of 2021.  While there may be some tightness at the beginning of the first quarter as demand picks up following the holiday period, overall palm stearic supply is likely to be fairly balanced for the first and second quarters.  Tallow-based material is still very tight, with oleic acid supply shorter than stearic acid.  The tallow-based shortages arose from a lack of meat production combined with strong demand from the biodiesel industry for raw tallow.  While meat production increased slightly in the second half of 2021, there were still low slaughter rates.  This saw some increase in the fourth quarter, with December a typically strong month for meat demand.  However, demand from the biodiesel market remained very firm, and there was very little additional tallow material seen in the fatty acids market during the fourth quarter.  This is likely to continue into the first quarter and even into the second quarter, and could be a structural issue in the tallow market if slaughter rates do not increase to a level where biodiesel and fatty acids demand can both be fulfilled.  Demand for all grades is expected to be stable at firm levels throughout the first and second quarters.

There may be an uptick in buying interest in January as players look to restock following the new year, but overall demand should be steady as all applications in the food, cosmetics and personal care industries are currently healthy.  One source said: “I think production is pretty good… when you look at demand in general it is also very good. I do not see [tightness] easing unless demand reduces, which we do not think will happen.”  Automotive demand is currently set to remain healthy, though there are ongoing concerns that increasing COVID-19 restrictions in Europe could cause a drop in activity again in several industries, including the automotive sector. The European Commission announced in the fourth quarter that it had launched an anti-dumping investigation into fatty acids from Indonesia. The probe is expected to last for the whole of 2022, so it is unlikely there will be any direct impact in the next year, but players will be keeping a close eye on the proceedings.

On Guard Against the Fatty Acid Dumpers

In the European fatty alcohols market, shortages are set to continue through the first quarter.  The market has faced tightness throughout 2021 amid vessel delays from Asia, logistical issues within Europe and high freight costs.  Supply constraints are expected to remain in the first quarter and possibly into the second. Vessel delays are not likely to improve in the first half of 2022.  One source said: “Vessels are supposed to be arriving in February and they are not even on the water yet. There are [still] hiccups in the supply chain, definitely.”  This is compounded by very strong demand from the downstream surfactants and end-use detergents markets.  Players are expected to have firm buying interest in January as they look to build stocks after the year-end destocking.  This is likely to be even stronger than in previous years as some market participants are looking to build stocks in case there are further coronavirus-related issues in 2022.  “I believe people intend to produce whatever they can produce in order to have material ready before wave number five hits and they are forced to lock down again,” said a source.  There are coronavirus-related issues with the palm oil complex in Asia that are causing issues for producers securing feedstock and are expected to continue into 2022.  It is unclear yet if there will be more logistical issues in Europe during the first quarter if COVID-19 restrictions tighten, but ongoing concerns over a lack of truck drivers are likely to continue.

Where are they Now?

After selling its North American surfactant business to Indorama (who soon thereafter gobbled up Oxiteno to form a major surfactants player), Huntsman is back on the deal trail again (as if they are ever really off of the trail). ICIS reports that Huntsman is considering selling its Textile Effects division as part of a strategic review of the business. Huntsman will start the review early in the first quarter of 2022, the company said. The division is based in Singapore. Huntsman does not have a timeline or deadline regarding when it could finish the review.

Huntsman expects the division will report nearly $100m in adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) in 2021, the company said.  The division makes dyes and textile chemicals used in pretreatment, colouration, printing and finishing. Huntsman operates 11 synthesis and formulation production sites in Asia, Europe and the Americas. Raw materials include amines, ethoxylates, acrylics and sulphones.  In 2020, Textile Effects accounted for 10% of the company's revenues and 5% of its adjusted EBITDA. Huntsman's other divisions include Polyurethanes; Performance Products, which makes amines and maleic anhydride (MA); and Advanced Materials, which makes epoxy resins and curing agents.

Textiles on Sale

Meanwhile over in Asia, ICIS reports that The Asian and south Asian linear alkylbenzene (LAB) market actually drifted lower in the fourth quarter of 2021 as demand as a whole failed to ignite. With the new Omicron COVID-19 variant now threatening to disrupt economies once more, sentiment among LAB players remains cautious.  The slump in energy prices towards the end of 2021 and the Chinese government’s efforts to combat inflationary forces and curb power costs also weighed on the LAB market.  Buyers adopted a cautious stance and bought on a need-to basis. Some suppliers held on to their offers but gave discounts for deals, while others focused on their own domestic markets at the year-end, citing soft demand in Asian export markets.  Maintenance shutdowns in China were completed by November, but suppliers mostly continued to focus on the local market, citing tepid buying interest in Asia and India.  However, some Chinese parcels could still find their way into Asia in the weeks ahead, especially after local Chinese appetite has been satiated.

In India, local demand perked up in November after the Diwali festivities in early November, but buying momentum fizzled at the end of the year.  Buyers anticipated a weaker market from weak upstream energy and benzene markets, and kept mostly to the sidelines.  Supply seems likely to dictate the tone of the market in 2022, as demand appears little changed. Even with Asian economies easing pandemic restrictions and initiating global vaccinated travel lanes, the expected pick-up in usage of cleaning solutions in the hospitality and aviation/transportation sectors is perhaps counter-balanced by people’s acceptance of living in an endemic COVID-19 situation, with appetite for hand sanitizers and cleaning liquids down from the earlier part of this year. Nevertheless, planned turnarounds in the fourth quarter of 2021 and the first quarter of 2022 are expected to keep supply in check across the region, while providing some support to the market.  The wild card could be Chinese supply, which - though limited in late year - could become more abundant in the first quarter as output stays high. This may be especially true post Lunar New Year in early February, when LAB plants in China come back from the holidays in full swing.

Wild Year of the TIger in LAB

Meanwhile, with the new COVID-19 Omicron variant starting to make its way through to Asia as well, a possible re-imposition of restrictions sometime in the first half of the new year will again be a dampener on demand. Potentially lower upstream markets from this deflationary economic bout could exert downward pressure on the LAB sector, as relative demand-supply goes out of balance.  The elevated freight market, which looks likely to prevail into the new year, will continue to hinder a good portion of the arbitrage play of Asia suppliers trying to move volumes to destinations outside the region, such as Europe, in a bid to capture a higher value market. Consequently, any excess cargoes will likely remain within the Asian region and add to overall availability.

Don't See This Often

The year in Fatty Alcohols ended with may supply chain woes as outlined by the great Lucas Hall at ICIS. He notes that : Freely-negotiated US Q1 fatty alcohol contract negotiations have largely been finalised against the backdrop of bullish cost pressures and worsening supply chain constraints.  Freely-negotiated contracts for standard balance material have largely been heard at a 30-50% premium from their Q4 settlements, with Mass Balance (MB) material largely heard at a 30-50% premium over standard balance material.

Short and long chain single-cut alcohols are particularly tight.  Overall production costs remain bullish despite a moderate downward correction in feedstock costs across the oil palm complex in recent days associated with year-end inventory balancing. Vessel space is tightening against the backdrop of soaring freight costs, with shipping companies informing southeast Asian exporters they are no longer taking booking for January. This will defer containers that have amassed in ports throughout the region to February or later, further delaying imports. Current lead times for container shipments are at a minimum of three to six months.

Long chain alcohols are largely imported in containers. Few suppliers have the ability to process and store long chain alcohols in bulk, further supporting the market

Imports Important

Malaysia's palm oil market remains fundamentally tight, with lower import taxes in India, adverse weather conditions in southeast Asia and the resurgence of the pandemic with the rise of the Omicron variant of the coronavirus all expected to pressure costs in Q1.  The premium on palm kernel oil (PKO) because of the above pressures - in addition to growing concerns regarding the traceability of sustainable volumes in Malaysia - may continue to discourage PKO consumption for oleochemicals production, adding to the pressure.  Increased scrutiny against Malaysian-origin material over forced labour allegations remains a major concern, as the traceability of Roundtable on Sustainable Palm Oil (RSPO) MB-certified material becomes more difficult, supporting higher premiums for MB PKO for oleochemicals production.

The Underpinning

As a result of these cost pressures, many southeast Asian oleochemicals producers are planning maintenance during and after the Lunar New Year, further tightening the market.  Domestic US fatty alcohols production capacity, as we know, is insufficient to make up for the import shortfalls against the backdrop of similar supply chain constraints, further supporting the market.  Downstream demand in many end-markets remains pent-up because of continued supply chain disruptions, with many players working on an as-needed basis to fill backlog demand for the foreseeable future. Downstream surfactants price increases remain on the table with little to no pushback from customers.

Prices have largely been heard at a 30-50% premium from their Q4 settlements, based on market feedback.  Long chain alcohols in containers have been heard much higher, given persistent and worsening supply chain constraints in that market.  Contracts increasingly include terms subject to changes in freight and demurrage costs, given these constraints. Some players have less volume available for their traditional quarterly contract customers, as they prioritise inventory-building and annual contract customers over smaller volume customers ahead of upcoming maintenance and ongoing supply-chain disruptions globally.

The prices in the table represent a range of settlements for standard balance material heard throughout the quarter for the majority of market participants. Prices above and below those listed in the table were heard throughout the quarter but excluded as they were not viewed as representative of the wider market.

Prices for synthetic [petrochemical] alcohols were heard at both ends of the above ranges amid the ongoing force majeure at Shell's Geismar site.  At least one buyer settled its Q4 C16-18 contract below the $1/lb DEL (delivered) US Gulf (USG) range.  The same buyer settled its Q4 C18 contract below the $1/lb DEL USG range.  In the wider market, multiple producers have switched their contract terms from a DEL to an FOB + freight basis or to terms subject to changes in freight and demurrage, given the ongoing shipping logistics constraints.

Hmmm...

US Surfactant bellwether, Stepan [hmm I don't think I’ve used that phrase before. It sounds right though] - So - US Surfactant Bellwether, Stepan announced a full slate of price increases, which it is probably useful to list here. So, as ICIS reported: Although the announcement did not cite a reason for the increases, demand for surfactants into cleaning supplies is expected to increase with the emergence of the Omicron variant of COVID-19.  In addition, demand from oilfield activity remains strong amid elevated crude oil and natural gas prices.  In addition to the product price increases, Stepan seeks a separate 1.5 cent/lb transportation increase.  Transportation costs throughout the US supply chain have risen sharply, due to insufficient trucks, railcars, and containers; high gasoline prices; and labour shortages.

Stepan seeks price increases for surfactants in the following product categories: [Take a look. There are some very wide ranges there – note on the dry products and on some of the smaller volume items like phosphate esters, amides and betaines. ]

Blends and derivatives of these products are also subject to the increases.

Don't be that Surprised!

Finally some news from a bunch of companies that we don't normally talk about here. US specialty chemicals company Polyventive has acquired the surfactants and dyes and pigments businesses of Canada’s Tri-Tex from SK Capital Partners for an undisclosed sum.  The acquired businesses, with plants in Quebec, Canada and Los Angeles, California, produce surfactants, dyes, pigments, and water-based polymers used in textile, personal care, cleaning and industrial applications.  Polyventive is a portfolio company of Arsenal Capital Partners.  In a related deal, another Arsenal company, Meridian Adhesives Group, on Monday acquired Tri-Tex’s adhesives business.

So that’s it. Happy New Year to all my great readers. I love it when I hear from you about something you’ve read here. So please feel free to get in touch. You know how. I will see many of you at ACI in Orlando at the end of the month and of course in May in Jersey City.

I guess, it wouldn't be a surfactant blog if we didn't end the year with some music. So what am I listening to these days? Thin Lizzy of course. Here’s the aforementioned Emerald.

t’s inspiring but still a little disturbing with the lyrics no? Just like the Passover story.

And here’s the gorgeous Parisienne Walkways with the legendary Gary Moore on guitar. Oh man..I really can’t think of anything more French than this.

Of course, we have to include this high-point of the movie Eddie the Eagle

And finally, who hasn't been to an Irish pub and sung along to this one? Wait what -  You haven’t? Get out there man…!

And finally finally, I just listened to this one from the ’73 album Vagabonds of the Western World. Remember this? The Rocker. Serious guitar break..

Happy New Year!

Surfactants Monthly – December 2022

Happy New Year my dear readers. We have the month’s news and some end of year music picks. This month’s promised fiction will come to you via a link at the end of the blog to a site I like which is publishing some interesting short stories.

Now – straight into the news, which, as always, comes to us courtesy of our good friends at ICIS. Of course, I can’t kick off the year without mentioning that the 13th World Surfactants Conference, will again be held in Jersey City at the Hyatt on May 4th and 5th. Register here https://events.icis.com/website/8544/

OK – now the news.

ICIS has published some good end of year summaries and I’ll excerpt some of the surfactant relevant ones here.

First up, according to ICIS the European fatty alcohols market is rather subdued looking ahead to 2023.  Supply is widely available, while downstream demand from the ethoxylates market is weak for the first quarter.  “Ethoxylates demand is very poor […] It’s clear the demand is a strong reduction,” said a producer.

Feedstocks have also trended downwards in recent months. Supply, demand and palm kernel oil (PKO) costs are the main factors discussed in Q1 contract negotiations.

A bit of a European Downer

Uncertainties and low demand mean most buyers have been reluctant to commit to Q1 volumes so far.  As a result, there has been limited progress in Q1 talks. Prices quoted so far have been stable to soft in comparison to those for the fourth quarter.

European Roller-Coaster Still Heading Down

“When the world is so uncertain, you shouldn’t sit with so much material in stock because prices tend to drop. Even if gas prices remain high, end-user consumption will be lower,” said a buyer. Some have preferred to fix volumes sooner rather than later, however, to ensure security of supply.  “We decided to cover part of our need as a lot of uncertainties and wanted to be on the safe side,” said another buyer.  More progress regarding Q1 contract talks is expected in coming weeks. Feedstock developments are also likely to provide more clarity on the market direction for 2023.

Meanwhile in the US market for fatty alcohols, Lucas Hall reports that Fatty alcohols  are seeing improved production margins in southeast Asia and subdued demand in China prompting an increase in exports to the US as demand continues to slow.vMid-cut alcohol supply is expected to remain long in H1 2023. Q1 contracts have been limited, with players separately looking to reduce their current inventory levels or commit to longer term agreements with a price adjustment.v Single cut C16 is also long, weighing on C16 and C16-18 blends. C18 remains snug relative to these other chains, but slowing demand is offsetting these concerns. vThese conditions are likely to persist despite an ongoing force majeure at Sasol's US Lake Charles, Louisiana, Ziegler alcohols and alcohol-based surfactants site. vSasol expects to complete the repairs at the site by the end of Q1. One dynamic that may shift is in the 16-18 chain. Because C18 markets are relatively snug compared to C16 alcohols, producers in southeast Asia are likely to maximise C18 production, in turn reduced C16 output. This could help get the market into a better supply balance in H1 2023.

An Unusual Divergence

Reporting from ICIS’s alcohol guru, Lucas Hall, noted that Mid-cut supply is long, limiting discussions for Q1 material, with large volume buyers looking to make long-term agreements over quarterly contracts. C16 supply is also long, weighing on discussions. Tight supply for C18 is offsetting the downward pressure in C18 and C16-18 markets.

Sasol expects to complete repair work at its Ziegler alcohol unit at Lake Charles, Louisiana, by the end of the first quarter of 2023, subject to delivery of equipment. The site remains on force majeure for Ziegler alcohols and Ziegler alcohol-based surfactants.  Demand is overall slow as players conduct year-end rightsizing against the backdrop of major economic concerns globally.

The prices in the table represent a range of settlements for standard balance material heard throughout the quarter for the majority of market participants. Prices heard above and below those listed in the table were excluded as they were not viewed as representative of the wider market.

People love this chart

Source: CME Group, Matthes & Porton, WSJ Cash Markets

And, completing the picture, ICIS’ Helen Yan reports that Asia’s fatty alcohols demand may pick up in the second quarter (Q2) of 2023 following the relaxation of China’s zero-COVID policy.

Next Year's Halloween Costumes?

• Demand may pick up in Q2 2023 on seasonally strong downstream production

• Buyers likely to still have high inventories for Q1 2023

• Geopolitical and macroeconomic uncertainties to curb spot interest

“We expect demand to pick up in Q2 which is usually the strong production season for the downstream markets,” a regional supplier said.  “Spot interest for imports is also likely to emerge in February or March after the Lunar New Year,” he added.  The Chinese market will shut on 21 January for the week-long festive holiday.  Trades and business activities in Asia typically wind down about a week or so prior to the Lunar New Year holiday, which is also celebrated in Indonesia, Malaysia, Singapore, Vietnam and South Korea.  The outlook for the first quarter of 2023 may be more subdued due to the high inventories held by buyers, amid weak sentiment and the slump in demand in 2022.

Hmm - a harbinger of things to come in 2023

“Demand for [fatty] alcohol is very low as customers are still sitting on high inventories. This will mean lower offtake in Q1 as customers will not be able to take the contracted shipments due to the backlog of cargoes,” a major buyer said.  Geopolitical and macroeconomic uncertainties, amid a prolonged Ukraine-Russia war, had dampened sentiment and weighed on demand in 2022.

8s and 10s holding up for now

The economic fallout from the sanctions on Russia had led to rising energy and food costs, recession fears, inflationary pressures and a global economic downturn.  Meanwhile, there are also concerns over the surge in COVID-19 infections in China and a looming recession in the EU and the US. China, the world’s second largest economy, is seeing a surge in COVID-19 infections. The country relaxed its zero-COVID policy on 7 December and the removed most of its restrictions.  Although market players are generally optimistic that the relaxation of the COVID-19 rules and anticipated reopening of China’s border will boost demand and bolster the Asian market in Q2 2023, there are also concerns that this may be offset by the looming recession in the EU and the US.

Loom and Doom

The weak macroeconomic environment is expected to restrain growth potential in the US, while the EU’s logistics challenges and cost-of-living crisis will likely curb demand in 2023.

The key end-use for the core fatty alcohols product, C12-14 mid-cuts, is surfactants, which comprise numerous cleaning and detergent uses, ranging from household agents to oilfield applications.  However, the supply of fatty alcohols may be constrained by regional plant maintenance shutdowns in the first half of 2023 in Malaysia and Indonesia.

In the world of LAB, ICIS’ Clive Ong provided a very insightful analysis into the markets in India and South Asia. Those markets continue to be mired in weakness with demand at a low ebb. Buyers remain mostly unhurried with supply ample in most regions.

In India, the LAB market has remained weak ever since the monsoon season in the third quarter and failed to revive before or after the subsequent Diwali festivities. The slump has been so severe that most suppliers have left the subcontinent alone as year end approaches, and are focused on other regions with higher net backs.  The weak demand for LAB from downstream linear alkylbenzene sulphonate (LAS) and linear alkylbenzene sulphonic acid (LABSA) resulted in a widening buy-sell gap. LAS/LABSA makers talked of poor demand for their products as well, as makers of washing liquids and powders switch from a portion of LAB/LABSA usage to more competitive alternatives such as sodium lauryl ether sulphate (SLES), alpha olefin sulphonte (AOS), alcohol ethoxylates and the like where possible.  The inflationary pressures over the past two years on other components in detergent production, apart from LAS/LABSA, such as soda ash, salt and even packaging have made producers sensitised to costs, resulting in an earnest search for alternatives to mitigate cost pressures.

Another important aspect of the surfactant/detergent sector in India is elevated power costs and utilities, which has been impacted by the volatile energy markets this year.

A number of participants anticipate that the weakness in the LAB market would likely persist into 2023, but some improvement could be in the offing when the second quarter demand season arrives. Users are understood to have modest stocks of LAB after months of buying on a need-to basis. Some continue to hold low stocks in anticipation of further weakness in the LAB market. Suppliers, on the other hand, are reluctant to discount prices sharply and give away more margins. The widening buy-sell gap continues to hamper sales in India.  Producers have started to lower offers in order to move volumes in late year, as demand showed limited pickup. From the chart below, initial offers in December have moved down to close the gap against the spot market prices, with sellers conceding to prices needed to move material.

Interesting

Over in northeast Asia, the Chinese market was hobbled by strict zero-COVID policies for most of the year. The sporadic and intermittent lockdowns across the country continue to dampen demand and trade of LAB in the domestic market.  Earlier from the middle of the year, producers were saddled with huge inventories which resulted in an exodus of Chinese products to the broad Asian region and elsewhere. Users in Africa, south Asia, the Middle East and Europe saw an increase in competitively priced Chinese material weighing down their markets. These exports declined in the fourth quarter as the Chinese market regained some equilibrium. The COVID-19 restrictions, maintenance and decent demand helped curb supply and kept the market steady.

And another one

While offers of LAB from China and NE Asia continue to decline in tandem with weakness in the broader markets of Asia, south Asia and the Middle East, the initial easing of zero-COVID policies in China has boosted optimism to some degree.

While the market still has to contend with the year-end lull season and the upcoming Lunar New Year holidays in the second half of January 2023, some participants anticipate that demand will be much firmer in spring, should the Chinese government hold fast to its decision to fast track the country out of its restrictive zero-COVID environment.  Some factories in China which initially planned to shut weeks ahead of the Lunar New Year on the back of poor demand and margins appear to be considering otherwise, as players start to look for a comeback in demand as rules are progressively relaxed.  In the meantime, should a recovery in demand for surfactants and detergents become a reality in the near term, the gap between LAS and LAB values would start to narrow, which would likely spur trade for both products.  Currently LAS makers continue to lament the high costs of LAB, while LAB producers continue to struggle with protecting their own margins, resulting in a general malaise in the LAB spot market.

I'm not sure what to make of this chart. Negative is bad, for sure

Around the middle of the month, Clariant announced a major project. They will invest Swiss francs (Swfr) 80m ($86m) to expand its Care Chemicals facility at Daya Bay in China’s Guangdong province, boosting support for pharmaceutical, personal care, home care and industrial application customers, the company announced.  This investment will increase Clariant’s production capacity for existing products as well as the introduction of new products by the end of 2024.  Clariant also aims for the site to become a new global hub for its healthcare business, saying it believes China would remain a growth driver for many chemicals.  Clariant is looking to expand the contribution of China sales in its global total to 14% from its present 11% and raise its China production share to 50% from 35%, both by 2025.  Its most recent investments in Daya Bay include a Swfr40m second production line of flame retardants, slated to come on stream in 2024, and its Swfr60m first line, due to start up in 2023.

In move reminiscent of the old days of Solazyme and LS-9, Genomatica (Geno) is attracting partners for the technology it is developing that would ferment sugar to produce oleochemicals, providing the industry with an alternative to palm-based feedstock.

Recently, Kao Group, a Japanese chemical and personal-care conglomerate, made an unspecified investment to help scale up and commercialise the sugar-to-oleochemical technology. Unilever, another personal-care company, also invested in the venture.

"Unilever + KAO have partnered with Geno ($120m-plus venture) to bring plant-based alternatives of palm oil into more products," the company said.

A fermentation route could be a simpler way to make oleochemicals.  Currently, most oleochemicals are produced from fats such as soybean oil, beef tallow, tall oil, coconut oil, palm oil or palm kernel oil (PKO).  The fats are hydrolysed to produce glycerine and mixtures of fatty acids. Different fats produce different proportions of fatty acids, as shown in the following table.

For companies that make surfactants and detergents, the fatty acids need to be converted into fatty alcohols.  Current production methods cannot easily target an oleochemical of a specific carbon length. Instead, producers are left with byproducts.

Sugar fermentation opens up the possibility of producing palm oil alternatives in a single step while minimising all of the byproducts or additional conversions.  LS9, the predecessor of the REG life sciences business acquired by Geno, had started up a demonstration unit a decade ago that was developing a route to ferment sugar to produce fatty alcohols. Geno has already demonstrated its ability to make highly pure chemicals.  It has successfully launched butanediol (BDO), butylene glycol (BG) and Avela, its brand of (R) BDO.  Geno did not elaborate on its sugar-to-oleochemicals process other than saying it is targeting molecules including 8-16 carbon atoms.

An interesting snippet out of Singapore earlier in the month: Nouryon has acquired a specialty surfactant alkoxylation plant on Singapore’s Jurong Island petrochemicals hub, the Netherlands-based chemical company said in a statement.  The acquired plant will enhance Nouryon’s ability to serve growing regional customer demand in end-markets such as agriculture and food, home and personal Care, natural resources, and paints and coatings, it said.  Details about capacities, the acquisition price or the seller’s identity were not disclosed. [ Our readers know everything – so – can someone tell me who the seller is and I will updated the post with that information – without attribution if you so wish.] Update Jan 4th: A number of you got in touch within hours of the blog going live to let me know that the seller was Solvay. I was a bit surprised, honestly, but am quite sure the information is accurate. This plant was commissioned in 2015 and is on a pipeline EO supply. There you go!

Who is the Mystery Chemical Plant Seller?

And finally, in the US, November EO actually ticked higher as demand grew. US November ethylene oxide (EO) contracts were assessed at 61.95 cents/lb ($1,365.75/tonne).  The increase in EO contract prices can be attributed to the uptick in ethylene contract prices for the month of November.  Availability of EO continues to improve as demand remains balanced with supply. Additionally, two turnarounds have since been completed. The market is expected to remain balanced through the fourth quarter, according to ICIS.

Kind of an uptick

That's it. As noted above, I have some music links for you, that I am pretty sure, I've not put in the blog before, that are also some interesting pieces I've listened to this year, often while writing the blog. Enjoy!

First up: The Death Wheelers, I Tread on your Grave. An instrumental album with 70's biker movie vibe. Some of the between songs commentary is hilarious, e.g. at 18:38. Well worth a listen all the way through.

A colleague in the industry has alerted me to delights of Viking Metal, a genre which, until about a month ago, I had no idea existed. Here's Amon Amarth with Put your Back into the Oar. In my part of the world, the Vikings made quite an impression and not in a particularly good way!

On the same label as the Death Wheelers, check out Death and Consolation by the Well. As if you needed any more evidence that Black Sabbath have a lot to answer for. Generally the Riding Easy Records Youtube channel has a very rich trove of music which, I for one, have never come across. Good soundtrack for cold winter afternoons working in the home office, if that's your thing.

Finally, I was prompted to re-listen to this classic by a story I read recently. Rattus Norvegicus by The Stranglers. Ridiculous lyrics with even more ridiculous bass lines..Outstanding!

So that's it for now. As promised, here's a link to an intersting short story that I read on a website dedicated to short stories. It has some tenuous connection to chemicals, but not surfactants. See what you think. https://728stories.com/

All the best

Surfactants Monthly – November 2022

It’s strictly business this month, with little time for music or general chit- chat. We’re saving that all for next month with a short story and some musical exploration – maybe combined, let’s see. The news is also somewhat slim. Nothing to read into that, really, just natural variation, I think.

So now – straight to the News, which as usual is largely courtesy of our good friends at ICIS.

Encouraging news out of Louisiana as Sasol reported that it expects to complete repair work at its Ziegler alcohol unit at Lake Charles, Louisiana, by the end of the first quarter of 2023, subject to delivery of equipment. The plant was damaged in a fire on 15 October. Sasol was able to restart alcohol production at 50% utilisation during November, while isolating the damaged section for repairs, it said. The timeline to resuming full production rates depends on completion of the repair work. The fire’s impact on production prompted Sasol to declare force majeure on supply of US Ziegler alcohols and derivative products in October. The force majeure will be lifted as soon as production rates and inventory levels improve, the company said.

Something to celebrate next year in Louisiana

Meanwhile in Asia, the alcohol ethoxylate picture continues to weaken according to ICIS: Asia’s fatty alcohol ethoxylates (FAEs) spot market is expected to remain sluggish till the end of the year due to prevailing weak macroeconomic conditions and the global downturn. Spot interest has been tepid due to various uncertainties.

Market's rather tepid

Recession fears, inflation woes, the Russia-Ukraine war and the fallout from the sanctions on Russia have seen an escalating energy and food crisis weighing on demand and curbing spot appetite. “Spot business is limited and mostly restricted to small lots on a need-to basis,” a supplier said. The coronavirus pandemic-induced slowdown in the Chinese economy has also dented demand. “We are waiting for China to relax its zero COVID-19 policy and for Chinese demand to pick up but it looks like this policy will stay till March next year,” another supplier said. Factories in China have been shuttered or are running at lower rates due to the sporadic partial and full lockdown restrictions imposed on several cities to contain the spread of the virus. Manufacturing activities have stalled, hampering business activities. China's official purchasing managers index (PMI) showed the October manufacturing index at 49.2% and the non-manufacturing index at 48.7%, where both readings have fallen into the contraction range. Due to the uncertainties, trade has largely been restricted to term or contract shipments as buyers adopt a cautious stance and are reluctant to lock in any large forward spot shipments.

A lot of downward pressure

Interestingly, at the same time, fatty alcohol supply tightness in Asia leads to an uptick in pricing: Asia’s fatty alcohol mid-cuts market is likely to see a pick-up in spot enquiries due to limited spot availability from both planned and unplanned plant outages. “There is more demand from China for mid-cuts C12-14 cargoes due to the shortage of supply,” a regional supplier said. A regional fatty alcohols plant in southeast Asia was shut due to production issues, while two other plants in the region had been running at reduced rates after resuming production in October, following their planned three-week shutdowns. “We are planning to increase our plant utilisation rate as we are out of stocks till February,” another supplier said. [ Good timing given the overall economic situation, I’d say]

Not exactly a roaring recovery though..

An excellent article by ICIS’ Al Greenwood gives us an early look at how Indorama’s IOD (Integrated Oxides and Derivatives) business is doing in South America – That is the old Oxiteno. Indorama expects surfactants demand in South America will continue to grow in the agricultural and energy markets, an executive said.  Brazil had a good crop season this year and next year's production could reach a record, said Joao Parolin, CEO of Indorama's Integrated Oxides and Derivatives (IOD) business for South America.  He made his comments on the sidelines of the annual meeting of the Latin American Petrochemical Association (APLA).

Nice outlook in South America

Agriculture is an important end market for surfactants, and Brazil is said to feed about 1bn people in the world each year with its products, Parolin said. Soybeans and corn rank among its largest agriculture crops.  Brazil also produces sugarcane for sugar and ethanol as well as cotton for textiles, he said.  Energy production is another important end market for surfactants, and oil output is expected to grow in Brazil. Parolin also pointed to rising oil production in Argentina.  While energy and agriculture are important surfactant end markets, home and personal care (HPC) is the largest one.  Inflation and the slowing economy are causing consumers to trade down and purchase lower cost products, Parolin said. These lower cost products use smaller amounts of surfactants.

However, home and personal care products must have some surfactants, and consumers will continue buying cleaning and personal-care products. As a result, demand will remain resilient.  For paints and coatings, demand patterns are shifting from new homes and new automobiles to home renovation and automobile renovation, Parolin said.

And in related news: Indorama Ventures’ third-quarter net profit jumped year on year on the back of stronger polyethylene terephthalate (PET) and oxides earnings, but fell compared with the previous quarter as tailwinds seen earlier in the year started to normalise, the company said.

Key points
- Combined PET earnings before interest, taxes, depreciation and amortisation (EBITDA) rose 27% year on year as firmer volumes seen since the start of the year continued.

- Integrated oxides and derivatives earnings more than doubled year on year on the back of integration benefits from the acquisition of Brazil-based surfactants specialist Oxiteno in April this year. Fibres division earnings were steady year on year during the quarter.

- Earnings declined across the board quarter on quarter, with PET operations impacted by weak demand and high energy pricing in Europe and oxides performance hit by lockdowns in China.

“Our management is working hard to extract the advantages that we enjoy in terms of geographic leadership, product diversity, and an unmatched customer base of global household brands. Together with our habitual lens on cost management, these actions will help us to weather the economic challenges and continue to focus on our long-term potential,” said Indorama Ventures CEO D K Agarwal.

In a continuing saga of weak markets in Asia: ICIS reports that The Asian linear alkyl benzene (LAB) market has been flat in recent weeks and with the downstream LAB sulphonate (LAS) sector on the decline, the LAB market will continue to find limited support from the derivative sector.

• Weak economic outlook fans bearish LAB sentiment

• Firm crude oil, upstream markets squeeze LAB margins

• LAS demand tepid on weak detergent, cleaner market

Disappointing Laundry

The weak economic outlook coupled with recession fears continue to prompt austerity measures among consumers, with priority placed on food and energy over discretionary items such as detergents and cleaners.  Consequently, demand for LAS remains in a low ebb, with appetite for spot cargoes weak.  Most users have sufficient stock from contractual offtakes to meet production requirement.  Suppliers concede that offers at $1,500/tonne CFR (cost & freight) SE (southeast) Asia were met with lukewarm interest, with sporadic sales in the mid-to-high $1,400s/tonne CFR SE Asia, according to ICIS data.  Some buying indications have fallen under $1,400/tonne CFR SE Asia but sellers deemed these prices too low to consider, given LAB prices in the $1,700s/tonne CFR SE Asia.  “The weak LAS market would continue to pressure the LAB sector,” said a trader of LAB in Asia. While demand for LAB remains weak, margins are squeezed by relatively firm crude oil and upstream markets.  Yet, LAB sellers find difficulty in raising prices as demand for LAS remains lacklustre.  Ample supply in the region has also prompted buyers to be unhurried.  With the zero COVID-19 policy in China still in force, some participants are concerned that Chinese supply would grow as the market enters the year-end lull.  If more lockdowns take place, trade and demand in China are expected to be constrained.  This could spur suppliers to look to outside of China to mitigate rising stock.  Two plants in Asia undergoing scheduled maintenance in November could help rein in availability in the near term.  “In the short term, supply is tightened by plant turnarounds but the poor demand could extend to after the Lunar New Year holidays in late January,” said a buyer in northeast Asia.

A familiar pattern

An interesting piece of press published by Alcohols guru, Lucas Hall reads as follows: Sinarmas Cepsa Pte Ltd and its parents companies, CEPSA and Golden Agri-Resources (GAR), on Tuesday signed a Memorandum of Understanding to expand bio-based chemicals production at its site in Lubuk Gaung, Indonesia, according to a press release. [It looks like they are talking about fatty alcohols]. Sinarmas Cepsa cited growing demand for home and personal care products, as well as increased demand for sustainable, bio-based solutions across a variety of industries as the driver for global fatty acids and natural alcohols demand. “Sustainably sourced, bio-based alternatives are key requirements for our customers and the markets we serve,” said Sinarmas Cepsa CEO Kung Chee Wan. “We are excited to grow with our customers and increase the scale of our sustainable and traceable integrated supply chains.”  Pending final investment decisions, Sinarmas Cepsa said the incremental production will bring additional employment and economic benefits to the local community.  The site, which currently has an oleochemical production capacity of 200,000 tonnes/year, started production in 2017.

ICIS’s Al Greenwood has published an excellent analysis of the sad state of the Mexican chemical industry. A portion of this work, of particular relevance to surfactants, I excerpt here: For years, Mexico's chemical plants have struggled with chronic shortages of feedstock, and the country is unlikely to reverse those shortages.  All of Mexico's crackers rely on ethane as a feedstock, and most of that ethane comes from the associated gas produced from the country's oil wells. Mexican oil production has been in long-term decline. A new fields programme by state energy producer Pemex was supposed to reverse those declines.  Oil production remained stuck below 1.80m bbl/day, lower than Pemex's goal of 1.95m bbl/day for 2022.  Tellingly, Pemex third-quarter investor presentation excluded slides showing its forecasts for oil production. Fitch Ratings and Moody's Investor Services doubt that Pemex's oil production will increase by any significant amounts in the next few years. The company lacks the money to increase spending on exploration and production.

Mexico has tried to offset the declines in ethane production through imports, but these have been insufficient.  The following table shows Mexico's ethylene production over the years. Figures are in millions of tonnes/day. The red bar represents ethylene. The yellow bar is ammonia. The year 2022 runs through August.

Quite shocking

Source: Secretary of Energy (SENER)

The decline in ethylene production has troubling implications because Mexico does not produce enough ethylene for its ethylene oxide (EO) plants. Recently, Pemex shut down its EO plant in La Cangrejera, leaving Mexico with just one EO plant in Morelos, Veracruz state.  Pemex is Mexico's sole producer of EO, and the chemical is too dangerous to ship overseas, leaving downstream consumers such as surfactants producers with no alternative sources. Ugh.

Mexican Surfactant Outlook - Rather Dry

And finally, US October ethylene oxide (EO) contracts were assessed at 61.75 cents/lb ($1,361.34/tonne).  The decrease in EO contract prices was a result of the continued decrease in ethylene contract prices for the month of October.  Initially, supply was tight on the market due to planned maintenance on a Seadrift, Texas plant. The maintenance has since been extended, however, availability of EO is improving.  Demand for EO and its derivatives has decreased on recession fears as well as increased interest rates and inflation. The market is expected to continue to balance in Q4.

Surfactants Monthly – October 2022

Surfactants Monthly – October 2022

I’ve been watching Derry Girls on Netflix. Set in Northern Ireland in the 90’s, it’s a comedy that relates the exploits of a group of Catholic schoolgirls in Derry / Londonderry / Derry / Londonderry / Derry – well depending on who you are….you know? Each half-hour episode manages to be funny, poignant and thought provoking. It’s the time of the peace process and the uneasy days leading up to a sort of détente between the factions. Bomb threats were still real and the Protestant and Catholic lives seemed like two worlds co-existing in the same time-space and only tangling at the edges with explosive results. It’s worth a try although viewers whose native language is American may need subtitles. Some of the contrasts are heart-wrenching. The protagonists, doing a silly dance as part of a school play, oblivious, while outside the road is closed by soldiers and their parents watch in silence on the telly as a bomb is defused. Some of the set-ups are ridiculous but are accepted without question by the viewer. One of the girl’s cousins, a boy visiting from England, is readily enrolled into the girls' school by the headmistress, a nun, – because, well, with an accent like that, how long will he last in the boys’ school? And we can’t let him go the Protestant school…..so… he's a Derry Girl! Check it out.

You'll definitely laugh and probably cry..

This month’s music exploration is inspired by Derry Girls. Season 3 opens with a retrospective by the girls’ parents as they look back fondly on a high school dance that took place in 1977. And right there in about 2 seconds there’s snippets of two great songs from Northern Irish bands of that 70’s era – and wow - did that open the floodgates of memories of a great album I bought in 1979 and one that I didn’t but must’ve heard a million times on John Peel on the radio back then. So after the surfactants news, we’ll get into that great music. As always, the sections are clearly labelled, so if you’re only here for the music – skip to the end.

Bitten twice - in 2 seconds

The News

The month’s news continues to have a downward feel to it, price and demand-wise that is. Not that it’s necessarily a bad thing. Cycles happen. Ups are followed by downs. The cure for high prices is high prices, blah blah etc. It feels weird when you’re in it though. However, if you take a step back and think about your business plan, your idea, your value proposition. Is it good? Are you good with it? Then good. Some things you’d change? Some things you really have put off changing ‘cos you know, too crazy busy and stuff? Now’s a good time.  That’s my sage management counsel -  all included in the price of your blog subscription. You’re welcome.

Asian ethoxylates posted another dodgy month according to ICIS. The market is expected to remain sluggish in the near term due to the decline in feedstock fatty alcohol mid-cuts C12-14 and prevailing weakness of local currencies versus the US dollar.  “Demand is slow due to the falling feedstock C12-14 mid-cuts and currency depreciation,” a regional supplier said.  Regional currencies including the Chinese yuan, Indian rupee, Japanese yen, Malaysian ringgit, South Korean won and Thai baht have all depreciated significantly against the US dollar this year [thanks uncle Fed!].  Spot prices of feedstock fatty alcohol mid-cuts C12-14 have fallen by about 20% since September to $1,330/tonne FOB (free on board) southeast (SE) Asia on 26 October, ICIS data shows. [is this a the canary in the coal-mine or is China digging their own coal mine?]

Wow!

A bunch of news from Sasol after the Lake Charles fire in October. First, the lesson. If Sasol can have a fire at their plant, you can too. Sasol does things right and takes this stuff seriously. You do too. Accidents still happen. No-one means for their plant to combust but it happens. Have a big wide-open mind when looking at your systems. They will not catch everything.

Anyhow – ICIS reports that Sasol expects to have some production of Ziegler alcohols [these are the linear detergent range alcohols like 1214 etc] before the end of November after a fire shut the plant on 15 October.  Major market players have not reported a major shock to their supply chains as a result of the disruption, as lengthening inventories against the backdrop of major economic headwinds globally exert added pressure on the market during the typical Q4 destocking season.

Sasol Updates

• 15 October: Fire at Ziegler alcohol plant causes unplanned shutdown, investigation underway

• 21 October: Sasol says fire limited to relatively small section of facility; declares force majeure on Ziegler alcohols, derivatives as it assesses damage, scope of repair

• 26 October: Sasol says fire limited to portion of plant for which it has redundant processes;  continues investigation into fire, scope of repair; expects some production before end-November

The fire was isolated to a portion of the plant for which Sasol has redundant processes as a result of the Lake Charles Chemical Project investment.   Sasol will work toward restarting the plant using the unaffected sections once all safety checks have been completed, with some production expected before the end of November.  The force majeure on Ziegler alcohols and derivatives remains in place.

Maintain a wide open mind

Meanwhile over in Europe, it’s not just BASF suffering from the energy crisis brought on by the way in Ukraine. As the great Al Greenwood reports in ICIS: Dow is cutting natural gas consumption by 15% at its European sites because of high costs, a company executive said.  "Throughout the third quarter, Dow implemented plans to reduce natural gas consumption at our sites in Europe by more than 15% due to high energy costs," said Howard Ungerleider, Dow chief financial officer. He made his comments during an earnings conference call.  During the third quarter, one of Dow's biggest challenges was expensive electricity, said Jim Fitterling, Dow CEO. In Europe, electricity prices were as high as €400/kWh.

To address high energy costs, Dow is working with European governments on policy proposals, Fitterling said.  For its part, Dow acquired an equity stake in Hanseatic Energy Hub GmbH (HEH), a consortium building a liquefied natural gas (LNG) terminal at Dow’s site in Stade.  Meanwhile, Germany’s economic affairs ministry chartered a fifth floating storage and regasification unit (FSRU) as the country seeks to quickly replace a shortfall in Russian gas deliveries.  "We've got a good game plan to navigate the winter and to navigate the next year," Fitterling said.

Given the outlook in the upcoming months, Dow has announced a cost-cutting plan worth more than $1bn.  One part of the plan will optimise Dow's mix of plants, products and applications, Fitterling said.  Another part will lower rates for higher cost plants, he said. "We will continue to do that, especially in Europe while energy costs remain as they are."  Right now, Dow does not have plans to shut down any plants, he said.

Other steps will reduce turnaround spending and improve operation efficiency, Fitterling said.  Costs are starting to fall for commodities, raw materials, freight and logistics, he said. "We've got a big effort on purchased materials and freight and logistics to get costs down, and also on purchased services, including contract labour."

Dow is speeding up the completion of some of its digital projects, which Fitterling said should also cut costs.  Other steps include maintaining a 15% reduction in capacity across Dow's polyethylene (PE) assets and placing a priority on its higher-margin functional polymers.

It is reducing operating rates across its polyurethane assets in Europe to mitigate high energy costs while still meeting demand.  It is looking for ways to improve marine-packed cargo logistics along the US Gulf Coast.  Dow started a cold furnace idling programme for its crackers. When Dow had idled its crackers in the past, it would keep its furnaces on hot stand-by. Because of the demand outlook, there is no need to do so, Fitterling said.  Dow plans to idle assets across its Performance Materials and Coatings segment for two to six weeks to manage cost and match demand, it said. The segment includes Dow's Consumer Solutions business as well as its Coatings and Performance Monomers business.  Coatings and Performance Monomers makes acrylates, acrylic binders, dispersants and vinyl acetate monomer (VAM).  Consumer Solutions makes adhesives and sealings, surfactants and silicone products.

Dow's EU Planning

Some positive news from Dow in the same earnings call: HOUSTON (ICIS)--Dow has started up its US alkoxylation expansion project in the state of Louisiana, and it plans to commence its Spanish alkoxylation expansion project by the end of the year. The Louisiana expansion should add 60,000 tonnes/year, and the Spanish expansion should add 34,000 tonnes/year, CEO Jim Fitterling said. He made his comments during an earnings conference call.  The surfactant expansions will serve pharmaceutical and home-care end markets.  Dow's alkoxylates fall within the company's ethylene oxide (EO) chain.  Monoethylene glycol (MEG) is the weaker part of that chain, Fitterling said. To address that weakness in the EO chain, Dow is concentrating its investments in higher-value applications, such as alkoxylates and amines for the company's oil-and-gas franchise.

Full speed ahead in the US though.

ICIS reports some interesting dynamics in the Asian LAB market : The market remains quiet while suppliers talked of squeezed margins from rising feedstock costs. The desire for higher values, however, were countered by the persistently weak demand in the region.

• Weak economic outlook weighs on sentiment

• Weak LAS and LABSA markets put dents on LAB demand

• Pressure on sellers as competition stays elevated

Chinese suppliers appear to still be staying away from regional markets in view of the prevailing tepid demand. Most suppliers have yet to quote offers after the Golden Week holiday in early October, as the market remains quiet amid the People’s Congress.

“Most sellers are focusing on the domestic markets since the export markets are generally weak,” said a producer in China.  Spot prices in China rose to yuan (CNY) 12,700/tonne DEL (delivered) in October, from CNY12,000/tonne DEL in the first half of the year, market sources said. In spite of the stringent COVID-19 restrictions hampering trade and demand, buying momentum in the mainland remains adequate with Chinese makers having little impetus to look toward export destinations.  Over in Asia, demand for downstream LAS (linear alkyl sulphonate) and LABSA (linear alkyl benzene sulphonic acid) remains at a low ebb with poor economic outlook amid recession fears hitting consumer demand of detergents and cleaners.  Most users have sufficient contract volumes of LAB to meet production needs, resulting in thin activity in the spot market.  The Indian LAB market was similarly lacklustre. Having just exited the traditionally slow monsoon season at the end of September, activity started to taper again ahead of the Diwali festivities next week.  At the same time, competitive offers, first from the Chinese at the start of the third quarter, and more recently from the Middle East, continue to weigh down the market.  Buyers, on the other hand, mostly buy on a need-to basis since most can rely on domestic supply. Others are cautious and slow to commit, as the availability of offers fuel the anticipation of a weakening market.  “The import market is regularly facing competitive offers while buyers are non-committal,” said a trader in India.

Steadily down

Earnings Season: The closely watched Stepan results for Q3 came out a couple of weeks ago. Study it like scripture.. Q3 operating income rose 36% year on year, with sales rising 19% to $719m.  Although Surfactants and Polymer sales volumes fell, sales rose on higher prices due to pass-through of higher raw material and logistics costs, the US-based producer of specialty and intermediate chemicals reported.

Q3 gross profit rose as sales grew at a faster pace than cost of sales [I love it when that happens, don’t you? But doesn't it remind you of a period not too long ago…?].

Stepan, Q3 ended 30 September:

Surfactants Operating income was $39.0m, up 13% from $34.5m in Q3 2021, with the increase primarily driven by improved product and customer mix that was partially offset by an 8% decline in global sales volume.  The sales volume decline was primarily due to lower global commodity laundry demand and raw material constraints in North America. Higher demand in the Functional Products and Institutional Cleaning end markets partially offset the decline in sales volume.

Polymers Operating income was $31.9m, up 61% year on year, with the increase primarily due to margin recovery and improved mix that was partially offset by a 10% decrease in global sales volume.  The volume decrease was primarily due to an 8% decline in global rigid polyol demand driven by double digit declines in Europe and Asia.

Specialty Products Operating income was $9.7m, up from $2.4m in Q3 2021, with the increase primarily due to improved margins and customer mix within the medium chain triglycerides (MCTs) product line.
Over the next few quarters, Stepan will be challenged by slowing global economic growth, weakening consumer and construction demand, continued inflationary pressures and a stronger US dollar, CEO Scott Behrens said.  For the full year of 2022, "we believe that Surfactants, Polymers and Specialty Products should all deliver full-year earnings growth versus prior year,” he said.  "Surfactant volumes within the Functional Products and Industrial Cleaning end markets are expected to show full year growth over 2021,” he said.  “Despite short-term volatility and challenges, we believe that the long-term outlook for rigid polyols will remain attractive as energy conservation efforts and more stringent building codes are expected to continue,” he said.  In Q4, Stepan will incur incremental expenses because of planned maintenance at its North American phthalic anhydride (PA) plant, he added.

A resilient business model is one that punches back

Back in Asia, ICIS’s great Helen Yan reports that the oleochemicals market is expected to remain flat in the fourth quarter due to the prevailing sluggish demand from China amid its zero-COVID policy, which is expected to remain in place for the rest of this year.

• China’s zero-COVID policy to weigh on Chinese demand

• Economic slowdown,  global recession fears curb demand

• Monsoon rains from Nov-Feb may disrupt upstream palm supply

Demand from China has not picked up despite the return of players from the Golden Week holidays from 1-7 October. “With the zero-COVID policy remaining in place and no relaxation of this policy, Chinese demand is expected to remain slow or flat in the fourth quarter,” a trader said.  The Chinese government did not announce any relaxation of its zero-COVID policy at the week-long 20th National Congress of the Communist Party of China (CPC), which started on 16 October in Beijing.  Meanwhile, the continued decline in feedstock palm kernel oil (PKO) prices has curbed spot interest in mid-cut C12-14 fatty alcohols, as buyers stayed on the sidelines and adopted a cautious stance.

“The PKO price has fallen to around $880/tonne, down more than 20% since early September,” a supplier said.  “However the monsoon rains from November to February may disrupt supplies and production output in upstream crude palm oil and palm kernel oil, which will lend support to the oleochemicals market,” he added.  Mid-cut C12-14 fatty alcohol spot prices were at $1,450/tonne FOB (free on board) southeast (SE) Asia on 12 October, down about 13% since early September, ICIS data showed.

Flattening out? Hard to tell.

And so to the US, where Alcohols guru, Lucas Hall reports the same downward trends as noted elsewhere. US Q4 fatty alcohol contracts settled mostly lower from their Q3 settlements, tracking a downtrend in feedstock palm kernel oil (PKO) costs and improving to long supply as economic concerns mount.

• US Q4 contracts settle mostly lower

• Mid-cuts, single-cut C16 contracts see biggest drop

• C18, C16-18 see more modest decreases

Watch the grey and dark green lines

Source: CME Group, Matthes & Porton, WSJ Cash Markets

Mid-cut alcohols contracts fell more than 31% from Q3. Mid-cut alcohols fell as the downtrend in PKO costs coincided with long supply and slowing demand, namely in consumer-end cleaning markets.  C16-18 alcohols fell less than 7%. C16-18 alcohols fell less drastically as prevailing tight C18 supply offsets the downward pressure felt from lower feedstock costs and waning demand.

Always find this type of graph confusing..you?

Source: ITC

In the long chains market, the premium on material with C18 content stems from continued tight supply associated with bottlenecks that cropped up earlier in the year when PKO costs were at a premium to alternative feedstock coconut oil (CNO). The PKO premium prompted an increase in CNO consumption in the feedslate. CNO produces much less C18 content by volume than PKO.  PKO and CNO prices are close to parity, supply of other chains long and demand softening, which may impinge production and the supply recovery in C18 markets.  Sasol confirmed it is completing a planned turnaround at its Louisiana site and plans to return to production sometime next week.

Q4 contract ranges*

*The prices in the table represent a range of settlements for standard balance material heard throughout the quarter for the majority of market participants. Prices above and below those listed in the table were heard throughout the quarter but were excluded as they were not viewed as representative of the wider market.

When was the last time you saw this?

And– European EO. This is a tough one. It’s driven by the two forces of war-time energy costs and collapsing demand in the face of same. How does it all play out? Only the inimitable Melissa Hurley of ICIS can reliably lay it all out: European ethylene oxide (EO) suppliers have dealt with significant production cost pressures due to increasing utility costs from high gas and electricity prices.  There are expectations that high gas prices will remain an ongoing issue into 4Q when 2023 adder fee talks ramp up.

According to Aura Sabadus, ICIS senior gas journalist, "Although gas prices are falling they are still likely to remain elevated compared with long-term averages, and especially against US gas (Henry Hub). So European petrochemical producers will still be at a competitive disadvantage to other regions."

Tough in Europe

Upstream ethylene prices rose by a record monthly adjustment in April, and there were additional double-digit energy surcharges applied in the EO market.  Since April, however, ethylene prices have been on a four-month decline and have almost returned to January 2022 levels. Despite the ethylene cost relief, EO suppliers are still struggling with high utility costs and margin erosion.  The EO price includes a conversion fee over the cost of ethylene, which is negotiated at the beginning of the year. Depending on the terms of an individual contract, the fee can be revised annually or fixed for several years at a time. Formulas can also vary in terms of ethylene cost pass through.

Ethylene edges down..?

Ethylene prices have increased 12% in the past year. The ethylene and EO price spread peaked in April due to record prices, but since then ethylene prices have fallen, reducing the spread.  Nonetheless, high utility costs have kept pressure on sellers' margins.  In 2021, ethylene prices increased by around 48%. The increased cost resulted in stable-to-firm adder fees for 2022. Some EO contracts were stable at a high level or were not up for renewal, resulting in steady fees in some instances. In the Mediterranean, the increases were larger, depending on starting point and account.

There are a few planned ethylene glycol (EG) and EO shutdowns at the end of Q3 and the beginning of 4Q in Belgium and Germany. BASF has planned a EO maintenance turnaround at Ludwigshafen, Germany in November, and a planned turnaround is taking place in INEOS Antwerp for EG and EO in September.  In 2021, supply was tighter due to more unplanned outages.

EO sources will discuss increased freight rates and additional energy adders for 2023. The EO production process is very energy intensive, and some companies have suffered from cost pressures due to emission adjustments.  Producers are separately discussing adjustable variable adders based on published indices (inclusive of CO2, gas and electricity) which could move on a monthly basis.

Demand strength varies depending on EO derivative. MEG demand has been weaker than expected in 2022 whereas, surfactant demand has been better. Glycol margins are under greater pressure amid lengthy supply and weak demand, with production rates lowered this year as a result.  Ethanolamine activity has picked after a particularly slow start to September. Glycol ether demand for the construction and automotive sectors remains slow, and there is little sign of improvement.  Downstream affordability is a main concern as demand starts to decline for certain products. The rising cost of living and inflation is weighing on consumer confidence.  On the consumer side, it is difficult to predict where demand is heading. EO demand into personal care remained steady this year, but there are concerns about general end-user demand due to the rising cost of living and rising inflation in Europe.

In August, INEOS Oxide launched a new low carbon, bio-attributed EO based on certified bio-based sources which delivers a greenhouse gas saving of over 100% compared to conventionally produced EO. Bio EO is currently at a notable premium to traditional EO.  In Q1, Clariant launched its Vita 100% bio-based surfactants and polyethylene glycols (PEGs), and joined the Renewable Carbon Initiative (RCI) to promote using renewable raw materials instead of fossil-based carbon.

And finally – do want something else to worry about? OK then, courtesy of Chemwatch, an interesting website I peruse occasionally, there’s a sulfur shortage looming. Yep. As we know [you should know], sulfur today comes mainly as a byproduct of petroleum refining. Sulfur is usually present in fossil fuels at about 1-3% by weight, which accounts for 80% of the more than 80 million tonnes of annual global sulfur supply. The switch toward renewable energy is imminent, however, and with it an overhaul of crucial chemical processes and a loss of key reagents such as sulfuric acid in the scales we have currently. It’s predicted that demand will outstrip sulfur supply by anywhere from 40 to 130% by 2040, depending on the extent of renewable energy infrastructure. So – sulfonators, take heed. The article actually linked to an even more interesting piece on a site called “The Conversation” which I’ve not seen before. It’s worth checking out – this cool graph is there

Pretty informative right?

This (the Conversation) article also says that the people who really get shafted by the sulfur shortage will be, guess who -  the poor in the 3rd world whose food supply will be threatened. So – sulfonation – first world problem, maybe..?.

The Music

I gotta tell you, this is one of the greatest rock-n-roll albums ever made. And I suppose it falls into the category of punk. It ranks up there with the greatest works of the Sex Pistols, Damned and Ramones. And like the greatest of those it presents riffs and sentiments that also appeal to the most ardent fan of Black Sabbath, Deep Purple or Motorhead (the ultimate crossover band). I’m talking about Inflammable Material by Stiff Little Fingers. For tribal reasons, which I’ve written about in this blog before, I would never see the band live, but the album surely made a mark through it’s thousands of playings. The songs deal with the typical teenage angst and rage with an overlay of life in Northern Ireland during the troubles. It’s a potent mix which brings out the best in music and lyrics. So – let’s dig in. The album opens with this:

Oof yeah, right? That’s a punk anthem for sure. And the lyrics don't take too much reading to see that they’re an even-handed rejection of both oppressors and liberators. Not a monochrome scream against the man, like many of their peers’ songs.

We're a suspect device if we do what we're told
But a suspect device can score an own goal
I'm a suspect device the Army can't defuse
You're a suspect device they know they can't refuse
We're gonna blow up in their face

The other great album of the period, also from Northern Ireland is of course , The Undertones (1979). Pure pop, with punk sensibilities admittedly, but this is escapist pop with not a reference to the IRA, UDA, RUC, troubles, let alone bombs, bullets and barb-wire to be found. Perhaps the greatest pop song of all time – taking the hormones of a generation, distilling them, putting them through PG filter-paper and packaging for prime-time consumption is this – Teenage Kicks.

And, I mean would that opening not appeal to your average Ted Nugent fan. Would perhaps the sentiment not also? The lyrics are actually worth reading in their entirety – but here’s a snippet.

Get an Alternative Ulster
Be an anti-security force
Alter your native Ulster
Alter your native land

Let’s stick with SLF for another one. This is the song that did it for me. It’s a quivering slab of raw reggae. Their rendition of a Bob Marley song with lyrics adapted to the wrong place at the wrong time in Belfast. Johnny Was (a good man). Here’s a live version from the same concert.

In a top floor flat in the middle of the night
There's a man with rifle and Johnny in his sight,
I said oh no, we can't let that kind of thing happen here no more
Oh no
Johnny, Johnny, Johnny...

A single shot rings out in a Belfast night and I said oh
Johnny was a good man

You know, I never even listened to the original by Bob Marley. Let’s check it out together.

Well, that was an emotional tidal-wave. Did SLF do it justice? Yeah, I think so.

OK – time for some light relief, which the Undertones can certainly and reliably provide. Here comes the Summer. At 1 minute and 24 seconds from Top of the Pops

Is it a crime
To be young
Every time
We have some fun
They put us down
And tell us that we’re wrong
Every time they sing the same old song
Here we are nowhere
Maybe that’s where we belong

Rage was not a quality to be found in the Undertones work. The furthest they would go might be termed persistent insistence in the direction of a paramour. You’ve got my number. Why don't you use it?

So – what to make of all this? Two great bands emerging at the same time from the same town – a cauldron moreso than just a town, really, and with two completely different takes on the world in their music. If you had to choose, which do you prefer? Me?  For breadth and depth and density and fullness and unashamedness and unselfconsciousness and rawness and barely-containedness and Fibonacci-jaggedness and singing-through-the-lump-in-the-throatedness of emotion, I have to go with SLF and anyway, the singer is Jake Burns so…  Here’s a song replete with double-entendres and some entendres-not-so-double. Funny, I think. Barbed Wire Love

Surfactants Monthly – September 2022

This month’s blog is one which chronicles, almost uniformly, a downward trend in pricing. This you may cheer you or not, depending on your perspective. There is no doubt that supply chain tightness is loosening and that is a good thing. Prices will find their own level in the coming months. I recently paid, through gritted teeth, an invoice on which was listed a “supply chain surcharge”. Take it off already! It’s annoying. The roller-coaster has surely turned.

Now the fun really starts

We’ll jump straight into the news now and, if we have time, maybe get into some music at the end.

As always, a big shoutout and thanks to my friends and colleagues at ICIS for the news. I subscribe and you should too.

At the end of the month and, as I think we predicted in last month’s blog, September US ethylene oxide (EO) contracts were assessed at 64.55 cents/lb ($1,423.07/tonne)

The decrease in EO contract prices was due to a decrease in October ethylene contract prices. The supply of EO remains tight following a planned maintenance on a Seadrift, Texas plant, however, the market is expected to balance in Q4.

Downward tilt but with some friction

Meanwhile in Europe European ethylene oxide (EO) contract prices for September were assessed at a steep double-digit drop on the back of a sharp fall in upstream ethylene values.  Despite the feedstock decreases, suppliers remain under production cost pressure due to the utility costs from high gas and electricity prices.

• Gas surge still weighs on production costs heavily

• Energy surcharge discussion ongoing, more for 2023 contracts

• Demand outlook for surfactants good

September EO prices where assessed at a €98/tonne drop on both ends of the range, bringing prices to €1,502-1,640/tonne free delivered (FD) northwest Europe (NWE).

More clear trend down

The ethylene contract price for September settled at €1,305/tonne, down €120/tonne from August.  The debate over EO energy surcharges continues and is expected to feature heavily in contract talks for next year.  Natural gas prices surged on Monday as Gazprom announced after the market’s close on Friday that Nord Stream flows would not restart as expected.  EO market sources are discussing increased freight rates and additional energy adders for next year. There is hope that the situation will become clearer in the fourth quarter of the year despite the heightened uncertainty seen.

An enduring image from 2022

Demand is still good for certain derivatives such as surfactants and ethoxylates but demand for monoethylene glycol (MEG) remains poor. There is general concern for demand across commodities after the summer break, however.  Eurozone manufacturing output contracted further month on month in August due to the rising cost of living eroding the purchasing power of consumers.

More BASF Surfactants! ICIS reported just today that BASF and South Korean producer Hannong Chemicals are planning to establish a joint venture for the commercial production of non-ionic surfactants in the Asia Pacific, the two firms said on Thursday.  BASF will hold 51% and Hannong Chemicals 49% stake in the proposed joint venture called BASF Hannong Chemicals Solutions Ltd., they said in a joint statement.  The joint venture will combine BASF’s technology and product innovation capabilities with Hannong’s production capabilities to supply non-ionic surfactant products to BASF and Hannong Chemicals, each with their own sales and distribution network, enabling the two companies to cater for increasing market demand, they said.  The new company will be located in the Daejuk site at the Daesan Industrial Complex in South Korea. [I can’t say I know Hannong. Here’s their website].

More Alpha Olefins! ICIS reports that ExxonMobil’s 350,000 tonne/year linear alpha olefins (LAO) facility in Baytown, Texas,  remains on track for start up in 2023. Announced in mid-2019, the facility will produce 10 products to be marketed under the ELEVEXX brand for external sales, but over half of the nameplate capacity is likely to be for captive use, according to Michael Fanset, global market development manager for performance olefins and derivatives at ExxonMobil  “The right place to put this was in the US because that’s where the market is and where our customers are, both our internal and external customers,” Fanset said, speaking on the side lines of the annual meeting of the European Petrochemicals Association (EPCA)  The decision to site the unit in Baytown was taken based on facility space, feedstock access and synergies with other production units at the site, including a solution polymers unit located close by. “Plot space fit, the feedstock was available, the were also some site synergies we could take advantage of,” Fanset said.

ExxonMobil announced at the start of this year plans to split its operations into three units, upstream, low-carbon solutions and product solutions, the later containing its downstream and chemicals operations. Part of its strategy on developing its chemicals assets has been to grow its footprint in the olefins derivatives space, according to Fanset.  “We [have] a very clear direction on our chemicals strategy to grow olefins derivatives,” he said. “We are a big PE player, and a big PP player, but we wanted to diversify olefin derivatives and LAO does that as an ethylene-based derivative,” he said.

“LAO has been an enabler for what we call our performance products, it goes into performance PE, goes into synthetics,” he added. “We’ve been purchasing it on the outside so as we looked at that opportunity we also saw the number of the external markets that were complimentary to what we do, and so we see LAO as what we would call a performance product that we would be able to grow internally and externally.”

The company’s chemicals strategy “is growing through large complex size investments like this”, Fanset added.  ExxonMobil has also completed a cracker and olefins derivatives complex with SABIC in Corpus Cristi at the end of 2021, and is expected to complete a large-scale polypropylene capacity expansion in Baton Rouge, Louisiana this year. LAOs are used in plastic packaging, engine and industrial oils, surfactants and other specialty chemicals.

Big in Texas

Continuing the downward trends news: ICIS reports that Asia’s fatty alcohols ethoxylates (FAE) demand is expected to remain subdued in the near term as buyers retreat from the market due to the price declines in the feedstock fatty alcohols mid-cuts C12-14 market and bearish market sentiment.

• Bearish sentiment, recession fears and inflation woes

• China to shut 1-7 October for National Day holidays

• Falling feedstock C12-14 fatty alcohols prices curb demand

Declining feedstock fatty alcohols mid-cuts C12-14 prices and uncertainties in the macroeconomics and geopolitics arena have been suppressing spot appetite, market sources said.  The feedstock fatty alcohols mid-cuts C12-14 prices have fallen by about 5% since early September to $1,520-1,640/tonne FOB (free on board) southeast (SE) Asia on 28 September, ICIS data showed.  “Recession, bearish sentiment, inflation and a strong US dollar versus local currencies have all weighed on demand,” a supplier said.  “Spot purchases are limited and if any, are usually for smaller parcels on a need-to basis,” he added.

Is that a dead cat bounce?

 “There are few enquiries and Chinese demand is weak due to the uncertain market outlook and upcoming holidays in China,” another supplier said.  The Chinese market is shut for the National Day holidays 1-7 October.  China, the world’s second-biggest economy, is projected to grow at a much slower pace of 2.8% this year compared with an earlier forecast of 5.0%, according to the World Bank, amid the country’s zero-COVID policy and ongoing property crisis.  It represents a sharp slowdown from the 2021 growth rate of 8.1% - the fastest recorded in a decade.  The Chinese economy has been grappling with partial and full COVID-19 lockdowns and power rationing due to scorching heatwaves, which engulfed Sichuan and Chongqing municipality as well as several other cities and regions in China recently.

Toward the end of the month, Stepan Company announced Monday that it has finalised the acquisition of the surfactant business and associated assets of PerformanX Specialty Chemicals. The acquisition includes intellectual property, commercial relationships and inventory.  "Alkoxylates are a core surfactant technology critical to Stepan's agriculture, oilfield, construction and household end use markets," said Scott R. Behrens, president and chief executive officer of Stepan Company. "We are pleased to have closed the acquisition of PerformanX and welcome PerformanX's customers to Stepan."  Financial terms of the deal were not disclosed. In an earlier statement the company said that the PerformanX acquisition should increase the company's annual revenue by $20m and it should be accretive to its margins for earnings before interest, tax, depreciation and amortisation (EBITDA).

More downward pointing news: Southeast Asia’s linear alkylbenzene sulphonate (LAS) market remains under downward pressure amid weak performance in the feedstock linear alkylbenzene (LAB) sector. Spot LAS prices were at around $1,550/tonne CFR (cost and freight) SE (southeast) Asia, but suppliers talked of growing difficulty in sealing deals at current levels.  Buyers have lobbied for parcels substantially below the offer prices, with the wide buy-sell gap reducing trade.

Familiar pattern

“Buying indications are declining and closing sales at current levels have become difficult,” said a supplier in northeast Asia.  Weak economic outlook and inflationary pressures have also dampened the surfactant and detergent sector, prompting caution among buyers of LAS.  “Inflation woes appear to have dented demand for detergents as people switch to cheaper alternatives or reduce the frequency of washing,” said a regional trader.  With consumers prioritizing funds towards food and utilities, demand for detergents could ebb further in the near term. [Uh oh.. we talked about this a few blogs back. A bit like what happened in 2008 / 9 . ]

Another “Downward Pressure” headline featured by ICIS on article by detergent range alcohols guru, Lucas Hall. Lucas notes that  Q4 fatty alcohols negotiations are ongoing, with freely negotiated settlements for mid-cut alcohols heard at a sharp decrease from Q3.

• Freely negotiated Q4 mid-cut contract settlements heard at sharp decrease

• C16-18 discussions ongoing alongside mixed feedstock, supply/demand fundamentals

• Economic concerns weighing on demand

Contract negotiations typically conclude by early October.  Mid-cut contracts face major downward pressure from a downward correction in feedstock palm kernel oil (PKO) the last several months.

The chart which rules them all

Source: CME Group, Matthes & Porton, WSJ Cash Markets

Long supply and slowing demand is adding to the downward pressure.

Because mid-cut supply is long and demand waning, some producers are separately offering to average down higher-priced Q3 contracts by adding additional Q4 volume at lower levels.

Co-products or..?

Source: ITC

Negotiations for long chains are expected to be more drawn out, owing to mixed supply and demand fundamentals.  C18 supply is particularly tight, offsetting the downward pressure felt from lower feedstock costs. Demand in the core surfactants market is slowing down and players are acting more conservatively as they manage their inventories with dampening consumer sentiment alongside mounting economic concerns.

Divergence usually temporary

Finally, the Economist wrote an interesting piece on Unilever which we may consider as a continuation of the Acitivist Investor Peltz / Marmite Maker Unilever saga. Essentially, CEO Alan Jope announced his retirement on September 26th and UL stock popped in response. This however, did not detract form the longer term trend which the article was keen to emphasize, i.e.:

You think you could do better?

The article outlines many good things that happened under Jope including the simplification of the ridiculously complicated corporate structure and the focus on health and hygiene. The piece goes on to mention that any incoming CEO has to deal with relatively new board member Nelson Peltz and investor pressure to break up the company. Tough job no doubt.  Would you want it? Think you could do better than Jope, even? Unless you are Laxman Narasimhan (who just left Reckitt to head up Starbucks - ugh!) the answer’s no you couldn't. And even if you are Laxman, the answer’s still only maybe.  Now, as regular readers know, the blog’s fascination with Nelson Peltz extends to his extended family which includes daughter Nicola and her new spouse Brooklyn (Beckham), giving us a barely valid excuse for this.

Big shoes to fill

So – that’s the end of the news. What else? Well, some music notes.

First, I read that Joey Ramone has sold a majority stake in his music catalog for $10 Million. Good for him, I guess. Sounds very corporate, doesn't it ? The Ramones were great though weren’t they? They came to the UK in ’76 and were part of that punk milieu of the 70’s with the Sex Pistols, Damned and lesser known bands like the Angelic Upstarts (of South Shields). I never saw them live; something to do with that tribalism back then. But some great songs really were a soundtrack to those teenage years. Starting with this classic. ; at less than 2 minutes

And this one – It sounds so American, right?

And – Beat on the Brat – with a baseball bat – also very American ..

And staying true to those 50’s rock-n-roll roots: Suzy is a headbanger

and the following song on the same album – Pinhead. Classic. Gabba gabba we accept you – what the heck does it mean? Apparently it’s reference to the 1932 movie, Freaks. Google it. Very weird.

But my favorite, for very personal reasons, is this one which featured for a brief while as a favorite of my daughter’s middle school class, much to consternation of the staff.  Warthog – kinda reminiscent of the most urgent of the Sex Pistols right? Nice.

Something else, I’ve been listening to and – completely different. The instrumental album, Clarity Through Distortion by El Supremo. I know nothing about them and can’t remember how I stumbled across them on YouTube. But check it out. The album lives up to it’s title. There’s hints of Hawkwind, Deep Purple, Black Sabbath, proper (early) Pink Floyd, Gong and even Van Halen in there. Other than the intro and outro, one of my favorite pieces is Ultimate Dropout. Is that not a riff that could literally feed a family of carnivores for a month!? Self indulgent? Just touch. Give it a listen anyway.

That’s it - surfactants and music lovers. I’ll be on time with the blog next month for sure.

Surfactants Monthly – August 2022

Not a lot of news this summer month, so music and musings are upfront and the news comes last. Skip if you must. The sections are clearly labeled.

Music

I’ve been listening to Wishbone Ash a bit recently. It’s been 50 years since Argus, their third album, was released in I think April of ’72. It was named album of the year by Sounds the weekly music newspaper. Any of our UK readers remember Sounds? There were 3 music papers back then: Melody Maker – for the intelligent and sophisticated, covered jazz, blues and rock. New Musical Express – for the sophisticated, covered the hip and new wave. Sounds – for those of us who identified as neither (intelligent nor sophisticated) covered the rest, including heavy metal, punk and such. I was a proud, card-carrying Sounds reader, of course.

Wishbone Ash was not on their best cover though..

I have to admit, if you care, that I was not a fan, at the time in 1972. This was the music of people’s older brothers, like Gordon’s brother John. Cool, different and with incredible album art that suggested something other-worldly. Something disconnected from coal-dust, fog, rain, baked beans, rock-hard porkpies, greasy chips, stale beer, smoke, times-tables, spelling tests, strikes, power-cuts, skinheads, the IRA and other staples of grim British life in the 70’s. It was the music of whispering Bob Harris of the Old Grey Whistle Test, for a time, it’s only outlet. It was in the ether, if not literally in the air (regular radio never played it) however, and influenced many great musicians and even entire genres, which we’ll address in a bit.

Super- Cool. Don't care what you say..

What got me listening afresh to Wishbone Ash? John Hibbs. Yes, the John Hibbs, long-time member of our industry and blog reader. He recently founded a consulting firm named Argus and alluded in a social media post that the name may have derived from the famous 50 – year old album. I say “alluded” because he left us guessing as to the actual name origin story. Interesting when you think about it; maybe appropriate. John’s got to be one of only a handful of folks in the world that have such a deep experience in surfactants and related products and is still active as an engaged industry participant with an unbiased perspective. This is not a paid promo, by the way – or any type of promo. But it occurred to me that folks often just disappear from our industry, which is of course, their right. But anyway, there’s a vanishingly small number of true independent experts around that are going to give you more than just old-guy platitudes. And one of them might have named his  company after a classic album, that we’re going to dig into now.

I think you should listen to Argus now. It’s 45 minutes and time well spent. Here it is.

Could you call it a hippie album? Sure you could. It has those elements. Does it have pop sensibilities? Absolutely it does. Your mam wouldn’t necessarily beg you to turn it off. What else, dear reader, what else? You may not have been a Melody Maker subscriber but you’re still intelligent. Listen and think. What else? Well, this is what else: There’s Yes (OK…), Rush (Hmmm… I dunno) and Iron Maiden (Wait, what… no way). And if there’s Iron Maiden then there’s Metallica, Pantera and on and on… (OK now that’s ridiculous)

Track 1 : Hippie dippie heaven, acoustic then “I’ve got to rearrange my life” Oh really Gautama, well you can get to it after you’ve finished shoveling that dirt over there” But then keep listening around 2:50, bass and two guitars roll in and, well did Geddy Lee ever listen to that bass? How about Chris Squire? Probably. And a young Steve Harris (Iron Maiden) – did he ever listen to that bass and then hear the two guitars come in and think hmm … one day I’m going to that but heavier-  much heavier. I believe so.

The second track, Sometime world (at 9:48), is a true classic. It has those Yes-esque harmonic vocals, the whistful hippie stuff still there. But wait until 12:36 – Oh yeah come on – you agree with me now about the Geddy Lee and Steve Harris thing right ? Keep listening, when the guitars come in. Would this be out of place, on any, any – Iron Maiden album. This stuff was in the ether before the Irons emerged. They were steeped in it and it shows. So yeah – think about it. Or just listen because it’s good stuff.

I think that's probably enough from me on the musical commentary. Listen to rest of the album – then maybe just for fun listen to that first track off Iron Maidens Killers album (1981). See what I mean – hopefully. Here:

Musings

What else?.. er .. oh as I mentioned last month, I was given the proceedings of the 1993, 3rd World Conference on Detergents. Another long-time industry member and blog reader, Mike Fevola gave the book to me. A very nice gesture, I thought. Many familiar names in there: Arno Cahn, AG Lafley, Bill Gasser, David Conner (Albright and Wilson – remember them?), Paul Sosis (Witco – remember them ?) Mike Cox (Vista - !), Icilio Adami (il professore of Ballestra!)  and many others.  Some of the topics, you may be struck by as they are timeless, such as sustainability and globalization. But it’s the little gems that got me:

Alan Lafley (P&G) was a keynote opening speaker and, from the book at least, seems to have written a small thesis. I don't think the actual speech was that long. Anyway – right at the end, he had this to say:

“Our industry should avoid exploiting “pseudo green” short-term advantages that do not redult in tangible environmental benefits. Petty tactical competition between members of our industry that resorts to ingredient bashing or marketing meaningless technical differences that confutes the public, enrage activists and encourage legislation will only create the belief that our industry cannot lead or be trusted on environmental issues.”

Right on, Alan. Clearly as relevant 30 years ago as today.

Here's to no more psuedo-greenery

Here’s another clear gem from the Unilver keynote “We must not forget that the ability of detergents to clean is of paramount importance ……ingredients that perform a most important service in relation to private and public health.”

Heinz Graffmann of Henkel concluded his paper with 5 bullet points, one of which was “The trend towards increased segmentation leads to increased operational complexity . Yet we have to reduce costs” Indeed is doubtless still tbe driver behind Henkel’s digitalization efforts 30 years on.

Some of the titles say it al. Claude Fussler of Dow’s paper is “Life Cycle Assessment: A new business tool?”

Some predictions may not have panned out as much as authors thought. Keith Grime of P&G noted that “the days of 20-year lifetimes for detergent chemicals are gone forever…” In some cases true, but many makers and users LAS would disagree.

In his paper, Jan Vogel of Vista concluded that “Both oleochemical and petrochemical surfactants are in plentiful supply, are competitively priced, are safe for the environment, and are available for the foreseeable future.” Do you agree that still holds today?

Oleo and Petro - Living in Harmony

And it goes on. Many of the key themes 30 years are the same today. Sustainability, supply chain and performance in particular. Is that a good thing? Probably. It shows that the industry was focused on long-term issues. And in surfactants (like many chemicals), 30 years is not that long a time. Missing though? Biosurfacants. The technology itself had been around for 30 years by then, but not ready for prime-time, it seems.

When Rhamno?

The News

As always, most of the news here is provided courtesy of our friends and partners at ICIS with whom we co-produce the great series of surfactants conferences. By the way, the 13 such event is now scheduled for May 4th and 5th in Jersey City, NJ. To register interest in the event, go here. If you feel like you may want to speak at the event, then get in touch with me.

Mid-month, the, quite useful, Indian Chemical News, reported that Galaxy Surfactants Limited, a leading manufacturer of performance surfactants and specialty care products with over 220+ product grades used in the Home and Personal Care industry, Q1 FY23 total revenue (including other income) stood at Rs. 1,156.9 crore, a YoY growth of 39.2% and QoQ growth of 9.7% on account of improved sales mix and realizations.

The company's EBITDA stood at Rs. 146 crore, YoY growth of 29.2%. The company achieved its highest ever quarterly PAT of Rs. 100.4 crore, YoY growth of 30.7% and QoQ growth of 2.0%.

The great Helen Yan of ICIS gave her Q4 perspective on Asian ethoxylates at the end of the month.  Asia’s fatty alcohols ethoxylates (FAE) market may improve in the fourth quarter if the Chinese economy gathers pace and feedstock fatty alcohols C12-14 mid-cuts and ethylene oxide (EO) prices remain firm Helen notes.

• Uptick in feedstock fatty alcohols C12-14 mid-cuts

• Feedstock EO lifts FAE domestic prices in China

• Chinese factory activities may gather pace in Q4

The FAE spot market has been in the doldrums amid mounting recession fears and a slowing global economy despite increases in feedstock fatty alcohols C12-14 and ethylene oxide (EO) prices recently.  Spot FAE 7,9 mols prices have been languishing at $1,675/tonne CIF (cost, freight and insurance) southeast (SE) Asia since mid-August, after peaking at $2,050/tonne CIF SE Asia in early March, ICIS data showed.  However, spot offers for September shipments are likely to be revised up by $20-30/tonne due to pressures from rising feedstock costs, market sources said.  The feedstocks fatty alcohols mid-cuts C12-14 and ethylene oxide (EO) prices have been on an uptick recently.  The feedstock fatty alcohols C12-14 prices have increased by about 25% since late July to average $1,655/tonne FOB (free on board) southeast (SE) Asia on 31 August, ICIS data showed.  The other feedstock ethylene oxide (EO) price has also rebounded in the Chinese domestic market, lifting up the domestic FAE 7,9 mols prices to average yuan (CNY) 10,300/tonne ex-warehouse in east China on 1 September, up by about 11% since early August, according to ICIS.

Cooling off. Cooling down.

The Chinese economy has been beset with sporadic COVID-19 lockdowns and power rationing due to scorching heatwaves, which engulfed Sichuan and Chongqing municipality as well as several other cities and regions in China recently.  China, the world’s second-biggest economy, posted a second straight month of contraction in its official purchasing managers' index (PMI) for August at 49.4, although the reading inched up from 49.0 in July.  

Hot in China

The other great surfactant workhorse in Asia – LAB is covered by Clive Ong in an ICIS article: The Asian and Indian linear alkyl benzene (LAB) markets remain under downward pressure from persistently tepid demand.  The weak economic outlook continues to weigh on sentiment and prompt caution among buyers.

• Suppliers lament weak margins

• Buyers lobby for lower prices

• Monsoon season dampens demand in India

While sellers continue to lament weak margins and are not keen to reduce prices sharply, persistently weak demand has prompted some to consider lower numbers in order to keep buyers engaged.  Export offers were heard largely at $1,650-1,700/tonne FOB China and around $1,800/tonne CFR SE Asia, ICIS data showed.  In India, demand remains in a low ebb amid the monsoon season. Some players attributed the slowdown in trade to the upcoming deadline for India’s Bureau of Industry Standards (BIS) certification in October.  Suppliers, both local and foreign, need to obtain the certification by the deadline before they can continue to sell LAB in India.

Levelling off / Trending down?

A minor portfolio cleanup by Clariant mid month. Clariant has reached a definitive agreement to divest its quats business to Singapore-based Global Amines Co in a deal worth $113m. Global Amines Co is a 50:50 joint venture owned by Clariant and Singapore-listed agribusiness and oleochemicals major Wilmar.  "The transfer will be an asset sale of the sites in Germany, Indonesia, and Brazil and will provide for tolling agreements where needed," it said in a statement.  The transaction is expected to be completed in the first half of 2023 pending regulatory and customary closing conditions, the company said.  "This divestment is a further step in Clariant’s portfolio transformation to focus operations purely on specialty chemicals," the company said in a statement.  This further proof that no-one ever sells a specialty business unless they are a family owner with a view to spending more time with their yacht.. er.. family or something ..

Just sold our specialty chemicals business

News from Malaysia, as reported by ICIS, in which a state government is acquiring a stake in a producer of surfactants. Malaysian state Terengganu is planning to acquire a 5% equity stake in PCG PCC Oxyalkylates which is currently building an oxyalkylates plant in Kerteh, parent firms PETRONAS Chemicals Group and PCC SE said. Terengganu state-owned firm Mentri Besar Trengganu signed a letter of expression with the two firms on 29 August to study the investment, they said in a statement. Construction of the oxyalkylates plant began in 2021, with production scheduled to begin in 2023,  according to Peter Berger, a management member of PCC SE.

"When fully operational, the plant will produce up to 70,000 tonnes per year of specialty ethoxylates and specialty polyether polyols," he said. Further proof that no-one, especially state actors, ever invests in commodities, unless they are green commodities like er.. solar things or ethanol that will save the world..

Commodity Investor

Meanwhile over in Europe, EO prices are going down still. How is that? They have to go up soon, following energy right? I guess there’s a lag. ICIS reporter, Melissa Hurley explains: European ethylene oxide (EO) market players are waiting for the next ethylene settlement for September to dictate formula pricing for the month ahead.

Concerns over production costs caused by record-high gas prices are mounting among market players. EO production is energy intensive and this is set to feature heavily in annual adder fee discussions for 2023.

How?

The ICIS TTF benchmark price for gas in Europe reached record levels this month, fuelling production cost concerns for the winter months.

Wow! Wait until next month, I guess..

Downstream products such as monoethylene glycol (MEG) are experiencing very poor margins and low demand levels.  There is a general concern over low demand among derivative markets. Economic activity in the eurozone contracted further, hitting an 18-month low in August, according to the latest Purchasing Managers’ Index (PMI) data on Tuesday.  Despite concerns for certain derivatives, downstream surfactant demand was still described as healthy.  Previously, European EO August contracts dropped by double digits on the back of upstream ethylene losses.

Indonesian palm oil never ceases to thrill. Indonesia’s extension of its waiver on its export levy on palm oil till the end of October is unlikely to have any significant impact on the oleochemicals market in southeast Asia., however, according to Helen Yan of ICIS.   “I don’t see much downtrend. The market is already immune to any announcement by the Indonesian authorities as they keep changing every two weeks,” a regional producer said.  Meanwhile, crude palm oil (CPO) futures have slipped lower following the announcement on 24 August by the Indonesian authorities.  “It will be towards the downside for CPO as Indonesian oil will be cheaper. CPO will probably either be bearish or move around the current range,” another supplier said.

Dunno what to say about this graph - you?

Indonesia has extended its waiver of the export levy on palm oil to 31 October, said Indonesian Trade Minister Zulkifli Hasan on 24 August.  He added that the decision was made to boost exports and shore up prices of palm oil fruit for farmers.  The waiver, which was implemented in mid-July, was originally expected to end on 31 August.  Prior to the latest revision, a crude palm oil (CPO) export levy of a maximum of $240/tonne was due to take effect in September.  Indonesia, the world’s largest palm oil producer, has been under pressure to reduce its build-up of stock following its three-week export ban in May.  At the end of June, Indonesia had inventories of about 6.68 million tonnes, compared with around 4 million tonnes at the end of 2021, according to the Indonesian Palm Oil Association.  The export levies and a separate export tax are used to fund subsidies for Indonesia’s biodiesel and smallholder replanting programmes.

A snippet from the UK as the German distribution juggernaut continues to build muscle: Brenntag has acquired UK distributor Prime Surfactants which supplies surfactants specialties for personal care, household, industrial and institutional cleaning, as well as other industry sectors in the UK.  “The acquired business estimates sales of approximately £22m in the financial year 2022. Signing and closing of the transaction took place simultaneously,” Brenntag said in a statement.  The Germany-based global chemicals and ingredients distributor said the acquisition would enhance its product and service offering to UK customers, while underlining the firm’s ambition to further strengthen the specialties business of its focus industries.

Brenntag bulks up

That’s it. The end of the news and the end of the summer (at least in the US). Now, we really plunge back into it with business travel, meetings, deals etc. Good fun. So how about a real piece of escapism. One of the friends of the blog sent me this piece of music that I have never heard before. It's a 63 minute song called Dopesmoker by the band Sleep. I can't say I condone what is sung about here – although It’s pretty much legal in many states. But the music is, well, it’s something a bit different. It’s like distilled essence of Black Sabbath. Check it out.

Surfactants Monthly – July 2022

We’re a bit late with the July blog and so, if you are so inclined you can get in touch and we will gladly refund the price of your subscription. You’re welcome! That’s funny because, you know, there is no subscription price..

There’s a whiff of recession in the air with prices edging back ever-so-slightly in the wholesale market and demand off a bit as folks cut back a bit and trade down in the face of consumer goods inflation. Once your stimulus money runs out and your rebound from the lockdown has finished, you realize just how much eating out costs and how much that basket of your favorite brands will put you back vs the store-brands – which are pretty much as good right?. So now what?

By the way, a friend of mine was getting so much incoming financial COVID-associated support that he temporarily gave up his self-employed professional avocation to make lamps – for fun – then started selling them – for real money- while spouse continued to bring home paycheck bacon. Heckuvva stimulus party that. I’m even feeling a headache and didn't even sample the punchbowl.

Anyhow - I’m not a forecaster and this is not one of those blogs that predicted the 2009 crash and that the English women’s football team would defeat Germany and bring the European cup home. No, we just read and think and opine.

It came home. And the lasses brought it.

By the way, this whiff of recession is like the smell that was in the air toward the end of 2008 when things just seemed a little bit ....off, you know? The Wall Street Journal says it best with a delightful headline on August 1st that reads Dollar-Store Dinners and Vats of Shampoo Help Families Cope with Inflation. It’s the “vats of shampoo” that gets me. A huge boiling cauldron of shampoo tended by a coven of recession witches into which is tossed, well, anything really; the family dog, little Timmy’s goldfish, Annabelle’s collection of Barbies – I mean there’s a recession on isn’t there? And this huge vat of shampoo will at least keep us looking good in the face of it.

The actual article wasn't as interesting as my imagination had it but was fairly informative. Energy prices are up 41.6% year on year and groceries up 12.2%. So folks are going to the Dollar Store and hence, average spending on grocery products at discount chains increased 71% from October 2021 to June 2022. OK that’s a lot. The article then goes on to declaim a bunch of first-world problems faced by US consumers such as eating canned chicken and peanut butter instead of whatever they were eating before. Look I get it and honestly I don't expect to change my eating habits at all. But some people in the rest of the world will actually starve. To death. If they’re not shot or worse in one of the struggles over resources that are breaking out. But look, this isn’t that type of blog either. We’re privileged (me and you dear reader) and let’s leave it at that.

The article goes on to note one shopper’s concern that the food at Family Dollar is cheap but it’s full of sugar. And that to me is a public health concern as masses of people, fresh from sitting around during COVID, now fall upon sugar and carbs as a money saver -for them maybe; a shorter life and cheaper food means lower aggregate expenses; but not for the public health system (it’s basically public in this case). But I’m off in the weeds again. The article goes on with some content actually relevant to surfactants and that’s the following: Consumer-products giant P&G just posted its largest sales gain in 16 years. Still, the company is predicting its lowest growth in years as consumers cut back on household staples like the company’s Tide detergent and buyer cheaper, more dilute private label alternatives.  

And there it is – as in 2009 when private label detergent sales moved more water than the Niagara Falls, consumers are again buying less detergent active and this will doubtless ripple back through the supply chain – for a while. Again – this is not a prediction, just looking at patterns and joining the dots. That whiff is in the air. Let’s see..

Hubble Bubble Toil and er... Recession Trouble?

Now to the regular news:

A lot of interesting Bio-based news this month. Two big items in particular caught the eye with headlines that were quite a bit more exciting than the actual news but still significant  for our industry.

First up Ineos – and going straight to the source, their 7/27/22 press release announces that “INEOS Launches new Bio-Attributed Ethylene Oxide, Completely Substitutes Fossil Feedstock With Renewable Biomass” – [I’ve not personally come across the term “Bio-Attributed” before and it doesn’t have a “TM” next to it so – I dunno – has anyone else seen this? A quick google of the term shows it’s use in the styrene and PVC world by companies like Vynova, Dupont, Trinseo and others. There are links with INEOS, including a family-tree connection with Vynova who got 5 plants from Ineos in 2015. Anyhow “Bio-Attributed” means bio-mass-balance as far as I can tell. So that’s cool, I guess. The Press Release goes on to read (in it’s entirety, but I’ve un-bolded where they have bolded, because it messes up my formatting, sorry.) :

INEOS Launches new Bio-Attributed Ethylene Oxide, Completely Substitutes Fossil Feedstock With Renewable Biomass

• The Bio-attributed Ethylene Oxide delivers 100% substitution of fossil feedstock on a mass balance basis, as certified by RSB and ISCC+.

• The material delivers a Greenhouse Gas saving of over 100% compared to conventionally produced EO

• Tobias Hannemann, CEO: “Our new EO delivers identical performance to traditional feedstocks - the fundamental performance of the product is not changed, but it comes with huge savings in fossil fuel usage and Greenhouse Gas emissions.”

INEOS OXIDE has launched new Bio-Attributed Ethylene Oxide (EO), based on certified bio-based sources which do not compete with food production.

First sales of this Bio-Attributed EO have already been made.

This new product reaffirms INEOS’ commitment to developing more sustainable ways to produce the materials we use and rely on every day. INEOS Oxide is developing a suite of solutions to deliver carbon neutrality by 2050, of which this new product is one.

Both RSB (Roundtable on Sustainable Biomaterials) and ISCC+ (International Sustainability & Carbon Certification Plus) have certified that the new product is 100% renewable on a mass balance basis and delivers a Greenhouse Gas saving of over 100% compared to conventionally produced EO.

This allows INEOS customers to significantly reduce their carbon footprint and offer innovative solutions to serve their ever more demanding markets for sustainable solutions.

EO is an important building block for a wide variety of derivative products, which are used in the production of detergents, thickeners, solvents, and plastics. EO is consumed internally by INEOS Oxide in the production of intermediates such as glycols, ethanolamines, glycol ethers and ethoxylates.

Mass balance is an essential tool used to reduce the reliance on fossil fuel materials as feedstock across a wide range of industries. In practice, it allows the mixing of renewable and recycled materials with traditional feedstock to create a lower-carbon product. It is recognized as a necessary step in arriving at a fully circular economy.

INEOS’sBio-Attributed EO is the culmination of three years of work to develop a low carbon ethylene oxide product.

Tobias Hannemann, CEO of INEOS Oxide, says: “In developing our Bio-Attributed Ethylene Oxide, INEOS is once again leading the way in developing sustainable solutions for products essential to our everyday lives.”

End of Press Release. Start of my comment and so-forth. :

OK – so, first up – who are RSB and ISCC+. Not heard of them so, let’s ask the interwebz. RSB is the Roundtable on Sustainable Biomaterials (RSB). Their headquartered in Switzerland and you can read about them here https://rsb.org/ .  ISCC+ is a certification sponsored by these guys https://www.iscc-system.org/about/objectives/ one of whose objectives is “Contributing to the implementation of environmentally, socially and economically sustainable production and use of all kinds of biomass in global supply chains” . Apparently entities like SGS can certify operations according to this ISCC+ standard.

This all seems clear. A key question for me is: Does this bi-attributed EO in any way muddy the bio-EO waters. To date, we have had Croda in the US, India Glycols (now JV’ing with Clariant)  and that company in Taiwan (Greencol) that was working with Toyota Tsusho. Will Croda’s Bio-EO be a little bit less special now that there’s a new Bio (albeit mass balance) option available? Will folks start to mentrally register the “attributed” part of bio-attributed in a small font size (regardless of how it’s written). I think that regardless, the only way that the large CPG’s like Uniliever and P&G are going to meet their overall sustainability goals by 2030 is to use some form of mass balance scheme between now and then.

Mass Balance Looks Interesting

IN other bio news and with an even more exciting heardline, CEPSA announced the following on July 20th. “Cepsa Química supplies Unilever with the world’s first renewable LAS surfactant, paving the way for circular chemistry”  Renewable LAS eh? Wow – that is exciting. I’ll skip to the punchline however. It’s bio-mass balance again. Sorry. Did the headline mislead me or did I willingly mislead myself? Don't know. But – if you read on into the actual text of the press release – all becomes a bit clearer. Heres’ the entire text of the press release:

• NextLab linear alkylbenzene (LAB) is the first LAB surfactant to be both renewable and biodegradable, as an alternative to the traditional fossil LAB, a surfactant used widely for cleaning and laundry products

• Unilever is the world’s first user of NextLab linear alkylbenzene (LAB) from renewable sources in cleaning and laundry products

• Both Cepsa Química and Unilever will continue to collaborate in exploring and incorporating sustainable solutions to their brands

Cepsa Química has supplied consumer goods leader Unilever with NextLab linear alkylbenzene (LAB), a new range of sustainable products which include renewable and recycled raw materials. This sets a new milestone for circular chemistry, as NextLab linear alkybenzene (LAB) is made using “green carbon” derived from biomass instead of the fossil fuels the industry has employed until now to make cleaning and laundry products.

Cepsa Química uses a Mass Balance approach to create NextLab. Through Mass Balance, traditional black carbon sources are blended and co-processed with those from plant-based sources, known as green carbon. Afterwards, they are tracked throughout the entire production process to ensure that an appropriate volume of the green carbon content is in the final LAS surfactant. 

This way of manufacturing surfactants is not only the most viable, short-term alternative to purely fossil-carbon derived products, but it also constitutes a vital steppingstone in the shift from petrochemical to renewable feedstocks. 

Unilever is the worlds’ first user of NextLab linear alkylbenzene (LAB), which incorporates biomass of certified origin, resulting in an LAB surfactant identical in properties and performance to traditional surfactants. The company will use NextLab to make Linear Alkylbenzene Sulfonate (LAS), the world's largest-volume synthetic surfactant and its key raw material for brands such as Persil, Cif and Sunlight.

Surfactants are crucial in the making of cleaning products. However, all LAS surfactant is made nowadays from black carbon and fossil fuels. Using a LAB made from renewable biomass to produce LAS is not only a more sustainable way to produce this raw material but also helps lower the carbon footprint of the final products. 

The path to a circular chemistry

As of today, 85% of the overall carbon demand in chemical and derived materials sector is still met using fossil fuels. By offering renewable and recycled alternatives, Cepsa Química is setting the path to a circular chemistry industry while directly impacting on the planet, both in its own production process and in that of its buyers.

Unilever’s Home Care business announced last year that it will source 100% of the carbon derived from black sources in its cleaning and laundry formulations with renewable or recycled carbon  – a strategy illustrated in its Carbon Rainbow model. 

With the chemicals used in Unilever’s cleaning and laundry products making up the greatest proportion of their carbon footprint (46%) across their lifecycle, pioneering the use of innovative new chemicals made with renewable feedstocks will enable the company to unlock new ways of reducing the carbon footprint of its products. As an upstream innovation, inclusion of NextLab within formulations will result in no change to the performance of the products that consumers know and trust. 

With NextLab, Cepsa Química reinforces its commitment to go along with its customers in the development of increasingly sustainable and environmentally friendly products.

End of press release. You know, now that I read it again, I really have to focus. It definitely does say “Mass Balance” right there. So it must be mass balance, but some of the other wording – interesting. It says “the first LAB surfactant to be both renewable and biodegradable” Of course, those who know LAB know that it has always been biodegradable and so it’s the renewable piece that has been added to the picture. I guess that by using this NextLAB, the user has caused some vegetable oil (e.g. Palm) to be put through a refining process and then those palm trees will be replanted at some point, therefore “renewing” the carbon in the supply chain that was used up by the LAB. It makes no difference whether or not those palm originated carbons end up in the LAB itself. OK so – like the EO example, this is going to be the way that companies like Unilever move the needle on surfactant  carbon between now and 2030.

Definitely Mass Balance

In yet more bio news, Evonik was reported by HAPPI to be celebrating the start of the construction of the world’s first commercial rhamnolipid production facility with a groundbreaking ceremony recently. The new biosurfactant plant is a triple-digit million-euro investment in Evonik’s biotech hub in Slovakia. This will establish Evonik as a pioneer of high-quality, sustainable biosurfactants on a commercial scale and further strengthen the site in Slovenská Ľupča as a strategic center for biotechnology. Rhamnolipids are biosurfactants and are essential constituents of cleaning and personal care products. Evonik’s rhamnolipids are 100 % bio-based and 100 % biodegradable. The original announcement of the investment was made in January and so – let’s keep an eye on this as it progresses.

In other Evonik news, it was noted that  Kensing, LLC, a leading manufacturer of natural vitamin E, plant sterols, specialty esters and high-purity anionic surfactants, and a portfolio company of One Rock Capital Partners, LLC (One Rock) [remember this the old BASF Chicago are plant spun out to private equity], announced that it has entered into a definitive agreement to acquire the Hopewell, Virginia amphoteric surfactants and specialty esters manufacturing operations (Business) from Evonik Corporation.

Located in Hopewell, Virginia, the Business primarily serves the personal care market, with a focus on skin care, hair care and oral care applications. The Business is known for product quality and technical leadership, with over 50 years of experience in betaines chemistry and ships products to leading personal care and home care customers in North America.

"The amphoteric surfactants and specialty esters manufacturing operations that Kensing will acquire as a result of this transaction are complementary to our existing product portfolio derived from plant-based feedstocks," said Serge Rogasik, Chief Executive Officer of Kensing. "Building on our leadership position in high-purity anionic surfactants, by acquiring the Business, we are expanding Kensing's presence in personal care and home care ingredients to provide our customers with an expanded range of low-detergency product and service offerings."

Rohan Narayan, Partner at One Rock added, "We are excited to support Kensing in its second add-on acquisition. The Business manufactures innovative, high-quality, natural raw material based products and is a great fit for Kensing. We continue to actively support Kensing's pursuit of acquisition opportunities aimed at further strengthening its position as a leading, global manufacturer of plant-based ingredients." The transaction is subject to regulatory approvals and customary closing conditions and is expected to close in the third quarter of 2022.

Amphoterics - No longer the red-headed step-child

That’s quite a few relevant press releases for July.

The great Lucas Hall of ICIS, produced a great end of month review of the picture for detergent range alcohols in the US. We herewith excerpt some highlights : Oh and of course as always, the comments in these things [..] are mine alone.

The supply-demand balance for both fatty acids and fatty alcohols in the US is expected to improve over Q3 as a major downtrend in feedstock costs alongside lacklustre demand in the key China market prompts a major rise in exports to the US.

Dampening consumer sentiment as economic concerns mount will add to the pressure. [sounds a bit like recession right?]

FEEDSTOCKS
Feedstock costs across the oil palm complex entered a major downward correction in early May as supply began to outpace demand, improving downstream fatty acid and fatty alcohols production margins.

Supply began to lengthen as inventories rose during the peak summer harvest season against the backdrop of weak demand from China, as the country continues to tackle the coronavirus against the backdrop of growing economic concerns globally.

Malaysia's palm oil inventories are largely balanced while Indonesia's inventories are long.  Indonesia recently waived the $200/tonne export levy on crude palm oil (CPO) from 15 July - 31 August to encourage more exports, which could further weigh on the market.

Palm fruits are susceptible to going rancid if left unprocessed for a long period of time, so incentives to increase CPO exports help avoid material losses from the harvest.

Indonesia is also looking to export more palm oil to incentivise higher biodiesel blending mandates in the country amid ongoing diesel shortages globally, with the country planning to raise the ratio of biodiesel in the blendpool from 30% (B30) to 35% (B35) from end-July.  Palm kernel oil (PKO) costs have plateaued in recent weeks, as the kernels are less susceptible to going rancid and can thus sit for longer periods of time before having to be processed into oil.

Now that's a trend!

Source: Matthes & Porton

Indonesia has grappled with palm oil policy throughout 2022 as it tackles high inflation alongside ongoing diesel shortages globally.  This effort will remain a major challenge in the coming months as subsidising the mandate becomes increasingly challenging with the waived export levies and mounting economic pressures globally.

FATTY ACIDS
US contract survey fatty acids continue to face mixed feedstock and supply-demand fundamentals.  While tallow-based acids and tall oil fatty acids (TOFA) largely remain on a need-to basis, increasing availability of competitively priced palm-based material from southeast Asia is weighing on the forward supply-demand outlook.  A sustained increase in imports in the coming months could help alleviate ongoing tightness in tallow-based and TOFA markets, especially as economic concerns mount.

Will tallow turn soon?

Source: ITC

Some buyers are looking to qualify vegetable-based material and/or adopting a wait-and-see stance against the backdrop of rising economic concerns globally.

Others are only buying as much volume as needed, given the growing economic concerns.  In tallow-based markets, the market continues to face pressure from historically high feedstock bleachable fancy tallow (BFT) costs and tight supply-demand fundamentals.

Source: WSJ Cash Markets

BFT costs remain historically high because of tight supply and increased demand into renewable fuels markets associated with increasing renewable diesel capacity nationwide.  Packaged material has been structurally tighter since January following the fire at PMC Biogenix's Memphis, Tennessee, packaging facility.

PMC is using third-party manufacturers to toll product produced at the site as it looks to restart mothballed assets and eventually rebuild the packaging facility during the next couple years.  Many formula-based buyers use the BFT average from the previous month and an adder number as a key component for the monthly contract calculation. An addition of lower-priced choice white grease (CWG) is sometimes used in the feedstock mix.

In palm-based markets, the market continues to face downward pressure from a major downtrend in feedstock costs across the oil palm complex and lengthening supply in Asia.

Harder to read, but everything down vs BFT

Source: CME Group, Matthes & Porton, WSJ Cash Markets

Freight costs have also come off earlier highs, adding to the downward pressure.

TOFA markets continue to face pressure from tight supply and strong demand, including for competitive tallow-based C18 oleic acid.  Feedstock crude tall oil (CTO) is also structurally tighter following the closure of a Panama City, Florida, paper mill in June.

This is the seventh consecutive quarter with a price increase announcement on the table.

Ever shallower steps - apart from that dark green one (Palmitic)

Derived from animal fats and greases like tallow or vegetable oils like palm and coconut, fatty acids are mainly used in cosmetics and toiletries, as well as for the production of lubricants and plasticizers in rubber and polymer processing.

FATTY ALCOHOLS
US fatty alcohols continue to face mixed feedstock and supply-demand fundamentals, with mid-cut alcohols long and long chain alcohols snug to tight, depending on the cut.  Demand in consumer cleaning markets is seasonally slower during the summer vacation period.  Demand in other end-markets remains overall strong, but increasing availability of competitively priced palm-based material from southeast Asia is causing some buyers to adopt a wait-and-see stance against the backdrop of rising economic concerns globally.  Others are only buying as much volume as needed, given the growing economic concerns.  A sustained increase in imports in the coming months could further lengthen mid-cut markets and alleviate ongoing tightness in C18 and C16-18 markets in the months ahead of Q4 quarterly contract negotiations, especially as economic concerns mount.

In mid-cut alcohols markets, supply is long and demand seasonally lower against the backdrop of a major downtrend in feedstock PKO and mid-cut prices in southeast Asia. Increasing availability of competitively priced imports in the spot market is weighing on the wider market.  Spot mid-cut alcohols have been heard at a major discount to their Q3 settlements, pressuring Q4 negotiations.  Some players are looking to renegotiate Q3 mid-cut alcohols contracts because of the major downward pressure in the market, with varied success, depending on their supply agreement.  C18 alcohols remain tight because of lingering supply-chain constraints from Q2 stemming from noncompetitive PKO and soaring freight costs.  PKO is now competitive to alternative feedstock coconut oil (CNO) and container freight costs have come off their earlier highs. This combination of factors will begin to exert some downward pressure on the market in the coming weeks as more competitively priced imports begin to arrive and supply constraints begin to ease.  Improving C18 production in turn is causing C16 alcohols to lengthen, discouraging players from splitting their C16-18 alcohols to prevent further C16 length and offsetting the supply recovery in the C18 market.

*The prices in the table represent a range of settlements for standard balance material heard throughout the quarter for the majority of market participants. Prices above and below those listed in the table were heard throughout the quarter but were excluded as they were not viewed as representative of the wider market.

As of mid-July, Sasol remains on allocation for C12 and C18 alcohols production ahead of planned maintenance at their Lake Charles, Louisiana, site this autumn.

There's that divergence again

In Asia , ICIS’ Helen Yan reported that demand for mid-cut fatty alcohols in Asia has picked up for September and October shipments due to firming costs of feedstock palm kernel oil (PKO).

• More enquiries for mid-cut C12-14 Sept-Oct shipments

• Firming PKO costs squeeze margins

• Buyers resist higher prices on recession fears

Enquiries from China, India and the Middle East have picked up for September and October shipments, according to several regional producers.

“We are getting more enquiries for the mid-cut C12-14 blend as the feedstock PKO has firmed to around $1,070/tonne yesterday [28 July] compared with $1,050/tonne earlier this week,” a regional producer said.  Since mid-July, spot prices of mid-cut C12-14 have held steady at $1,280-1,350/tonne FOB (free on board) southeast (SE) Asia, after falling by 58% from early March, ICIS data showed.

Way down

Spot availability is also expected to be constrained due to an upcoming 20-day maintenance at a regional 100,000 tonne/year fatty alcohols plant from mid-September to early October.  Buyers are expected to put up a stiff resistance to any sharp price increases given weak market conditions and a looming recession.  “Demand is really bad, and recession is going to be a real problem in the second half of this year,” a buyer said.   Buyers have been adopting a cautious stance on the market and are mostly buying smaller lots on a need-to-basis.  They were unwilling to lock in large forward spot shipments, given inflationary pressures and recession fears.  The International Monetary Fund (IMF) has cut global GDP growth forecast to 3.2% in 2022 from an earlier forecast of 3.6% issued in April.  “The risks to the outlook are overwhelmingly tilted to the downside,” the global financial stability watchdog said in the July update of its World Economic Outlook (WEO) report.

A little further downstream, Helen also reported that Asia’s fatty alcohol ethoxylates (FAE) demand is expected to remain soft in the near term due to prevailing weak market conditions and a sluggish Chinese economy.

• Feedstock fatty alcohols C12-14 prices falling

• Inflation woes, recession fears fuel uncertainty

• Strong US dollar weighs on sentiment

The downward price trajectory of the feedstock fatty alcohols C1214 and a sluggish Chinese economy has weighed on demand as buyers adopted a cautious stance and were unwilling to lock in large forward spot shipments. Spot FAE 7,9 mols prices had fallen by about 17% since early March to $1,550-1,700/tonnne CIF (cost, insurance and freight) China on 14 July, ICIS data showed.  In southeast Asia, spot FAE 7,9 mols prices declined by about 15% over the same period to $1,700-1,800/tonne CIF.

A more muted reflection

Market players have stayed on the sidelines given the uncertain outlook.  The economic fallout of the Russia-Ukraine conflict and sanctions on Russia - such as strong inflationary pressures following the surge in commodities prices, growing recession risks, a strong US dollar - has continued to dampen sentiment and suppress spot interest in the FAE markets.  “Currently, there are few enquiries as buyers are cautious due to the decline in the feedstock costs and sluggish Chinese economy,” a regional supplier said.  Meanwhile, feedstock fatty alcohol C12-14 prices have fallen by about 58% since early March to an average of $1,315/tonne FOB (free on board) SE (southeast) Asia on 14 July, ICIS data showed.  “We expect the Chinese economy to rebound in late August or early September and market activities to pick up then to boost the regional trades,” another supplier said.  Economic data released on Friday showed a marginal improvement in June, with overall second-quarter GDP growth sluggish.

China’s industrial output in June increased by 3.9% year on year, rising for the second consecutive month, official data showed.  In the first half of 2022, industrial output grew 3.4% year on year, slightly faster than the 3.3% in January-May period.  China’s GDP growth in the second quarter slowed to 0.4% year on year, the lowest quarterly increase posted since the first quarter of 2020, when COVID-19 began its spread.  The world’s second biggest economy logged a first-half 2022 average growth of 2.5%.  “Increasingly complicated and gloomy international situations, coupled with more sporadic outbreaks of the pandemic, have posed severe impact on the economy and left significant downward pressure,” according to the National Bureau of Statistics (NBS).  A series of measures were implemented to counter the economic headwinds, helping key indicators to rebound in June following sharp declines in the previous months, it added.

In LAB markets, ICIS reported in east and south Asia they are at a crossroad with the path ahead mired in uncertainty. With outlook increasingly clouded, participants found decision-making an onerous task.

• Recession, inflation fears dampen sentiment

• Buyers stay cautious amid dim economic outlook

• Chinese supply tightens but raw material costs fall

The LAB market was weak from the second quarter when China entered a lockdown to combat the resurgence of COVID-19 in the country.  Demand took a tumble in Asia and India, while the economic outlook turned gloomy on a potential global recession and runaway inflation.  With demand in China in the doldrums, inventories in the mainland built up quickly, which resulted in Chinese suppliers aggressively targeting the export markets to reduce stock pressure.  Consequently, competitively priced Chinese lots started to undercut regional suppliers with parcels being found across Asia, Africa, South Asia and even the Middle East.  “We are unable to sell much in Asia as cheap Chinese material are available,” said a producer in Asia.  With Asian suppliers diverting volumes to other regions with higher netbacks, these destinations also came under downward pressure.  LAB is an organic compound used almost wholly as an intermediate in the production of surfactant linear alkylbenzene sulphonate (LAS), also known as linear alkylbenzene sulphonic acid (LABSA). LAB’s main end market is the biodegradable detergents and other cleaners.  By the second quarter, however, with China having exited its lockdown, a recovery in domestic demand started to digest inland inventories.  Coincidentally, a workers’ strike in Korea rendered the sole producer in the country shut at about the same time, spurring additional demand for Chinese cargoes as Korean users sought nearby sources in lieu of local cargoes.

“Buyers are starting to question higher offers, citing a steep reduction in upstream costs,” said another trader in Asia.  Traders in India echoed the sentiment, but the onset of the monsoon season in late June is expected to slow trade and demand even more, as inclement weather impacts manufacturing, distribution and usage in the region. giving discounts on the basis on declining raw material costs.

Coming off a high

As shown in the chart, the LAB market is struggling with keeping pace with costs. In the shaded area, from the beginning of May, spot deals have been done at a steeper discount to offers compared with the unshaded region. Buyers’ acceptance of successive offer price increases has been harder to come by, likely due to weaker economic outlook and a retreat in raw material costs.  In conclusion, it is not a sure-fire thing that suppliers would be able to raise prices even though supply, especially the cheap Chinese cargoes, has started to tighten.  Demand will likely be stagnant at best with global economic outlook staying gloomy on risk of a recession.  The resultant weakness in upstream markets and raw material costs coupled with speculation that China could begin another round of lockdown as virus cases sprout recently could keep players in the LAB market confounded with decision-making staying extremely difficult.

And in Europe – recession conditions seem a little ahead of the US, as pricing in the alcohols market there make a more definitive story. ICIS reported that European fatty alcohols Q3 contract prices dropped by triple-digits following improved contractual supply and falling palm kernel oil (PKO) prices.

Further to go?

Q3 contracts were assessed at €2,250-2,350/tonne FD (free delivered) NWE (northwest Europe), a €550-750/tonne reduction from Q2.  Some sellers opted to conclude monthly contracts rather than quarterly due to market volatility. Overall, there was significant buyer pushback on prices for Q3.  Discussions saw downward pressure,  largely led by falling PKO values and improved supply, both domestically and from Asia.  Prices discussed earlier in June were seen at a higher level to offers heard in July.  Sources suggested prices were falling to €2,100/tonne FD for those still looking for Q3 volume in mid-July. However, contract settlements at this level were not reported.  Contractual demand is expected to be lower for Q3 in comparison to Q2.  In some instances, players are looking ahead to Q4 with more buying interest than Q3 due to the expectation of falling prices.  In the downstream ethoxylates market,demand is softer for Q3 and supply levels are rising. Downward pressure continues to be seen throughout the chain.

In other CEPSA news: ICIS reported a weaker Q2 for the company, although LAB remained very strong. Let’s see how long that lasts though.. Cepsa tracked declines but retained healthy margins for its chemicals business in the second quarter, despite solid margins in its surfactants segment, the Spanish energy firm said.

Strong demand in the home and personal care applications led to increased sales volumes for linear alkylbenzene (LAB) for Cepsa.  In contrast, Cepsa’s intermediates segment – covering its phenol/acetone and solvents portfolio – fell compared to stronger demand a year prior and exacerbated by a turnaround at the Palos de la Frontera site and downstream shutdowns.  Chemicals sales volumes fell 15% compared to the second quarter in 2021, and were down 14% on the previous quarter of 2022.  After a strategic review of the chemicals division during Q2, shareholders decided that the segment should remain within the group on the back of a solid operational and financial performance.

Reasons to be cheerful in cleaning sector

In keeping with Cepsa’s LAB business in Q2, Stepan also did well overall. ICIS reports that Stepan achieved record earnings in the second quarter, driven by strong performance across business units . Second quarter adjusted net income and sales both rose by 26%, as price increases were passed down to customers in line with higher raw material and logistics costs.

This improvement was driven by growth in our Functional Products business as a result of elevated crop and energy prices and continued growth in the construction industry” said Stepan CEO Scott Behrens.  He added, “we believe demand across our business should remain healthy, but the Company will continue to be challenged by inflation, raw material and logistics constraints.”

There’s more to the story though. Stepan saw a 3% decline in global surfactants sales volume in Q2 2022 compared to Q2 2021. The decline was driven by global commodity laundry products associated with raw material and logistics constraints in North America and lower demand in Latin America.  [oh oh – is this a preview of Q3?] Higher demand in the functional products, personal care and institutional cleaning end markets partially offset the above.  Despite the decrease in global sales, Stepan's Q2 2022 surfactants operating income was $48.2m, up $2.3m from Q2 2021.

Selling prices rose 32% primarily because of the pass-through of higher raw material and logistics costs as well as an improved product and customer mix. Good for them, but also somewhat reminiscent of 2009 when rising raws ultimately lifted all margin boats.  Note that a foreign currency translation negatively impacted net sales by 3%.

Finally Stepan noted that the startup of Stepan's alkoxylation expansion in Pasadena, Texas, originally slated for late 2023, is now expected to start up in early 2024.Following the delay, the investment in the capacity expansion is expected to increase by approximately 10% to $245m.  The new plant will provide “a flexible capacity” of 75,000 tonnes/year, capable of both ethoxylation and propoxylation,  When operational it will bring Stepan's alkoxylation network to three plants and position the company with a footprint in the globally strategic US Gulf Coast, it added.  Stepan said its alkoxylation business grew volumes in the strong double digits with healthy margins that are accretive to the company.

Arrives late. Costing more than expected. Still worth it

Finally, one of our great blog readers and good friend in our great industry, gave me a copy of the 1993 proceedings of the CESIO conference. What fantastic reading and very interesting to see many familiar names there as attendees and speakers. I really can’t do it justice this month. Next month however, I’ll talk about some of the topics discussed and what has changed and hasn't over the last ~30 years.

And in music, I’ve been listening to a lot of psychedelic, so-called, stoner-rock on Youtube this month – all by bands you’ve never heard of. All the songs seem to blend into each other. Or maybe you have to be stoned to truly appreciate the individual pieces of music. That’s not likely to happen though. But even straight and sober, the effect is quite pleasant. I’m just having trouble picking out what individual pieces to feature here.  Let’s see next month.

Otherwise, I have to be brutally honest with you (and please keep this between us), I’ve been listening to a lot of Chic (yes that Chic). In fact I will admit that back in the late 70’s, I really admired this music. Of course, I would never admit this embarrassing fact to even my closest friends as we queued overnight to get front row tickets to see Rush in 1977 at Newcastle City Hall or faced no queues at all to see Iron Maiden and Def Leppard at St. John’s College, York in 1980. So, please do keep this confidential if you don't mind. Here’s a few classics from the great Chic. :

I want your love – 13.5 minutes of luscious groove

The much remixed Good Times

And the SugarHill Gang’s gorgeous mix thereof – in Rapper’s Delight

And who could forget Le Freak

Or Everybody Dance – These extended versions are outstanding no?

My Forbidden Lover The  12” mix. Check out those bass lines

And no, of course, I never did see them live. One got the impression that neither denim, nor leather nor hair, let alone all three together, were welcome at such events. But was that truly the case? Would it have been better to attend alone? in a group? with a girl? I’ll never know. Certain tribes moved in tightly proscribed circles in those days.

That’s it.

This tribe continues to move in surfactant circles, but our arms are open to welcome all. Thanks for joining us.

Surfactants Monthly – June 2022

This month we’ll take a look back at the music of Kate Bush, with some enticing nuggets scoured from deep within the bowels of YouTube. We’ll have some surfactants news of course, mostly courtesy of our friends at ICIS.

Finally in my blog after how many years...?

The big news involves the blog’s favorite activist investor, Nelson Peltz. Last month, I thought I’d get ahead of the game and publish the blog with a day to spare at the end of May. And it was on that day, of course, that Unilever and Peltz chose to announce that they had come to an accommodation on a board seat for Peltz, without any of that expensive proxy fight business that P&G went through before acceding to Peltz’s overtures. Clever timing to avoid the blog’s attention, I suppose, but no matter, we get to indulge ourselves once again this month in all things Peltz.

In addition, Tatler magazine released a sneak peek, at the activist investor’s equally famous daughter’s photo session with the magazine. It’s tasteful with the 27 year old adopting a somewhat retro late 70’s riffing on a 60’s look (in my opinion – kinda like Debbie Harry’s take on Jackie O) along with generally unaffordable clothes. Worth checking out..

Do you see a bit of Debbie / Jackie...?

The Wall Street Journal first reported on May 31st at 4.40PM (about 12 hours after the May blog first hit reader’s inboxes) that Unilever PLC said it would add Nelson Peltz to its board and disclosed his fund held a 1.5% stake in the company. The investment is worth about $1.6 Billion. To underscore why this is even happening, the WSJ published the following graph :

Not hard to figure out "why Nelson?"

The WSJ goes on to note that Unilever said Mr. Peltz would be joining the board as a nonexecutive director and member of its compensation committee, with his appointments expected to be effective from July 20. The move to appoint Mr. Peltz came   after pressure from at least two other big shareholders to bring him in, according to a person familiar with the matter. Trian’s stake comes a few years after the New York-based firm bought into Unilever rival P&G. In 2017, Mr. Peltz narrowly won a P&G board seat, in what was at the time the most expensive proxy fight in U.S. history. He didn’t push to replace P&G’s chief executive and a turnaround took time, but a year after he became a board member, sales started to improve. In April, the Cincinnati-based owner of Pampers diapers and Tide detergent posted its strongest quarterly sales gain in decades as customers continued to buy its more expensive products despite rising inflation. At P&G, Mr. Peltz set out to dismantle the bureaucracy that he and some executives said was hobbling the company, as well as sought to make executives more accountable.

The WSJ goes on: Unilever has already embarked on a restructuring that it says will allow it to be more responsive to trends and increase accountability. The company is also cutting jobs and says it is committed to improving the performance of its existing brands while rotating its portfolio into higher-growth categories. For instance, Unilever said Monday that it had bought a majority stake in Nutrafol, which makes physician-formulated products designed to address thinning hair and compromised hair health for women and men, at various life stages.

Still, Peltz’s appointment to the Unilever board, as well as confirmation of Trian’s investment, is likely to be welcomed by the consumer-products company’s investors. “We hope Peltz can stimulate positive changes to culture, remuneration and organizational structure like he did at P&G,” said RBC analyst James Edwardes Jones.

Analysts have previously speculated that Unilever could sell or spin off its food businesses, which include brands such as Ben & Jerry’s and Hellmann’s mayonnaise, to boost growth. Several analysts have said that Unilever should cut its profit-margin targets to focus more on investing in innovation and driving overall sales growth.

Bernstein analyst Bruno Monteyne said Mr. Peltz brings “a huge amount of credibility” and that breaking up Unilever could make sense if it allows the company’s various divisions to be better run. Mr. Monteyne has previously said he isn’t aware of any company the size of Unilever that is operating successfully while being spread so broadly. Unilever sells products in around 190 countries to 3.4 billion people, and while the U.S. is the company’s biggest market by sales, it has greater exposure to emerging markets such as India and Brazil than most of its peers.

The company has long been known for its sustainability agenda with its previous CEO, Paul Polman, scrapping quarterly profit reports and investing in areas such as sustainable palm oil, paying living wages to suppliers and cutting carbon emissions. Under Mr. Jope’s leadership, Unilever has gone further, seeking to give each of its 400 brands a social or environmental purpose.

On Tuesday, the joint statement from Mr. Peltz and Unilever indicated that the company’s work on sustainability will continue, with the investor saying he wanted to “help drive Unilever’s strategy, operations, sustainability, and shareholder value for the benefit of all stakeholders.”

On the same side now...

End of Peltz section. Beginning of the rest of the news.:

Solvay takes a significant leap into biosurfactants, as reported in the great Cosmetics & Toiletries magazine.: Solvay has introduced Mirasoft SL L60 and Mirasoft SL A60 (INCIs: Not Provided), two glycolipid biosurfactants. Based on rapeseed oil and sugar with a low environmental and carbon footprint, these ingredients are suitable for a range of applications in beauty care such as shampoos, conditioners, shower gels and face washes and creams. Mirasoft SL L60 and Mirasoft SL A60 are 100% biobased and biodegradable surfactants manufactured through a fermentation process.

“This product launch underlines both our commitment to surfactants technology and our long-term vision for the future,” commented Jean-Guy Le Helloco, global vice president, home and personal care at Solvay. “We focus on future technology shifts to enable our customers to reach their sustainability goals.”  “With the potential of a net neutral carbon footprint in the near future, biosurfactants represent a step-change technology in the eco-design of next-generation beauty care products," said Galder Cristobal, research and innovation director of home and personal care at Solvay. "The eco-profile of Mirasoft SL L60 and Mirasoft SL A60 is truly a breakthrough compared to conventional, fossil fuel-based surfactants." Cool. Good luck to Solvay in this modest step into the field.

Dipping a toe into biosurfactants

Here’s something which didn't make it onto my radar screen until just now and it’s the revival of a mid 90’s tax law that seems to directly impact surfactants. ICIS reports that the US will revive Superfund taxes on 42 building-block chemicals as well as imports of several substances made from those chemicals.  The two Superfund taxes were allowed to end in the mid-1990s. The US is reviving them as part of the $1trn Infrastructure Investment and Jobs Act that President Joe Biden signed into law in November.  The proceeds raised by the taxes will help replenish the government's Superfund programme, which pays for the clean-up of waste sites.  The US is reviving two different Superfund taxes.  The first one is levied on the sale or use of 42 chemicals. These taxes are imposed on companies that make or import the 42 chemicals. The full list is in the ICIS article here https://subscriber.icis.com/news/petchem/news-article-00110781114 but halfway down the list is ethylene at 0.487 cents per lb tax. But there’s more!

A second tax covers substances sold or used by importers. The government has published three lists of substances that could fall under the tax. The most recent list was published earlier in June, and it includes 121 substances and their tax rates. Again the ICIS article has the full list but I can confirm that it includes Ethylene Glycol at 0.20 cents per lb, Ethylene Oxide at 0.28 cents per lb, synthetic linear fatty alcohol ethoxylates [whatever those are] at 0.32 cents per lb and synthetic linear fatty alcohols at 0.42 cents per lb. There’s apparently another 2 lists published by the IRS that suggest that linear alpha olefins, among other things will be subject to a tax. The IRS has published a FAQ page to help here https://www.irs.gov/newsroom/irs-issues-superfund-chemical-excise-taxes-faqs

I know but...

In further evidence of an incipient slowdown, ICIS reported that the linear alkylbenzene (LAB) markets in east and south Asia remain unchanged despite suppliers’ attempts to achieve higher values, as margins remain thin. The availability of competitively priced Chinese lots continued to weigh on the market.

• Supply length prompt buyers to be unhurried

• Competitively priced Chinese lots weighs

• Monsoon kick off in India could dampen demand

Suppliers in Asia and the Middle East continued to target higher numbers, in a bid to improve thin margins. However, some conceded that buyers are slow to respond, given the availability of cheaper Chinese material circulating in the system.  “Most suppliers need prices to rise in order to reflect elevated costs, but buyers are lobbying for lower prices pegged to Chinese material,” said a producer in NE Asia.  A strike at a key producer in NE Asia over the past two weeks appears to have had limited impact on the Asian sector as well, as supply remains adequate to meet demand.  Suppliers to India also faced a similar challenge of competitively priced Chinese material. Sellers in the Middle East and Asia tried to increase prices to Indian customers, but continue to face an uphill challenge.  “With Chinese material cheaper, buyers are continuing to ask for these prices,” said a trader in India.  Hence, sales remained mired in tough negotiations as the buy-sell gap remained. Consequently, fixtures for spot cargoes have been slow in recent weeks.  “We are still in negotiations for sales into India and Pakistan as buyers are slow to increase bids,” said a supplier in the Middle East.

Meanwhile, domestic producers in India have plans for another price increase for July local material. Some traders anticipate that offers could jump to rupees (Rs) 185/kg for July, up from the current spot level of Rs175/kg ex-tank.  A key producer remains in protracted shutdown since May and might restart only sometime in August. Consequently, supply in the domestic market remains snug.  However, with the onset of the monsoon season, which is a typically slower season for LAB and related products, the tight supply could be countered by waning demand.

Demand vs Supply results in....

The great Lucas Hall of ICIS reported a similar trend in fatty alcohols at the end of the month. HOUSTON (ICIS)--US Q3 fatty alcohols contract negotiations are diverging against the backdrop of competing feedstock and supply/demand fundamentals.

• Freely negotiated Q3 mid-cut alcohols heard at sharp decline with PKO drop

• Mid-cut supply long, demand slowing during summer low season

• Freely negotiated Q3 long-chain alcohols largely heard flat to sharply higher on C18 tightness

• Downtrend in PKO supports increased PKO consumption in near-to-medium term
  

In mid-cut alcohol markets, freely negotiated Q3 contracts have largely been heard at a sharp decline from Q2, tracking a major downtrend in feedstock palm kernel (PKO) costs in recent weeks against the backdrop of long supply and slowing demand during the summer low season.

Fats and OIls heading down...

Source: CME Group, Matthes & Porton, WSJ Cash Markets

Freely negotiated US Q3 mid-cut alcohol contracts have been heard in the  upper $1.20 to low $1.40/lb DEL range.  Some players hedged against bullish PKO markets earlier in the year, creating carryover volume as the market entered Q3 negotiations.

Players are also running their plants hard as they look to catch up to critically tight supply in the C18 market, in turn increasing mid-cut alcohol production in the same time.

But 16's and 18's remain tight

In long-chain alcohol markets, freely negotiated Q3 contracts have largely been heard flat to sharply higher, tracking tight C18 supply. Single-cut C16 markets supply constraints are easing as players prioritise C18 production, but C18 and C16-18 blends remain critically tight.  Freely negotiated Q3 contracts for C16 alcohols have been heard slightly lower to a rollover from Q2. C18 alcohols have been heard at a sharp increase from Q2. Blended C16-18 alcohols have also been heard at a sharp increase from Q2.

Now that PKO costs are once again at a discount to competitive feedstock coconut oil (CNO), producers are likely to slowly increase their consumption of PKO in the feedslate, in turn producing more C18 alcohol in the process.

As of early June, Sasol remained on sales control for C12 and C18 alcohols and derivatives as it builds inventory ahead of a turnaround at its alcohol and ethoxylates plants in Lake Charles, Louisiana, this fall.

*The prices in the table represent a range of settlements for standard balance material heard throughout the quarter for the majority of market participants. Prices above and below those listed in the table were heard throughout the quarter but excluded as they were not viewed as representative of the wider market.

Remember the US market usually lags...

Further down the value chain, Helen Yan reports some huge declines as Asia’s fatty alcohol ethoxylates (FAE) market is likely to face more downward price pressure in July on lower feedstock fatty alcohol C12-14 costs amid declining upstream crude palm oil (CPO) and palm kernel oil (PKO) prices.

• Inflation woes, recession fears

• Weak consumer confidence, buyers cautious

• Elevated freight costs a major concern

Spot offers for July shipments of FAE have been revised lower, tracking feedstock fatty alcohols C12-14 costs and weighed down by tepid spot appetite.  Spot FAE 7,9 mols prices were at $1,840-1,900/tonne CIF (cost, insurance and freight) southeast (SE) Asia on 16 June, down by about 10% since early March, ICIS data showed.  “Demand is weak as buyers are cautious due to the decline in the upstream palm oil market, elevated freight costs and macro-economic issues such as inflation, recession and geopolitics,” a FAE supplier said. Feedstock fatty alcohol C12-14 prices have fallen by more than 40% since early March to average $1,815/tonne FOB (free on board) SE (southeast) Asia on 15 June, ICIS data showed.

Well over the hump

Malaysian crude palm oil futures have fallen below the Malaysian ringgit (RM) 5,500/tonne level, a level not seen since February, following the announcement by Indonesia to accelerate its exports of at least one million tonnes of crude palm oil and derivatives.  “PKO price has dropped to around or below $1,300/tonne, down from March when it was around $2,300/tonne,” a fatty alcohols supplier said.  Indonesia, the world's biggest palm oil exporter, has decreased its crude palm oil export levy by almost half, to a maximum $200/tonne. The reduction of the export levy, from its previous level of $375/tonne, was to accelerate the exports of its stockpile of about one million tonnes of crude palm oil and derivatives that had built up due to its temporary export ban.

The export ban was lifted on 23 May, after it was imposed on 28 April to contain soaring domestic cooking oil prices.  The new levy is effective 14 June and will be valid until the end of July. The maximum rate will increase to $240/tonne from 1 August.

Moving that Palm Oil Stockpile..

End of surfactants news and beginning of the music section

Kate Bush is back in a big way – because one of her songs was featured in the latest season of Stranger Things on Netflix. This one:

It’s from the 1985 album Hounds of Love. Pretty nice right?

It was this next quirky masterpiece though that launched her to prominence and earned her photograph a place on my bedroom wall, 1978’s Wuthering Heights which reached number 1 in the UK that January.

That posh hippie-chick vibe coupled with incredible creativity and a little craziness and, let’s be honest, a certain comeliness of appearance – yep that’s it. Check this one out – Babooshka . Crazy, comely, creative AF. That’s Kate.

Yes – and shortly banned from many pub jukeboxes due the glass-breaking sound effects – sad but true.

Why is this next one so emotional? 1985’s Cloudbusting. No idea. But it is – for me anyway.

However, for the emotional tour de force of the 80’s – by any artist. Get a load of this quivering hunk of 100% bathos. An aching tribute to pure love. You may not want to listen this at the office, if tears streaming down your face is not a good corporate look for you – just saying..

Is there any doubt this lady is a genius of the human spirit? Story about this song: I made the mistake of playing the video as part of the music warmup for one of my conferences a few years ago. Of course by it’s conclusion, I was in no condition to appear in public let alone speak. I quickly cued up something by, I think, Deep Purple and then disappeared to the bathroom to compose myself before starting the proceedings. Lesson learned.

Let’s lighten things up a (very little) bit. 1985’s Waking the Witch was a favorite of mine for a while becase at ~31 seconds there’s a Geordie voice “wake up man”, suggesting that yes, it was indeed possible for a lad from the Northeast to get close to the unattainable Kate. The song, of course is another incredibly creative, densely packed – just wow – different thing. Ain’t exactly Bananarama right?

Where to end? Don’t really want to – but here’s the first single off the second album, Hammer Horror.

Incredible right? I’m not sure what else to say. Creativity, originality, passion, emotion – totally un-self-conscious and un-ironic. Is there a lesson there. I dunno – maybe it’s just great music and leave it at that.

Until next month

All the best,

Neil

Surfactants Monthly – May 2022

It looks like I may have been too tough on Tide in last month’s blog. I linked Stepan Company comments about the consumer markets in their quarterly report directly to our beloved brand leader in detergents, when in fact no such link was stated. The brand’s owner sprang promptly to its defense as they should. So there we are. Another reminder of the wide readership of the blog and the need to keep wilder musings to the music or culture sections.

Interestingly, the Wall Street Journal last week outlined some difficult trends in the consumer markets, in an article entitled “Shoppers Are Fretting. Stores Are Listening” along with a sub-head “Consumers are growing cautious, and companies from Walmart to Procter & Gamble are altering course to reflect changing budgets. ‘Mom only has money right now for the bare-bones basics.’  The article goes on to discuss how some consumers are shopping for cheaper alternatives to their normal purchases in order to mitigate the effects of inflation. Examples given include how Walmart is stocking more half gallons of milk for shoppers who can’t afford a full gallon. And P&G is touting a dish-soap bottle that allows users to save money by extracting every drop. However no mention of Tide. So for now…. I guess it’s

By the way, I know this is not the music section yet, but has there ever been a band who mastered the metal ballad to the extent that The Scorpions did? This is the highest, purest, most ridiculously over-the-top expression of that venerable art form. Crank it up and let the emotions course through your pulsing veins!

Still in love with you ......

Also – by the way, no mention in the WSJ of Activist Investor Nelson Peltz and his battle with the management of Unilever. So nothing really to report there, unless you want continued tabloid fodder from the Nicloa (Peltz) / Brooklyn (Beckham) story, in which case.. https://www.dailymail.co.uk/tvshowbiz/nicola-peltz/index.html .

MAY 10 – 11TH, saw the 12th ICIS  World Surfactants Conference in Jersey City and the first one back in person since May of 2019. It was great. Next year, 2023, our dates in Jersey City are May 4th and 5th. You can register your interest here. https://secureforms.icis.com/13thWorldSurfactantsConference-RegisterInterest

The 2022 conference broke a lot of news, and to the extent that some of that news was reported in the press, I will cover some of that (so that is some of some of the news – are you following this? Means I’ll write about only a fraction of what happened at the conference). The reason I do that is because; you gotta be there. It’s boring for me to try to re-tell what happened at the event and so you just have to be there. In fact, if you were there, you would have heard how I marshalled John Milton, Metallica, Diamond Head and the Cat and the Washing Machine in support of being there.

End of commercial. Start of News:

Interesting news from the Asian LAB markets as prices start to trend down (that’s right – down). The great Clive Ong of ICIS reported that the Asian and India linear alkylbenzene (LAB) market continues to struggle amid increased availability of Chinese cargoes. Buyers have become non-committal as they anticipate the ample supply to prevail in the near term.

• Chinese lockdown easing uneven and sporadic

• Buyers in Asia and India unhurried as supply ample

• Producer margins remains squeezed by firm upstream markets

Despite the announcement of easing of lockdowns in China, the pace of lifting restrictions remains slow and uneven, and very much depends on each locale.

Consequently, some participants anticipate that Chinese domestic demand might remain tepid in the near term, although some producers mulled higher prices in June.

The pressure to export remains for most Chinese producers as inventories remain elevated. The increased availability of Chinese lots at competitive prices, however, dampened buying impetus in Asia. “Customers are now pegging bids against the lower Chinese cargoes,” said a producer in NE Asia.  Most suppliers in Asia are now targeting other destinations outside of the region, given the current low buying indications.

The Indian LAB market has also come under downward pressure from an influx of cargoes. One domestic producer has gone into extended shutdown from May, but local supply has swung from initially being tight to now rather adequate.  “The market balance has been disrupted by inflow of cargoes,” said a producer in India.  Buying indications have declined in recent weeks, with suppliers in Asia unable to achieve sales at previous levels.  Apart from more suppliers targeting sales to the subcontinent ever since the anti-dumping duties five-year period lapsed in April, Chinese offers have undercut general offers by other suppliers in Asia and the Middle East.  The increased availability of offers have prompted some buyers to wait and see, as they anticipate further weakness in the market.  “Customers in India has lowered their bids and we are unable to meet these numbers,” said a trader in Asia.

Definitely downward. What does this mean?

We’ve been writing fairly frequently about the German chemicals group, PCC recently and so I was pleased to see the recent news that they are considering building a new alkoxylates facility to produce non-ionic specialty surfactants and polyether polyols in the US.  The company is evaluating two sites. A final investment decision has not yet been made. Project costs or capacities were not disclosed.  Meanwhile, construction of an alkoxylates joint venture project with Petronas Chemicals at Kertih in Malaysia’s Terengganu state remains on track, with startup of production targeted for Q3 2023.

PCC disclosed the information in its Q1 results filing on Thursday. Q1 sales rose 65.2% year on year to €345.3m. Higher sales were cited to high average selling prices, particularly for polyols, surfactants and chlorine co-product caustic soda. Duisburg, Germany-based PCC is focused on chemical feedstocks and specialties. It also has a container logistics business.

More German Investment in the US

Meanwhile, over in Asia, all eyes are on Indonesia as they wrestle with the various forms of export controls on palm oil: According tio ICIS reporting, there is a reasonable prospect that Indonesia will reimpose its domestic market obligation (DMO) policy on palm oil.  This will keep 10 million tonnes of cooking oil in Indonesia, to ensure the country will have sufficient stock for food and other domestic needs.  The news on 20 May comes a day after the Indonesian authorities said it would be lifting the prior export ban on palm oil on 23 May.  Indonesian farmers had staged protests against the export ban earlier this week.  “We will wait for the official announcement on DMO,” a regional fatty alcohols producer said  “Crude palm oil futures have rebounded and regained what it lost earlier,” another supplier said.  On 19 May, crude palm oil (CPO) futures for the most actively traded monthly contract closed lower at ringgit (M$) 6,072/tonne on the Bursa Malaysia Derivatives exchange, down from M$7,104/tonne on 29 April, after the announcement of the lifting of the export ban.  "It's going to be [a] roller coaster [ride] for the CPO market," a separate regional oleochemical producer said.

The export ban on palm oil was implemented from 28 April by the Indonesian authorities, after its previous DMO regulations were unable to contain soaring domestic cooking oil prices earlier this year.  In January, the Indonesian government imposed a DMO of 20% of companies' planned exports. This was raised to 30% in March, before it was scrapped in favour of higher export levies.  Under the DMO policy, Indonesian companies had to show proof of their domestic sales of CPO and/or refined, bleached and deodorised (RBD) palm olein, to secure export approvals for oleochemicals, including fatty acids, fatty alcohols and soap noodles.  Indonesia is the world’s largest palm oil producer and exporter, followed by Malays

Domestic Market Still Encouraged

In a tremendous Insight Article by ICIS’ Joe Chang, he draws on data and analysis from many sources including a panel discussion at our conference. You should read the whole thing here https://subscriber.icis.com/news/petchem/news-article-00110765654 .  A key piece of data and chart however, should make all readers sit up and take notice. Here it is:

A massive pile-up in inventories at key US big-box retailers may be a warning sign for chemicals demand, which has partly been propped up by the overbooking of orders.

• Walmart and Target disappointing Q1 results show huge inventory builds

• Retailers to start unwinding stocks through next couple quarters

• Retail destocking to trickle down to chemicals demand

Not a good trend, really, is it?

The Clariant – SABIC relationship has been a subject of much speculation since the love-on-the-rebound matchup got started after the bungled Huntsman – Clariant hookup several years ago. ICIS recently reported that Clariant’s shares jumped in value on the prospect of a takeover of the Swiss specialty firm by Saudi producer SABIC. Speculation was prompted by Clariant's announcement that an agreement between it and SABIC will expire on 24 June.  This means that Clariant could be vulnerable to a takeover, as petchems major SABIC can now exceed its 33.3% share in the company and would be able to nominate more than four supervisory board members.

The stock price gained 7.81% on the Swiss stock exchange over the course of a morning, although in the wake of an accounting investigation, remains 1.89% below the level of a year prior.

Apparently the governance agreement between the two firms will expire at Clariant’s annual general meeting (AGM) on 24 June, after being established in September 2018.

In response to the news, the Swiss firm acknowledged that SABIC could increase or decrease its stake in the company as any other shareholder, and that the runup in Clariant’s share price reflected speculation in the market.  “We have worked together with their representatives on our Board for many years and have been fully aligned on our purpose-led strategy to deliver shareholder value,” a Clariant spokesperson said to ICIS.

“Thanks to this close cooperation, we have built a high level of trust that does not necessarily need a formal governance agreement.”  SABIC initially came in as a white-knight investor with an initial 24.99% stake bought from activist investors White Tail in 2018, in the wake of a failed merger with US producer Huntsman.  This relationship is important to both parties, with SABIC CEO Yousef Al-Benyan mentioning it at the company’s first quarter financial results announcement for 2022.  “Clariant is a part of SABIC’s strategy in our specialised business – we have been paying attention to Clariant and it remains a key part for our future strategy,” said Al-Benyan at the press conference following the results.

Clariant insisted that this stock market speculation would not disrupt efforts to stabilise the company.  “We will continue to focus on executing Clariant’s purpose-led strategy to deliver profitable growth and value for all stakeholders including shareholders,” stated Clariant’s spokesperson.  “After sharpening and pruning the portfolio profile over the last years, Clariant has one of the best specialty chemicals portfolios with an ambition to a top quartile specialty chemicals performance, underpinned by attractive 2025 financial targets.”  Targets to 2025 include compound annual sales growth between 4-6%, group earnings before interest, tax, depreciation, and amortisation (EBITDA) margins of 19-21% and free cash flow conversion of around 40%.  But this, coupled with its portfolio – which has been refined over the years – could serve to make Clariant an even more attractive option for takeover, according to Baader Bank analyst Markus Mayer.

“Clariant is the most obvious takeover target in the sector, as its valuation is far too cheap and the chemical processing catalyst market is after years of no change in a consolidation phase,” Mayer said in analyst note.  “Chemical processing catalysts are late cyclical and will profit structurally from the high energy price level and high CO2 prices, plus Clariant has an overlooked white biotech platform and its therefore among our most preferred chemical companies.”

Since the agreement was signed, Clariant has undergone several changes at executive level.  In the wake of share purchase, SABIC executive Ernest Occhiello was appointed CEO, but resigned with immediate effect, citing personal reasons, which saw Hariolf Kottmann reinstated as an interim in July 2019.  Kottmann was replaced by current Clariant CEO Conrad Keijzer in January 2021 and announced that he would stand down as chairman of the board the following month.  Stepan Lynen replaced long-term CFO Patrick Jany in February 2020, but in the wake of the recent investigation into Clariant’s accounting, it was announced he would step down from the role from 1 July.  Lynen will be replaced by ENGIE North America CEO Bill Collins, who also served as the group’s deputy CFO.

OK so lot’s of Changes and maybe the Swiss specialty chemicals company can be picked up at a rather attractive multiple in today’s market and in the midst of today’s company news. Expect more than one suitor, in my view, although it is SABIC’s to consummate quickly or let go.

Swift Swiss Consummation Expected

More Asian downward trends were reported mid-month by ICIS, this time in the PKO value chain. Lucas Hall, fatty alcohol and fatty acid guru, reported that a downtrend in feedstock palm kernel oil (PKO) costs in recent weeks has exerted downward sentiment on US fatty alcohols markets as wider concerns over Indonesia's ongoing export ban on crude palm oil, and refined bleached deodorised (RBD) palm olein, logistics and Chinese demand during ongoing lockdowns persist.

• Lower PKO costs exert downward sentiment 

• Mid-cut supply sufficient to meet demand

• Long-chain alcohols remain snug to tight, namely C18

Although PKO costs have fallen in recent weeks as China's lockdowns persist, feedstock costs remain at historic highs, underpinning the wider market.

The ever popular fats and oils chart

Source: CME Group, Matthes & Porton, WSJ Cash Markets

Logistics concerns, namely in container markets, are adding to the pressure, driving the premium for packaged material over bulk material to historic highs.  

LyondellBasell and Sasol's JV US Lake Charles, Louisiana, cracker had an unplanned shutdown last week, according to market sources. A Sasol representative said there were no disruptions to US fatty alcohols  production. \ Some southeast Asian producers are on their typical annual maintenance.  Supply of mid-cut alcohol remains sufficient to meet demand, as the flow of bulk material remains in much better shape than container material, especially as so many containers are currently tied up in Chinese ports. Many players hedged against higher palm prices in Q4 and Q1, creating some carryover volume as the market approaches the summer low demand season. \ C16-18 alcohols remain snug to tight, particularly single-cut C18, as the PKO premium over CNO persists. While the downtrend in PKO may encourage increased consumption into the feedslate, C18 alcohol is expected to remain tight into Q3. CNO inherently produces less C18 content. Tight container markets are adding to the pressure, as most importers ship in container.  Demand remains overall healthy to strong, with demand in industrial end markets largely outpaced available supply. Consumer segments are healthy but concerns over inflation are impacting forward sentiment.

Q3 contract discussions have yet to begin in earnest.  One supplier said an ongoing disruption from one importer was creating short-term spot opportunities for mid-cut alcohols.  Premiums for container volumes continue to widen over bulk volumes as logistics remain a challenge globally against the backdrop of ongoing lockdowns in the key China market and lingering logistics challenges in southeast Asia as the country curbs exports of various palm oil products.  Players continue to closely monitor Indonesia's export bans on crude palm oil, and refined bleached deodorised (RBD) palm olein for potential impacts on margins and logistics from the country.

Still up - but there's always a lag isn't there ?

Premiums for mass balance (MB) material are largely in the range of 13-17 cents/lb over standard balance material.  MB material  remains tight as certified sustainable material becomes more challenging to source against the backdrop of ongoing supply-chain disruptions and the ongoing withhold release order (WRO) from the US Customs and Border Patrol (CBP) against Sime Darby Plantation Berhad and its subsidiaries and joint ventures, as well as FGV Holdings Berhad and its subsidiaries and joint ventures, from late 2020.  In early 2022, the CBP said it found sufficient evidence of forced labour at Sime Darby, subjecting its imports to seizure and destruction.  Supply is expected to remain tight over the medium-to-long term.  The US is a major net-importer of natural fatty alcohols and a key production region for synthetic alcohols.  The key end-use for mid-cut alcohols is surfactants. This class of chemical products comprise numerous cleaning and detergent uses, ranging from household agents to oilfield applications.

ICIS’s Joe Chang continued to rack an impressive month of Insight Articles, this time drawing substantially on Kevin Swift’s paper delivered at our May conference. By the way, Kevin, former Chief Economist at the American Chemistry Council is now Senior Economist at ICIS.  And again, the the spirit of you gotta be there, I’ll just offer a snippet here:

Enough Said!

A further snippet reported by Joe from our conference concerned logistics and order patterns, i.e.: The trend of buyers overbooking orders to ensure sufficient supply is unlikely to end anytime soon as logistics constraints persist, panelists at the 12th ICIS World Surfactants Conference said.  “I don’t see this trend going away anytime soon. Unless sea freight rates decline, then [overbooking] and hoarding will continue,” said Eric Byer, president and CEO of the National Association of Chemical Distributors (NACD).

In what seems to be be now a pattern of downward trend news, US April ethylene oxide (EO) contracts fell by 2.20 cents/lb ($49/tonne), based on a decrease in US April ethylene contracts.  April EO contracts were assessed at 60.8-70.3 cents/lb FOB (free on board).  US natural gas futures soared above $8/MMBtu due to ongoing supply concerns ahead of higher demand this summer, which is pressuring feedstock ethane costs.

More EO should be pulled into derivatives as demand picks up going into summer, although co-raw material volatility will persist.  Demand is looking strong in the short term during the peak bottled beverage and construction seasons, but there is some anxiety about long-term demand as the odds of a recession have gone up due to higher inflation, tighter monetary policy and worsening supply-chain woes.  The majority of EO contracts are formula-based, and price movement comprises 80% of the change in the ethylene price and an additional conversion fee, or adder.  Like ethylene, EO contracts are settled at the beginning of the month for the previous month’s price.

Another Downer..

And in China: some price declines and stagnation reported in the China FAE market. Spot prices of FAE mols 7,9 have stagnated at $1,800/tonne CIF (cost, insurance & freight) since 14 April, ICIS data showed.

And another....

China's factory activity in April shrank for the second consecutive month, with the official purchasing managers’ index (PMI) dipping to 47.4 – its lowest level since February 2020 – according to the National Bureau of Statistics (NBS). The resurgence of COVID-19 cases had led to stricter control measures, which weighed on factory activities and demand, said the NBS.  Separately, China's April general manufacturing PMI by Chinese media group Caixin also showed a sharper decline to 46.0 in April, from 48.1 in March.

And another.. (you're getting this right?)

The Caixin PMI covers small- and medium-sized firms, while the NBS's PMI concentrates on state-owned enterprises. A figure of 50 and above denotes expansion, while figures below that level signify contraction.

One of the blog’s favorite companies, Galaxy Surfactants Ltd reported a 34% rise in total income at Rs. 1054.13 crores in Q4FY22 as against Rs.786.10 crores in same quarter last year. Net profit rose by 25% and reached Rs.98.40 crores as against Rs.78.68 crores for the period ended March 31, 2021. Company has reported 25% growth in EPS at Rs.27.76 for the period ended March 31, 2022 as compared to Rs.22.19 last year. The company has recommended final dividend of Rs.18/- per equity share of face value of Rs. 10/- each. For the full year, company's total income rose by 32% to reach Rs.3698.22 crores in FY22 as against Rs.2794.92 in FY21. However the net profit fell by -13% and stood at Rs.262.78 crores as against Rs.302.14 crores for the Financial Year ended March 31, 2021. EPS also went down by -13% to reach Rs.74.12 in FY22 versus Rs.85.22 in FY21.

Around the middle of May, my alma mater, Pilot Chemical announced some personnel moves. Hans Hummel has been named sustainability manager, a newly-created position, and Jeff Crume is now a business manager.  Hummel will be responsible for further developing, overseeing and administering Pilot's sustainability strategy, which includes Environmental, Social and Governance (ESG) goals and initiatives around the four pillars of sustainability: Products, People, Planet and Governance & Ethics. Crume has been named business manager – Biocides. He brings a wealth of commercial experience to this role from his more than 20 years in chemical industry sales, marketing and business management roles. In this position, which he assumes as Hummel transitions to sustainability manager, Crume will be responsible for the profitable growth and management of Pilot Chemical’s Biocides business, including profitability, strategy development and execution, and product management activities. 

And finally, some bullish news from Kao, as ICIS reported that Japan's Kao Corporation announced plans to build a new tertiary amine production plant in Pasadena, Texas, mainly to meet growing demand for sterilizing/cleaning applications but also for a wide range of other industrial applications, the company said in a news release.  The new US production is scheduled to begin operations in January 2025 and will have an annual production capacity of 20,000 tonnes/year.  Kao has the world's largest production capacity, with three production sites in Japan, the Philippines and Germany. A company source said the company expanded production at its Philippines site by 10,000 tonnes/year in 2021 and expects to expand production at its Germany site by 20,000 tonnes/year later this year.  Kao uses proprietary catalyst technology that introduces dimethylamine into fatty alcohol in the presence of such a catalyst to produce selective tertiary amines.  [very interesting] The derived tertiary amines are used as basic ingredients in hair conditioners, dishwashing detergents, disinfectants and many other household products.

Not just skin cream, you know...

The Music Section: This month Spotify has sought to remind me what an outstanding album Montrose was. The eponymous first album from the American heavy rock band named after lead guitarist Ronnie Montrose was released in 1973 and accompanied many a maths homework session for me over the high-school years. And was most likely responsible for the untimely demise of some substantial quantity of braincells. Worth it though.

Montrose was arguably Van Halen before Van Halen was. This first album clocks in at 32 minutes and 8 songs. Produced by Ted Templeman who also went on to produce Van Halen’s first album. The other VH link? Sammy Hagar on vocals of course.

When Montrose first came to tour the UK, they were opening for venerable British rockers, Status Quo (remember them?). Anyway, the cult following that Montrose built up made a great show of coming to the front of Newcastle City Hall to support Ronnie, Sammy and gang and then leaving the venue before Status Quo came on. Not me though. I’d paid for 2 bands so…

Here's the whole album – apparently recorded to YouTube from the vinyl. You should listen to the whole thing. It’s only 32 minutes!

Early American Heavy Metal

Some highlights: Rock the Nation, opens the album with a 3 minute declaration that Montrose is the first American heavy metal band. Why American? Well the enthusiastic cowbell for one thing – and the whole “across the nation" thing”. Brits typically didn't sing in such terms. Hey doesn't young Sammy Hagar sound just great?!?!

The next 2 songs, I always regarded as a pair as they always seemed to be played together at the various heavy rock discos in those days. Was not Ronnie Montrose clearly the direct inspiration for Eddie Van Halen? The second song of of the pair, Space Station #5, for me has always been the greatest ever heavy rock song without a guitar solo. Check it out. Where’s the solo? Well actually, it occurred to me just a few days ago that it’s hidden in plain sight right at the start of the song. Listen to it again. Cool right? Anyway, I think a solo in the middle would have unnecessarily interrupted the careening progression of a beautifully crafted heavy rock paen to blasting into space. Ah.. so many braincells killed by this one. I probably coulda been another Einstein, maybe.

The next one I’d like to draw your attention to is Rock Candy. Opens with Bonham-like percussion, a screeching guitar that would make Ted Nugent stop in his tracks and Sammy Hagar at his full throated best. Story about this one: I had intended to use this track during one of our surfactants conferences a few years ago. The message was around something about making everything count; guitar, bass, drums, vocals. Everything is individually and collectively brilliant in this song. However it wasn't until my close advisor and spouse pointed out to me the nature of the lyrics that would be considered somewhat inappropriate for our (then) 2018 sensibilities, that I scratched it in favour of a much safer Scorpions ballad. Pity.

And the last song. Make it last. Is it a ballad or a kind of an anthem? Who cares. Since then, there’s been so many imitators. It’s a perfect song to end an album with right? Funny thing about this one. I’d listen to Sammy back then singing about being 17 and 21 and 25 and I’d think that’s so old and how would things actually be then. Interestingly in that 17 – 25 stretch, it turns out a lot of great things happened. Fell in and out of love a bunch of times then got married. Still married. Still in love. Keep on rolling, make it last. Keep on rolling….

Surfactants Monthly – April 2022

You’ve still got about a week to reserve your spot at the upcoming conference, May 10-11 in Jersey City. Did I mention we have, for the first time ever, an exclusive breakfast briefing by Shell Chemical? They don’t speak that often in public about their surfactant related business, so now is your chance to hear what they have to say – in person. Check out the website for the event and book when you still can. Thanks. End of commercial.

In what’s becoming a bit of a habit, the WSJ misleadingly headlined an April 28 story about Unilever as follows: Unilever’s Activist Truce Should Hold for Now. They’re talking about activist investor, Nelson Peltz and, as the story goes on to confirm, there is no such truce. A lull maybe, yeah, but not a truce. A lull isn’t a truce in my book. Anyhow the story notes that the company has done pretty well recently and they have not heard from Nelson since he built up a stake and rattled some management cages. That’s not a truce though right ? - if they have not heard from him yet. Anyway, the article goes on to note that Marmite Maker Unilever increased sales by 7.3% in the first three months of 2022 compared with the same period a year earlier. Growth was slightly faster than European peer Danone and well ahead of the 4.4% forecast by analysts covering the stock. Unilever was also able to raise prices without losing too many consumers. It charged 8.3% more for its products—one of the most aggressive increases reported by a household-essentials producer so far this results season—and the volume of goods sold slipped just 1%. Good for them right?

The WSJ went on to report that Unilever wouldn’t say whether it had met with Trian Partners during a call with investors Thursday. However, Lazard pointed out in its first-quarter review of shareholder activism that activists at European targets are treading carefully since the war in Ukraine began, to avoid coming across as tone-deaf. I would also added that Nelson Peltz has been otherwise occupied by the April marriage of his most-valuable asset, daughter Nicola to Brooklyn Beckham, scion of the footballing pop culture royal family of David and Victoria. For details of this match, we must go to the authoritative tabloid source of the Daily Mail, which I think I have to add to the Blog’s mandatory reading list. As of today, that reading list includes – this blog, People Magazine, erm...and of course, ICIS Chemical Business. So it’s a pretty exclusive list. Anyway for the Mail’s coverage of the wedding, go here: https://www.dailymail.co.uk/tvshowbiz/article-10703957/Nicola-Peltz-stuns-Valentino-bridal-gown-ties-knot-Brooklyn-Beckham.html

Best pic, IMHO – This one.

Nicola wears Valentino

It looks like Vogue got first dibs on the official photos. Smart couple.

Oh and here’s one with the groom in it.

Groom wearing er.. a tux, probs from that rental place in the mall ..

Start of the serious surfactant news, which is probably what you came for.

ICIS’s Clive Ong reports on Asian LAB at the end of April as follows: The linear alkylbenzene (LAB) market in India remains buoyant, with near-term supply expected to be snug. Buying interest remains keen on the import front as well, with buyers seeking some spot lots in view of the shortfall in the local market.

• India domestic market to remain snug

• Chinese supply elevated amid lockdowns

• Asia buyers unhurried on considerations of ample availability

The domestic market in India, in particular, is expected to remain tight in the near term as a producer will kick off planned maintenance and expansion in early May, which is expected to last at least three months. “We are making arrangements to meet some of the shortfall in the local market,” said another producer in India.  The tight local market also translated into firmer buying interest on the import front. Spot prices rose above $2,000/tonne CFR (cost and freight) India, surging ahead of China and the rest of Asia, ICIS data showed.  Suppliers in the Middle East, China, and the rest of Asia continue to target sales towards the subcontinent, as demand in China and the rest of Asia continues to lag.

The Chinese market remains weak, with the ongoing lockdowns weighing on trade and sentiment. Logistical woes inland and at the ports continue to hamper trade, resulting in elevated stocks in the country.  Chinese suppliers remain under pressure to deal with high stocks and were understood to be offering cargoes at a discount. Consequently, buyers in SE Asia have become unhurried, with expectations of cheaper offers available for their picking.  “There are cheaper offers from China compared to other Asian material,” said a buyer in Asia.  Trade in the region slowed as some buyers decided to wait and see, on hopes that prices would lose ground in the near term. However, most suppliers in Asia are not keen to reduce prices significantly, with feedstock costs trending higher.  “Our Asian supplier could not match the prices of the Chinese and hence did not offer,” said a trader in Asia.  The chart below shows the ratio of India prices versus SE Asia, which clearly depicts the outperformance of the former in the current period. It also shows the prices of LAB in SE Asia against the downstream product of LAB sulphonate (LAS). A lack of impetus in the LAS market will continue to act as a weight to the LAB market in the region, keeping the ratio in a narrow band.

Clear differential

By contrast the India LAB market is looking pretty vibrant, with domestic demand staying decent as reported by Clive Ong of ICIS. Tight availability in the local sector is expected to persist in the near term, as a producer plans to shut for an extended maintenance in May.

• Tight availability to bolster India market

• Chinese demand at a low ebb amid lockdowns

• East Asia trails India as buyers wait and see

Domestic India prices for April parcels surged to rupees (Rs) 170-175/kg ex-tank, up from around Rs152-153/kg ex-tank in March. Tight supply coupled with decent buying interest spurred the market higher.  “April sales are fine and prices steady at the new level,” said a producer in India.  The firm domestic market has also fuelled buying interest on the import front. Suppliers in the Middle East and Asia mostly indicated prices at above $2,000/tonne CFR (cost and freight) India, although most concede that buying indications are moving up slowly.  The volatile crude oil markets have roiled sentiment, especially among buyers, prompting some to become cautious. However, with upstream markets on the rise and hence an increase in raw material costs for LAB, makers continue to push for higher numbers in a bid to maintain workable margins.

“Our costs are rising fast, and hence we have to try for higher LAB values,” said a producer in east Asia.

What we've been used to seeing these days

Meanwhile the Chinese market remains mired in tepid demand, with the COVID-19 lockdowns and the resultant logistics problems weighing on trade and demand.

Suppliers are keen to export out of China, as they are saddled with stocks. However, logistical issues and port restrictions at some locations appear to have dampened this initiative to some degree.  Other Asian suppliers also faced weak buying momentum in the region, with the downstream linear alkylbenzene sulphonate (LAS) market stagnant.

“Buying interest is not strong and buyers are slow to commit, especially to higher offers,” said another LAB producer in Asia.  The price gap between SE Asia and India has widened in recent weeks, with different performance in these two regions become increasingly evident. Some players expect Asia will need to deal with the excess Chinese material before it is able to recover, while Chinese lots will likely have an impact on the Indian market as well, perhaps capping its current uptrend.

An interesting snippet on Shell by Al Greenwood in ICIS Chemical Business. Shell is considering building another linear alpha olefins (LAO) plant in Geismar, Louisiana, the company confirmed late April.  The company could make a final investment decision in the first quarter of 2024, said Curtis Smith, spokesman. Production could start in 2026-2027. The capacity would be world-scale.  The value of the project is $1.4bn, according to the Louisiana Board of Commerce and Industry, which received an application from the company for a tax break. Shell had started production at its fourth LAO plant in Geismar late in the last decade.  That plant could produce 425,000 tonnes/year.  As well as going into polymers and lubricants, LAO’s are used as raw materials for AOS- alpha olefin sulfonates. Very interesting right? As luck and great timing would have it, we are hosting a Shell breakfast briefing at next week’s surfactant conference. You have to be there to see what’s really going on with them. I’ll not be reporting it here or anywhere else. Join us!

Not your typical breakfast

Big news from BASF in China: BASF and Sinopec, late April broke ground the expansion project of their site in Nanjing, China’s Jiangsu province, the companies said in a joint statement.  The site is operated by their 50:50 joint venture named BASF-YPC Co.  The partners will expand the production capacities of propionic acid, propionic aldehyde, ethyleneamines, ethanolamines and purified ethylene oxide.   A new tert-butyl acrylate (TBA) plant will also be built.  The TBA plant will use acrylic acid and isobutene produced by the JV itself as feedstocks, the first time this production technology is applied outside of Germany. The expanded and new plants are planned to come on stream by the end of 2023. Capacities details are not disclosed.

No idea what's with the bikes

April saw Stepan’s Q1 results reported by ICIS: Stepan’s first-quarter net income rose year on year despite flat sales volumes and weaker polymers operating income due to stronger business for surfactants and specialty products, the US-based producer said on Tuesday

Key Points
- Surfactants operating income rose around $600,000 year on year to $53.8m during the quarter on the back of an improved product and customer mix, with gains significantly offset by supply chain challenges and a 1% decline in sales volumes.

- First-quarter specialty product operating income rose $1.1m year on year to $3.7m due to shifting order timings in the food and flavour business and medium chain triglycerides margin recovery.

- Polymer division operating income fell to $14.1m during the quarter compared to $18m a year earlier due in large part to a power outage at Stepan’s Milssdale, Illinois, plant in January, resulting in some force majeure declarations and increased costs.

Outlook
“We believe that demand across our business will remain strong but the company will continue to be challenged by external supply chain issues, including raw material availability and transportation constraints that impacted us in 2021 and during the first quarter of 2022,” said Stepan CEO Scott Behrens.

ICIS published some additional analysis on the Stepan results : Stepan saw a 1% decrease in surfactants volumes in Q1 because of lower demand for laundry products within its consumer products business, the company said in its earnings call.

Strong demand in the functional products, institutional cleaning and personal care end markets mostly offset the decrease in consumer laundry demand.

President and CEO Scott Behrens said the softness Stepan is seeing stems in part from significant and persistent raw material and transportation constraints in the North American market against the backdrop of the impact of price inflation on consumer trends in developing regions, including the Mexico market.  Behrens added that surfactant inventory levels across the household, industrial and institutional cleaning (HI&I) chain are in a better balance but still not at the levels they need them up to given the robust demand from their customers.  Global agricultural volumes increased as high commodity prices for corn and soybeans drive increased planted acreage and demand for crop protection in North America and Brazil. In Asia, continued growth in the post-patent herbicide market also contributed to higher volumes.  Oilfield volumes increased as elevated crude oil prices support demand for oilfield products, including biocides. Raw material availability offset some of this growth.

Not so in love right now

On the same day, CEPSA, also a major player in surfactants, also reported stronger earnings. As reported by ICIS: Cepsa reported a 10% increase in first-quarter chemical earnings on the back of higher selling prices and despite almost flat sales.Privately-owned Cepsa did not provide sales figures for the first quarter. It measures earnings in current cost of supplies (CCS) earnings before interest, taxes, depreciation and amortisation (EBITDA). Cepsa provided sales figures for the production of linear alkylbenzene (LAB) which is widely used in detergents and produced by Cepsa in Spain, Asia, and the Americas.

Cepsa said margins in chemicals had been “solid and sustained” despite high prices for natural gas and electricity in the first quarter.  Thanks to healthy increases in earnings at Cepsa’s Energy and Upstream divisions, overall CCS EBITDA stood at €605m in the first quarter, up 87% year on year.  Speaking at Cepsa’s headquarters in Madrid, CFO Carmen de Pablo said surfactants had performed particularly well in the first quarter, both in the home and personal care sectors. “For surfactants, we saw a strong increase in sales volumes during the first quarter, both year on year and quarter on quarter. Intermediates and solvents also posted a good performance, in line with previous quarters,” said De Pablo.

CEPSA stays bullish

According to the great Helen Yan of ICIS, China Covid problems are leading to soft ethoxylate markets in the region. Asia’s fatty alcohol ethoxylates (FAE) market is expected to remain soft in the near term due to lockdowns in China and declining feedstock fatty alcohols market.  Demand for FAE had weakened due to the cautious stance adopted by regional players who are closely monitoring the Chinese market, which had slowed down significantly following lockdown measures implemented to contain the spread of the Omicron variant.  Shanghai, a major port and key financial and manufacturing hub, had been locked down since late March.  Spot appetite has waned and trading activities stalled as market players grapple with logistics issues, transport restrictions, port congestion and manpower constraints.  Supply chains have been disrupted and shipments delayed as factories were temporarily shuttered or running at reduced rates.  “Demand is low due to the China lockdowns. Customers are waiting also as the feedstock fatty alcohol market is bearish,” a regional FAE supplier sai

Demand dampens and prices ease

Feedstock fatty alcohols C12-14 prices have fallen by more than 15% since early March to $2,550-2,625/tonne FOB (free on board) southeast (SE) Asia in the week ended 20 April, ICIS data showed.  Spot prices of FAE mols 7, 9 were flat at $1,900-1,950/tonne CIF (cost, insurance and freight) SE Asia on 21 April, ICIS data showed.

Back in the US, our fatty alcohol guru from ICIS, Lucas Hall (who will be delivering his exclusive insights and analysis at our conference next week) notes the following: US fatty alcohols markets remain underpinned by volatile but overall firm feedstock costs and ongoing supply chain disruptions in the global market, primarily on imports.

• Palm in a downward correction, narrowing premium to CNO

• SBO, BFT remain firm

• Demand for imported material slows on downward correction in Asia

US fatty alcohols markets remain underpinned by volatile but overall firm feedstock costs and ongoing supply chain disruptions in the global market, primarily on imports.  However, feedstock costs across the oil palm complex have entered a downward correction in the last several weeks, pushing buyers to the sidelines.  Buyers are already committed to their Q2 volumes but the downward correction has slowed demand in the spot market as wider economic concerns mount.  Certified mass balance (MB) material, however, remains tight, sustaining the MB premium over standard balance material.  Palm oil prices are in a downward correction ahead of expectations of weaker demand for palm oil during the Ramadan holiday as well as during the oil palm harvest during the summer months ahead.

Palm turns down

Meanwhile, feedstock soybean oil (SBO) and bleachable fancy tallow (BFT) costs remain firm. SBO remains at a premium to palm on historically tight supply and sustained concerns over global cooking oil supplies against the backdrop of the Russia-Ukraine war.  SBO and BFT demand into renewable fuels markets also remains strong, further supporting the market.  Palm kernel oil (PKO) costs have largely been at a major premium to CNO costs the last several months, encouraging CNO consumption over PKO in the feedslate.  While PKO and CNO produce similar levels of mid-cut and C16 alcohols, CNO produces significantly less C18 material, pushing C18 alcohols tight throughout the last quarter.  The downward correction in PKO may encourage increased consumption of PKO in the feedslate in the coming months, improving C18 availability in the same time.  Lead times from southeast Asia remain long - up to four to five months - because of ongoing shipping logistics constraints globally. Slower demand in China, because of ongoing coronavirus-related lockdowns across parts of the country, may alleviate some of these disruptions in the near term.

The prices in the table represent a range of settlements for standard balance material heard throughout the quarter for the majority of market participants. Prices above and below those listed in the table were heard throughout the quarter but excluded as they were not viewed as representative of the wider market.

US Q2 fatty alcohols contracts were assessed at a sharp increase from Q1, tracking bullish feedstock costs across the oil palm complex in Q1.  Palm oil markets were bullish in Q1 as Indonesia introduced temporary curbs on exports of palm oil and palm products ahead of disruptions to global sunflower oil supply because of the Russia-Ukraine conflict.  Freely-negotiated contracts for mid-cut alcohols did not rise as sharply as long-chain alcohols as supply and demand were more balanced.  Some players had carryover volumes from Q1 as they hedged against the uptrend in feedstock costs. Freely-negotiated contracts for long-chain alcohols saw larger increases, as single-chain C18 alcohols became particularly tight during the quarter with the increase in CNO consumption in the feedslate over PKO.  Tight C18 markets increased demand for C16 alcohol for blending, in turn keeping C16 markets snug to tight during the quarter.  C16-18 alcohols are commonly sold in a ratio of 30:70, 50:50 and 70:30.  Settlements from one natural supplier of single-cut C16 and C18 alcohols were heard closer to $1.80/lb, given that supplier's competitive access to bulk storage capacity. Most other natural suppliers import in containers, where freight costs continue to soar.

Mass balance (MB)
MB premiums were largely heard in the $300-330/tonne range.  MB material is tight as certified sustainable material becomes more challenging to source against the backdrop of ongoing supply-chain disruptions and the ongoing withhold release order (WRO) from the US Customs and Border Patrol (CBP) against Sime Darby Plantation Berhad and its subsidiaries and joint ventures, as well as FGV Holdings Berhad and its subsidiaries and joint ventures, from late 2020.  In early 2022, the CBP said it found sufficient evidence of forced labour at Sime Darby, subjecting its imports to seizure and destruction.  Some players have had oleochemical products detained at ports.

Malaysian players continue to work to avoid further disruptions to their supply chain, but overall availability is expected to continue to tighten in the medium-to-long term.

Makes a change from heroin I suppose

Some EO pricing news from Europe and then the US: First from Melissa Hurley of ICIS, who is fast establishing an authoritative reputation for analysis in this market: European ethylene oxide (EO) pricing for April remains unclear still in the face of soaring energy costs and record high ethylene prices.

- Sharp production costs throw curve ball to formula pricing

- Supply more snug due to unplanned outages, demand healthy

- Purified EO demand higher,  suppliers less focused on MEG production

Separate supplier and consumer discussions are ongoing. Talks were expected to finish last week but the situation is unprecedented, making for challenging contract talks.

Long march continues

Separate energy charges of varied amounts have either been implemented, are still under discussion. or have not been accepted by consumers.  The European ethylene contract reference price for April was up by a record month-on-month adjustment of €230/tonne from March.   This supersedes the previous record high set in March.

Upward ethylene pressure was a key issue in the market, with energy costs also causing mounting production costs.  Previously, 2022 adder fees were assessed stable to firm due to sharp production pressure.  Supply was balanced to tight in the first quarter, following a few force majeure declarations at Dow's production unit in Terneuzen and Shell's Moerdijk EO unit, both in the Netherlands, as well as Nouryon's facility in Sweden.  Shell's cracker remains offline but is expected to restart this week, according to sources upstream.  The FM for EO supply remains in place, according to sources at the end of last week.

Interesting trend

MEG MARGINS
Downstream monoethylene glycol (MEG) margins have experienced significant pressure due to rising costs and demand challenges in the spot market.

European MEG contract prices struggled to keep up with the increasing ethylene prices in 2021.  Contractual consumers are minimising volumes in the face of higher prices or postponing monthly allowances for April, according to sources.  Demand has increased for purified EO in cases, and local glycol sellers are opting to optimise production away from MEG towards better performing derivatives. Certain EO derivatives are performing better such as surfactants and polyethylene glycol (PEG), leading suppliers to adjust EO production accordingly.  General end-user demand could weaken in the face of higher inflation rates across Europe as the cost of living soars.  March EO contract prices were between €1,567-1,705/tonne FD (free delivered) NWE (northwest Europe).

And for EO in the US, ICIS notes that US March ethylene oxide (EO) contracts fell by 2 cents/lb ($44/tonne), based on a decrease in US March ethylene contracts.  March EO contracts were assessed at 63.0-72.5 cents/lb FOB (free on board).  Following the historic changes to the global ammonia market in March, the first week of April was calmer. EO and ammonia can be combined to produce ethanolamines, which are facing April price increases.  More EO will be pulled into monoethylene glycol (MEG) later in Q2 as turnaround activity wraps up and the peak bottled beverage season begins.

US EO does it's own thing (like the rest of the country)

Finally, Al Greenwood writes a very nice analysis of the synergies between Oxiteno and new parent, Indorama. Check it out here. https://subscriber.icis.com/news/petchem/news-article-00110750362 You may need a subscription though.  Side note – I received some encouragement from not-disinterested parties to continue to use the Giselle memes when writing about Indorama’s surfactants business which continues to have a strong base of operations in Brazil. What do you think, dear reader?

So - what do you think?

I gotta make the music section brief this time as I’m on the road again right now – first to Paris. OK so who remembers this one from Adam and the Ants?

Then I go to Zurich. So this one is not claiming to be Swiss music but come on.. who hasn't yodeled this in the shower? (I know Focus are Dutch! But this song sounds Swiss – to me)

That’s it. See you next week in Jersey City!

Surfactants Monthly – March 2022

Before we jump straight into the news: Please consider registering for our surfactants in-person event in May (10 – 11) in Jersey City, NJ. If you missed ACI in Orlando this year, now’s the chance to get back on the circuit, to meet old friends and new, to talk shop, to make deals, to learn a heck of a lot, to see who won the awards, to have a laugh and a joke and listen to some great music and just generally get back to normal. Everyone else will be there, pretty much, so.. yeah you should register, I think – Here's the link. https://events.icis.com/ehome/worldsurfactants/home/

News: I know most of you have been waiting on literal tenterhooks (not sure what tenterhooks are but I think you get it) to hear the next installment of the Activist Shareholder / Marmite Maker – Nelson Peltz / Unilever corporate thriller. Well, nothing much has happened in the past month as far as I can see from my searching of the financial press. So, OK, we can seek solace in the pages of the Daily Mail which can be relied upon to write about (and picture) Peltz daughter Nicola at least once every 48 hours. We are not disappointed. According to the one of the world’s most visited English language news websites (Not kidding. #4 behind the NY Times and ahead of the Grauniad[1].) Brooklyn Beckham and his fiancée Nicola Peltz looked sensational as they starred as the faces of Pepe Jeans' Spring/Summer 2022 campaign.

The article is, as always well sourced and illustrated. The happy, soon to be wed, couple struck a 60’s note in the black and white photoset. Anyhow that’s all I have from the house of Peltz this month. We can only hope for whatever is happening behind the scenes with Unilever to be made public in the financial or tabloid press next month. Let’s see.

Love Peltz Style

Great news from Holiferm and Sasol on the last day of this month as reported by ICIS.  Sasol has agreed a partnership with UK company Holiferm to develop new biosurfactants.  Under the partnership, Sasol will purchase the majority of sophorolipids produced at a new Holiferm manufacturing facility that is due to start up in early 2023 in the UK. Sophorolipids are biosurfactants made through fermentation, using yeast to convert vegetable oils and glucose. “The Holiferm expertise in the area of fermentation technology and production is a perfect fit with Sasol’s position as a global leader in the supply of surfactants and surfactant intermediates into the fabric and home care, personal care as well as industrial and institutional cleaning markets,” Silke Hoppe, vice president,  Essential Care Chemicals, at Sasol Chemicals, said in a statement.

Financial or other terms were not disclosed.  Holiferm is a developer of fermentation technology to make biosurfactants. It has research and development facilities in Manchester and a commercial plant and a pilot project in the Liverpool area. [so this is great news from 2 companies that I know and respect greatly. Kudos to both and I look forward to hearing a great deal more about this collaboration.]

Tidying up news from a while back: Brazil’s competition authority, the Administrative Council of Economic Defense (CADE), has green-lit Indorama Ventures' (IVL's) acquisition of Ultrapar’s surfactants business, the Brazilian company said.  IVL is to acquire the business for $1.3bn, the two companies announced in 2021.  Thailand-headquartered IVL produces polyester, glycols and surfactants.  “CADE [has] approved the sale of Oxiteno S.A. – Industria e Comercio [surfactants subsidiary] to Indorama Ventures PLC without restrictions,” said Ultrapar’s CFO, Rodrigo de Almeida Pizzinatto.  “Provided there are no appeals by third-parties or by the CADE Court, the approval will become final within 15 days of the publication of the SG's recommendation.”  With the Oxiteno acquisition, Indorama said it would become the largest nonionic producer of surfactants in the Americas.

BIg force in the surfactants ring

AFPM had their annual meeting again in person in San Antonio last month and there were some interesting reports filed by ICIS from there. My policy of “you gotta be there” remains firmly in place. It’s not just for my own conferences. So, you won’t get a lot of detail about the event, however, some general news filed by ICIS from there is allowable. Here goes.

The great Lucas Hall of ICIS noted that the US oleochemicals demand outlook is mixed as economic concerns continue to mount against the backdrop of the Russia-Ukraine conflict..  While oleochemical markets are somewhat more resilient to economic fluctuations, given their role as building block chemicals in products consumed as part of everyday life, rising inflation and increased economic concerns will impact consumer spending habits.  The personal care sector is the largest end market for oleochemicals, including cosmetics, fragrances, hair care and coloring products, sunscreen, toothpaste, and products for bathing, nail care, and shaving.  Rising inflation is likely to lead to less consumer spending in segments like cosmetics, fragrances, hair dye and nail care. Consumers are also likely to choose lower-cost brands when deciding on products like soap, shampoos, conditioners and body wash, as well as toothpaste.

Similar trends are expected in cleaning and food markets, where consumers are expected to choose lower-cost options for cleaning products, grocery store food and pet food, especially as costs for other raw materials drives the price of premium products higher relative to in-house brands.  Some market players see this as a potentially delayed impact, as continued raw material shortages globally continue to displace demand and production already on the forward books.  Lead times for some oleochemical shipments from southeast Asia are as long as four-to-five months.

Longer-term, sustained economic pressures could prompt players to consider reformulating products such as toothpaste to use sorbitol instead of glycerine.

Derived from animal fats and greases like tallow or vegetable oils like palm and coconut, fatty acids are mainly used in cosmetics and toiletries, as well as for the production of lubricants and plasticizers in rubber and polymer processing.

The US is a major net-importer of natural fatty alcohols and a key production region for synthetic (petrochemical) alcohols.

Maybe only 1 Chanel bag per week now

Additional dynamics in the feedstocks markets are the result of additions of capacity in petrochemicals as the great Lucas Hall also reports: Expanding US synthetic (petrochemical) alcohols capacity with the anticipated commercial startup of ExxonMobil's new linear alpha olefins (LAO) unit in Baytown, Texas, targeted for mid-2023 could create increased competition in the downstream alcohol ethoxylates market, said sources on the sidelines of this year's International Petrochemical Conference (IPC).  The Baytown unit will have capacity to produce 350,000 tonnes/year and will produce 10 products that will be sold under the ELEVEXX brand name.

LAOs are used in plastic packaging, engine and industrial oils, surfactants and other specialty chemicals.  C12, C14 and C16 LAOs are commonly used in the production of surfactants.  Alcohol ethoxylates are largely used in the production of detergents.

Synthetic alcohols producers Sasol and Shell each have internal ethoxylation capacity in the US, while ExxonMobil currently does not.  Indorama is poised to close its acquisition of Oxiteno from the Brazilian conglomerate Ultrapar in Q1 2022,

Stepan in October announced plans to build a new alkoxylation plant at its site in Pasadena, Texas.  The new plant will provide “a flexible capacity” of 75,000 tonnes/year, capable of both ethoxylation and propoxylation.  The plant is expected to come online in late 2023.  When operational it will bring Stepan's alkoxylation network to three plants and position the company with a footprint in the US Gulf Coast. The US is a major net-importer of natural fatty alcohols and a key production region for synthetic alcohols.

Downstream competition is fierce

Further detailed analysis of the US market by Lucas Hall shows further supply chain constraint and volatility: Increasing alcohol supply chain volatility is expected to underpin US fatty acids and alcohols markets into H2 2022, as demand for numerous carbon fractions continues to outpace supply against the backdrop of soaring feedstock costs and import disruptions globally, heading into this year’s International Petrochemical Conference (IPC).  Crude oil and energy markets in general are also soaring alongside the Russia-Ukraine war.

Crude oil prices indirectly pressure feedstock fats and oils markets, as renewable fuels like biodiesel compete with petroleum-based fuels in the global market.

FEEDSTOCKS
Malaysian palm oil stocks remain historically tight because of labour shortages in the first two years of the pandemic, with stock levels largely remaining below the 1.75-2.00m tonne threshold the market considers to be balanced. Malaysia supplies about one-third of global palm oil demand.

Source: Malaysian Palm Oil Board (MPOB)

Stock levels were beginning to find more balance in H2 2021 following the peak summer palm harvest.  However, stock levels fell alongside a move from the Indonesian government in late January to curb rising cooking oil prices by introducing export curbs on palm oil and palm products, further supporting the uptrend in vegetable oil costs.  The government briefly expanded the export curbs in March before scrapping the policy in favour of an export tax, after the previous policy failed to reduce inflation. Soybean oil (SBO) markets are also historically tight because of drought conditions impacting production in both Argentina and Brazil. Argentina supplies a significant chunk of global SBO demand.  Rapeseed oil has also been historically tight because of drought conditions in Canada in 2021. Canada supplies more than half of global rapeseed oil demand.  The Russian invasion of Ukraine effectively slashed global sunflowerseed oil supply. Combined, the region supplies roughly 80% of global sunflowerseed oil demand. Sunflowerseed oil accounts for only 12% of global food oil consumption and 9% of total vegetable oil consumption - including biofuels and other industrial uses - according to the US Department of Agriculture (USDA).  This sudden supply shortage against the backdrop of preexisting tight vegetable oil supply globally sent vegetable oil prices soaring even higher, as global players were forced to look elsewhere to satisfy demand.

Source: CME Group, Matthes & Porton, WSJ Cash Markets

While vegetable oil prices have entered a downward correction in recent days now that Indonesia has removed the export curbs from the market, soaring energy and feedstock costs continue to squeeze production margins in southeast Asia.  Squeezed production margins in southeast Asia have caused players in the region to reduce operating rates against the backdrop of preexisting cost pressures like high shipping equipment and freight costs.  The Russia-Ukraine conflict threatens to further weigh on imports as shipping equipment and vessel space further tightens because of the supply chain disruptions from eastern Europe.

FATTY ACIDS
The combination of these issues is further increasing demand from the domestic market to satisfy the import shortfalls.  Sustained import disruptions continue to support demand for domestic fatty acids.  Multiple carbon fractions remain tight, including C8, C10, C8-10, C14, tallow based C18-oleic and stearic acids, and tall oil fatty acids (TOFA).  Oleochemicals producers are running as hard as they can, as demand for fatty acids largely continues to outpace supply, but overall domestic oleochemical capacity is insufficient to make up for import shortfalls alone, keeping the market historically tight.

Domestic oleochemicals players are also facing supply chain disruptions, including raw material disruptions and higher shipping equipment and freight costs.

Beaded and flaked stearic acids from PMC Biogenix's US Memphis, Tennessee, site are expected to remain disrupted into H2 2022 as the company continues to make repairs following a fire at the site's packaging facility in January.

FATTY ALCOHOLS
Multiple carbon fractions remain tight, including C8, C10, C8-10, C16-18 blends and C18, depending on the supplier.  C18 alcohols have grown increasingly tight in recent weeks as bullish feedstock palm kernel oil (PKO) costs encourage an increase in coconut oil (CNO) in the feedslate, inherently producing less C18 alcohol in the process.

The downward correction across the oil palm complex following the removal of Indonesia's export curbs may encourage more players to increase their consumption of palm oil and PKO in the weeks to come.  Mid-cut alcohol supply is relatively more balanced, but increasingly volatile supply chain conditions are also increasing demand in that market.  Domestic natural and synthetic C18 alcohol availability is also tight, given the overarching supply tightness in southeast Asia.  Freely negotiated US Q2 fatty alcohols contract negotiations have largely been heard at a sharp increase from Q1, tracking the above cost pressures and increasingly volatile supply chain conditions globally.  Freely negotiated contracts for mid-cut alcohols have largely been heard in the low-to-high $1.60/lb DEL (delivered) US Gulf range. Discussions have been heard as high as $2.00/lb.  Discussions for long-chain alcohols have largely been heard above $2.00/lb for both single-chain and blended C16-18 volumes.  One supplier was heard lower than $2.00/lb on C16 alcohols, given their competitive supply position in the market.  Few suppliers have the capability to ship and store long chain alcohols in bulk. Most suppliers ship by container, exerting pressure on the wider market the last several quarters.

In the wider market, concerns regarding US Customs and Border Protection's (CBP's) increased scrutiny on Malaysian-origin product persists, with isolated instances of imports being rejected or detained continuing to be heard in the market.

Meanwhile over in Asia, markets are trending in a somewhat different direction as reported by the prolific and insightful Helen Yan: Asia’s fatty alcohol ethoxylates (FAE) market is likely to soften in the near term, due to declining feedstock fatty alcohol C12-14 costs and a slowing Chinese economy.

• Indonesia increases CPO and PKO levies

• Lockdowns in China to weigh on demand

• Supply of fatty alcohols C12-14 to ease

The removal of Indonesia’s domestic market obligation (DMO) export curbs, replaced with an increase in levies on crude palm oil (CPO) and palm kernel oil (PKO), has eased feedstock fatty alcohols C12-14 supply from Indonesia at the same time that the coronavirus spike in China weighs on demand.  China’s zero-COVID-19 strategy has seen full and partial lockdowns being imposed in numerous cities in the provinces of Jilin, Hebei, Shandong, and Guangdong, as well as in some communities in Shanghai.

Factories in China have been shut or are running at lower rates, while logistics and transportation issues have delayed shipments and deliveries following fresh lockdown restrictions to contain the highly infectious coronavirus Omicron variant. Spot prices of FAE mols 7, 9 fell by $50/tonne to $1,850-1,900/tonne CIF (cost, freight and insurance) China for drummed shipments in the week ended 24 March, ICIS data showed.

“Indonesian cargoes will be cheaper and more competitive with higher CPO and PKO levies and removal of the DMO policy,” a trader said.

In place of the DMO policy, Indonesia has raised its export levies on CPO and PKO.

The maximum levy rate has now been set at $375/tonne when the reference price for the edible oil hits $1,500 a tonne, up from $175 previously.  CPO and PKO exports are subject to both levies and duties. The duties remain unchanged at $200/tonne for CPO and $245/tonne for PKO.  Under the DMO policy, Indonesian companies had to show proof of their domestic sales of crude palm oil (CPO) and/or refined, bleached and deodorised palm olein to secure export approvals for oleochemicals including fatty acids, fatty alcohols, and soap noodles.  On 10 March, Indonesian companies were required to sell 30% of their planned exports of CPO and olein in the domestic market, up from 20% previously.  The DMO policy was initiated in late January to rein in soaring domestic cooking oil prices.  Demand for cooking oil, derived mainly from palm oil, has surged ahead of the Muslim fasting month of Ramadan, which starts a month ahead of the upcoming Eid-ul-Fitr festive holiday in early May.  The Indonesian government recently lifted the cap on retail prices of branded cooking oil and subsidized bulk domestic cooking oil.  Indonesia is the world’s largest palm oil producer, followed by Malaysia. Indonesia produced 47 million tonnes of CPO in 2021, according to the Indonesian Palm Oil Association (GAPKI).

No longer obliged to shop domestically

In contrast, the Asian linear alky benzene (LAB) market has been bolstered by rebounding crude oil prices. However, buyers remain slow to accept lofty offers by suppliers amid heightened uncertainty from the recent crude volatility. With crude markets likely to remain in a flux in the near term, the buy and sell gap between LAB buyers and sellers might need time to bridge.

• Volatile crude market causes hesitancy among buyers

• Suppliers’ margins eroded by buoyant upstream markets

• Chinese market dampened by lockdowns and logistics issues

Buyers remain mostly cautious after last week’s tumble in the crude oil market while sellers cited lofty selling indications amid eroded margins.  “Costs are rising quickly and we need to reflect that in the LAB market,” said a supplier in Asia.

However, some sellers concede that buyers are slow to follow as uncertainty remains elevated.  “Buyers are hesitant to commit to large price increments and will need some time to reconcile that cost push has lifted the market,” said another seller in Asia.

Offers were cited largely at around $2,000/tonne CFR (cost & freight) Asia and above, while buying indications were heard below $1,900/tonne CFR Asia.  In China, the lockdowns across cities from the recent surge in COVID-19 cases weighed on demand and resulted in logistical issues inland.  “Demand is a bit soft as the lockdowns affected trade; hopefully the restrictions can be lifted soon,” said a producer in China.

Over in India, local producers have sold out of March cargoes and are preparing to offer April lots from next week.  Some sellers talked of hefty increments for April material, citing rapidly rising upstream costs.  “Customers have snatched up March cargoes with much bargaining as they anticipate further increases for April,” said a producer in India.

Domestic India prices rebounded to the Indian rupees (Rs) 150s/kg ex-tank in March, from around Rs130/kg ex-tank in January.  LAB is an organic compound used almost wholly as an intermediate in the production of surfactant linear alkyl benzene sulphonate (LAS), also known as linear alkyl benzene sulphonic acid (LABSA). LAB’s main end market is the biodegradable detergents and other cleaners.

Still a gap between buyer and sellers

Splitting is in the news again. And while Unilever is somewhat hesitant, Solvay has embraced this time-honored method of boosting shareholder value. ICIS reported thtast Solvay’s plan to split into two independent listed entities next year is driven by a push to unlock additional value in the business through intensified strategic focus and attracting different classes of investor, the CEO of the Belgium-based firm said on Tuesday.  Solvay announced on Tuesday plans to break up the 159-year-old company into a lower-growth, cash-strong business containing more commoditised assets including its soda ash operations, and a more innovation-focused entity that could deliver higher returns. [so what side did surfactants end up on? Read on]

The process is expected to be complete in the second half of 2023.

Referred to for the time being as EssentialCo, the more commoditised business will house Solvay’s soda ash and derivatives operations, as well as peroxides and silica assets, with total annual 2021 sales of €4.1bn.  The other arm, currently known as SpecialtyCo, houses two sub-divisions focused around materials, including composites and specialty polymers, and consumer and resources operations, including oil and gas service chemicals fragrances, and surfactants. [OK then, this seems like a reversal of the Solvay / Rhodia merger with some minor adjustments] The businesses generated revenues of €6bn last year.

The separation is to be achieved through a partial demerger of Solvay that will see the specialties assets spun off to SpecialtyCo.  With an emphasis on unlocking value in the company beyond its current market valuation, the split allows for more precise targeting of specific parts of the investor landscape, according to Solvay CEO Ilhan Kadri.

“There are value stock owners,” she said, speaking at a press conference on Tuesday. “They like dividends, they like resilient cash cows over the cycle, and this is exactly what's EssentialCo is.”  “There are other investors that like growth stocks, businesses and entities which are investing heavily in their top-line growth, and this is exactly the SpecialtyCo type of business model,” she added.

Solvay had already started work on carving out its soda ash operations, which produce strong cashflows but also heavy carbon output, and the other assets that are slated to go along with it into that new business have similar operational profiles, according to Kadri.  “[These] are commodity-like businesses, they need to focus on operational excellence of cost effectiveness, or lean manufacturing,” she said.  “They will have between medium to low type of growth, close to GDP, although some of them will do more. They will manage the energy transition specifically… they have a high cash delivery and are able to cover their needs with resilient cash generation,” she added.

The specialty operations will stand as more growth-focused, less bulk production businesses, Kadri said.  “The SpecialtyCo… [businesses have] the same operating model very much concentrated on innovation, customer intimacy and meeting those unmet needs, with strategic flexibility,” she added.

The split companies will be better-positioned to provide stronger growth in the long term according to Kadri, with Solvay to continue to report as a single entity in the run-up to the break-up. The company declined to comment on the intended management for the two businesses, but stated that pro-forma updates would be issued throughout the process.  No stone was left unturned in the plans to reorganise the business, according to Kadri, with the soda ash carve-out preparations giving the firm the opportunity to take a stronger look at Solvay’s fundamentals.  Despite the work that preparing to break the business apart, the process does not preclude further divestments in the meantime.

“There are no sacred cows,” Kadri said. ] The shares of each company are expected to be listed on Euronext Brussels and Euronext Paris. Solvay shares were trading down 2.2% as of 13:28 GMT compared with Monday’s close, following the announcement of the split.

There really is nothing that can't be split it seems

And speaking of splits, the some-time split-off (from Akzo) Nouryon’s adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) rose 10% year on year in 2021 on the back of strong growth for its surfactants and ethylene and sulphur derivatives operations, the Netherlands-based firm said earlier in March.

Key points

- EBITDA at its performance formulations division rose 15% year on year, driven by strong demand from agriculture, hygiene, packaging, pharmaceuticals and oil and gas end markets.

- 2021 earning for technology solutions operations fell 3% due to higher energy and raw materials pricing.

- The company passed through 11% in price hikes in Q4 as energy cost increases accelerated.

- The company, which spun out its base chemicals operations into a separate business, Nobion, [are you following this?] under the ownership of Nouryon’s equity investors Carlyle and GIC, announced that it is looking at an initial public offering in September last year.

An easy charge to make these days

No blog is complete without a look at EO: ICIS notes that Ethylene oxide (EO) suppliers are dealing with high production costs and are increasingly concerned about the next ethylene contract price settlement for April.

Gains in naphtha this week have eaten into cracker margins, causing operating rates to be trimmed.

• High production costs lead to reduced operating rates
• Naphtha gains cause concern over April ethylene contract
• MEG margins under immense pressure from feedstocks

Like everything else isn't it?

EO prices are at record highs, since ICIS started recording prices in 2004.

Now with the upstream developments, there is even more uncertainty for April.

The following graph shows the EO and ethylene spread has continued to decrease in 2022.

Money harder to make

High production costs throughout 2022 have been eating away at downstream ethylene glycol margins. With another historically high ethylene contract price settlement on the cards, the situation is set to worsen, according to market sources.  Previously, European MEG contract prices struggled to keep up with the increasing ethylene prices in 2021. MEG contract prices increased 33% in 12 months, while ethylene contract prices rose by 44%.  In March, MEG contract prices increased by around 7% month on month, mirroring the ethylene increase. Some market participants were surprised, as it has been previously challenging from a supplier perspective to pass on the feedstock increases downstream. A settler added that it was needed to help the EU to continue operating. In the week to 4 March, European MEG margins fell further on stronger naphtha, LPG costs.

Also in MEG

Certain EO derivatives are performing better such as surfactants and polyethylene glycol (PEG), leading suppliers to adjust EO production accordingly.  End user demand could weaken in the face of higher inflation rates seen across Europe.

As if you needed reminding

An interesting snippet from Reuters regarding sustainable palm oil: Malaysian tech firm DiBiz launched the world's first online marketplace for sustainable palm oil last month to encourage sales of products certified as environmentally compliant as buyers have avoided the more expensive goods. The trading platform, called Trustparent Marketplace, will link palm oil buyers and sellers across the supply chain and has additional measures for traceability to ensure the industry's commitment to "No Deforestation, No Peat and No Exploitation". "What this means is just like you go to Amazon to buy your products, now, every stakeholder in palm oil can come on to the Dibiz marketplace," said DiBiz co-founder and Chief Executive Officer U.R. Unnithan, who is also president of the Malaysian Biodiesel Association, told Reuters at the sidelines of an industry conference.

Critics blame the rapid expansion of palm plantations for rainforest deforestation and human rights abuses, prompting consumer boycotts against the edible oil.

But palm oil industry officials say such campaigns are hindering efforts to achieve sustainability certification and develop a market for certified sustainable palm oil (CSPO). About 14.6 million tonnes, or 19.3% of global palm oil produced is certified by the Roundtable of Sustainable Palm Oil (RSPO), which is seen as a global standard for sustainability claims. However, planters in Indonesia and Malaysia, the world's two largest palm oil producers, have complained that demand for the more expensive oil with CSPO certification is lacking despite investing millions to meet the requirements.

Kudos to our good friends at Galaxy Surfactants who announced last month that they gained distinct recognition as Supplier Engagement Leader 2021 awarded by a globally acclaimed body on environment impact measurement, Carbon Disclosure Project (CDP).   The company earned the distinct ‘A’ rating as granted by CDP basis its deep sustainability focus across its business value chain ecosystem. Galaxy Surfactants has been recognized for successful engagement with their suppliers on climate change and played a crucial role in the transition towards the net-zero sustainable economy.

The Supplier Engagement Rating (SER) by the CDP evaluates corporate supply chain engagement on climate issues and helps companies identify as well as respond to environmental risk and opportunities through CDP’s industry-leading disclosure framework. K Natarajan, Chief Operating Officer, Galaxy Surfactants, said, “At Galaxy Surfactants, we pursue sustainability holistically by involving our value chain partners in our joint journey to mitigate environmental impact. Under this approach, one key focus is to reduce carbon footprint. Our constant endeavor is to decarbonize our value chain, accelerate climate solutions and improve our overall sustainability quotient. This recognition by CDP further strengthens our resolve to continue our environment-friendly pursuits and bring about a positive impact”.

And finally: Distributors are a key channel to market for surfactants manufacturers – and can be high-growth and profitable. That’s why we have Eric Byer, head of the NACD speaking at our upcoming conference in Jersey City (one more plug? Thanks). The world’s biggest chemical distributor, Brenntag has reported record results for financial year 2021 which was characterized by exceptional market conditions. Both global divisions, Brenntag Essentials and Brenntag Specialties, delivered excellent results in their first reported year within the new operating model.

Dr. Christian Kohlpaintner, Chief Executive Officer of Brenntag SE: “In 2021, Brenntag managed to maintain supply under very challenging conditions and continued to provide products and services to our customers throughout the year. We achieved this mainly due to the long-lasting relationships with our supply partners as well as the exceptional efforts and expertise of our Brenntag employees. Our unique global presence in 78 countries, our strong position in our industry segments and our intimate product knowledge were decisive to navigate well through 2021.”

In 2021, Brenntag generated sales of 14,383 million EUR. Operating gross profit rose by 19.6% to 3,379 million EUR compared to 2,869 million EUR in the previous year. Brenntag accomplished to translate the positive gross profit growth into an over proportional growth (+29.5%) of operating EBITDA to 1,345 million EUR. Profit after tax remained largely stable with a total of 461 million EUR despite EBIT being impacted mainly by extraordinary expenses due to excise tax payments and provisions. Earnings per share ended at 2.90 EUR.

The implementation of Project Brenntag, the first step of Brenntag’s comprehensive transformation journey, was started at the beginning of 2021. The transformation is ahead of plan and continues to make very good progress in achieving additional operating EBITDA of 220 million EUR annually by the end of 2023. Since its inception, Project Brenntag has generated around 120 million EUR delivering already more than 50% of the expected uplift. Additionally, the optimization of Brenntag's global site network is ongoing. Of the around 100 planned site closures across all regions by 2023, 72 have been completed to date. Furthermore, since the initiation of the program, 925 jobs have been reduced structurally and in a socially responsible manner out of approximately 1,300 planned in total by 2023. The new Go-to-market approach is now fully implemented globally with dedicated sales organizations for the two global divisions, Brenntag Essentials and Brenntag Specialties. Project Brenntag is designed to build the strong basis for sustainable organic earnings growth in the coming years. It will expand Brenntag’s global market leading position through an increased focus, reduced complexity, and even stronger partnerships with customers and suppliers.

Brenntag can look back on a long-standing history of strategic Mergers & Acquisitions activities and an impressive track record of successful transactions. In 2021, Brenntag acquired six companies with a cumulative enterprise value of 440 million EUR, the highest investment amount in M&A since 2015. Around 80% of this M&A spend was related to the highly attractive Life Science segment, and here especially to the nutrition industry. Highlights included the acquisitions of Zhongbai Xingye in mainland China and of JM Swank in North America. As a result of those two acquisitions, Brenntag’s 2021 global nutrition business grew to around 2 billion EUR in sales. Overall, acquisitions contributed 33 million EUR to Brenntag’s operating EBITDA in 2021, of which the majority was attributable to the deals closed in 2021.

Dr. Christian Kohlpaintner, Chief Executive Officer of Brenntag SE, said: “Brenntag’s business model again proved its resilience in particularly difficult times of severe pressure on global supply chains. We expect the overall macro-economic, geopolitical, and the associated operational conditions to remain challenging. Supply chains have been and still are under severe pressure, further impacting production and supply. We only expect some normalization of market conditions later in the year. Against this background, we currently expect a positive performance at operating EBITDA in 2022 with both divisions contributing to this growth.”

In light of current economic conditions, Brenntag Group expects the operating EBITDA for financial year 2022 to be between 1,450 million and 1,550 million EUR. This forecast considers a normalizing market environment later in the year, includes the potential efficiency improvement driven by the measures of Project Brenntag as well as the contributions to earnings from acquisitions already closed and assumes that exchange rates will remain stable on the level at the time of the guidance publication. The global economy is expected to continue to be severely impacted by exceptional influencing factors that cannot be reliably forecast, such as the COVID-19 pandemic, current geopolitical developments, pressure on global supply chains, inflationary tendencies, and price volatility.

At the General Shareholders’ Meeting on June 9, 2022, the Board of Management together with the Supervisory Board will propose a dividend increase of 7.4%, which translates into a dividend of 1.45 EUR per share (2020: 1.35 EUR). This is the 11th consecutive dividend increase since the IPO in 2010. The payout ratio of 50% from profits after tax attributable to Brenntag shareholders follows Brenntag’s dividend policy.

Connecting Chemists - for many decades

End of the news: Beginning of the music section: Occasionally, Spotify does a good thing for me and recommends a decent playlist. This month, the Blues playlist really hit the mark and got me digging into Youtube for more detailed research. Why? Maybe the news has got us all in that frame of mind.  I can’t say blues is the answer to our troubles but there were some great songs from 40 – 50 years ago or so that have clearly influenced thousands of musicians since. Here’s a few, I’ve been listening too.

First; check out this quivering slice of red meat for hard-blues lovers from English band Spooky Tooth; Evil Woman (1969). The Hammond organ, grinding guitar riff, insane vocals. And that solo – Wow! Is it possible that this one song sent both Black Sabbath and Deep Purple in the right direction to the benefit of literally billions of music fans. Yes. It’s possible. Honestly, it’s likely.

Not convinced? Here’s 1971 Sweetleaf from the Sabs

OK so on to a related band, Humble Pie with Steve Marriott on vocals in 1971 – Black Coffee, a Robert Plant influence do you think?

Here’s Zep themselves. How many more times from a ’71 live performance

How about Robin Trower? This is a 1974 performance of Bridge of Sighs. It’s blues. It’s psychedelic. It’s Gorgeous..

How about one of the progenitors – John Mayall’s Blues Breakers – this one from 1966 with EC (who many claimed at the time was G)

Let’s wrap it up with Mr. Big by Free performed at the Isle of Wight in 1970. Now here’s something you might not know. Paul Rodgers on Vocals (who went on to headline Bad Company) is from Middlesborough in the Northeast of England. So, now you know. Demography is not destiny.

Ah lovely right? see you all in my See you all in May.

Surfactants Monthly – February 2022

It often feels weird writing about surfactants when there are huge other things going on in the world. Then I think, yeah but who wants to hear from me about the affairs of the day. Everyone has their own opinions and the news surrounds us 24/7. I also think that, if the business of surfactants is how you’ve bought (OK still buying) a house and sent (still sending) some kids to college, then that’s a huge thing so.. And I think that, at least folks read this business blog and get something out of it. Some even find the humorous bits funny and one or two enjoy the musical interludes. If I told you what I think about Ukraine, I’m not sure you’d gain anything at all and maybe you’d resent the airspace here being taken up with something that doesn't add to what you get on the telly or your newsfeed. I will say, though, that I have a concern about World War 3. I hear the phrase used at least once a day, these days. Having read and heard enough about WW2, I think 3 would be bad. The technology’s more effective and the people, as a society and individuals seem more fragile. Those people, our parents and grandparents, back in 1939 – 45, they were tough and could put up with a lot. Today, I don't see that so much – in myself and the people I encounter. The technology though. That’s tough, tougher. It gets the job done. Cold. Ruthless. No matter what. Two trends, correlated, different directions. A bit of a concern.

Some lighter fare. Readers enjoyed the Unilever piece last month so I have eagerly tracked the wires for updates on the Trian / Unilever battle and honestly there’s not that much although I think it’s fair to say that the pressure on Uniliever CEO Alan Jope, seems to be building, albeit slowly – and some might say, inexorably. Activist Shareholder, Nelson Peltz has been quiet since last month – actually have you noticed how some people manage to get a prefix permanently attached to their names? When did Nelson transition from just plain old Nelson to Activist Shareholder Nelson. When did Neil Young adopt the prefix Aging rocker  or more recently, Sanctimonious Aging Rocker..Anyway, A.S. Nelson has been quiet but other shareholders of Unilever have not.

From the Financial Times of February 6th:  Bert Flossbach, [by the way, was there ever a name that screamed out for the prefix Old Money?] founder and chief investment officer at Flossbach von Storch [yep], an €80bn Cologne-based asset manager and a top-10 shareholder, said the FTSE 100 consumer group should consider overhauling its structure, which consists of three divisions for beauty, food and household products. “Unilever should seriously think about splitting the company,” he said. “Talk of synergies between different businesses is usually theoretical and designed to keep the status quo, and smaller than the efficiency gains that you would get from a split.” [ouch! Old Money Flossbach makes a point though]. “If you’re a food manager, you’re thinking differently from a household products manager or a beauty manager,” he added. “If you run these businesses under one structure capital allocation can become a problem. And you’re very diverse in a negative sense because you don’t know precisely what you stand for.” Flossbach said one option could be to keep the food business under the Unilever name and spin off other divisions. “You increase efficiency and enhance the spirit of a company when it has a clearer mission. Cost-cutting is not enough on its own.” He added: “The best defence against any kind of hostility is a high enough stock price.”

Another top-20 shareholder [not named by the FT] called for the removal of the Unilever’s chair, Nils Andersen, reflecting concerns that he and the board allowed chief executive Alan Jope to make increasing bids for the GSK division, a potential deal whose size and timing blindsided investors and provoked a backlash. The top-20 shareholder said a new chair should be appointed from outside the board. He added that a replacement for Andersen could then evaluate both Unilever’s strategy and whether Jope and its chief financial officer Graeme Pitkethly were appropriate for their positions [ouch again, right?].

Interesting developments, I think you’ll agree, but I know you, my dear readers. You’re looking for something more. Some other, perhaps orthogonal, information that will keep you thinking and musing the rest of the day. Well, we deliver that here at the blog. For the really interesting stuff, we have to go to another British newspaper with a slightly wider appeal than the FT, although still a serious paper, and that is the Evening Standard. In a February 11th article beautifully headlined “ Who is Nelson Peltz? The Wall Street billionaire stalking Marmite maker Unilever” [see how they use a prefix for Unilever there. Not sure how complimentary that is. You know Marmite. You either love it or hate it.] the paper  goes on to note that  “….Nelson Peltz is used to interesting meetings. Still, the first sit-down with his daughter’s soon-to-be in-laws must have stood out. [Former Spice Girl] Victoria and [Footballer] David Beckham flew out to meet the Peltzes at their 44,000sq-ft Floridian mansion over Christmas. The house will soon host Nicola Peltz’s wedding to Brooklyn Beckham. Of course, the rendezvous took place on the elder Peltz’s territory: the 79-year-old founder of Trian Fund Management is used to getting his way.”

Daddy's most valuable asset

The paper then goes into all the business stuff that we covered above and in last month’s blog. So for a complete detailed exposition of the family angle to this story, we have to go to, where else, to the Inimitable UK Paper The Daily Mail. I encourage you to read the whole article here (published on January 19th) for a master-class on prurient interest journalism served up with a comprehensive raft of detail and diligently sourced visual documentation (i.e. lots of photos). The headline itself says so much and can you spot the 2 prefixes without the suffixes? “Brooklyn's marrying up! Billionaire Trump-loving future father-in-law and his model wife put David and Victoria in the shade - boasting a multi-million dollar property empire, several private jets and ten children between them” Again the whole article is well worth reading for those that are interested in such things. However, I will provide here the Daily Mail’s own 5 bullet point summary of the story. :

• Brooklyn Beckham will be marrying into a family whose net worth dwarves his own parents' £769million fortune, with Nicola's businessman father Nelson Peltz, 79, estimated to be worth £1.3 billion 

• The father-of-ten was born to a Jewish family in Brooklyn, and dropped out of the University of Pennsylvania's Wharton School - later attended by Trump - in 1962 to become a ski instructor, but instead ended up being a delivery truck driver

• Nelson, a former top Trump supporter, shares eight of his ten children with his third model wife of 35 years Claudia Heffner Peltz, and the pair count a 27-bedroom mansion complete with ice hockey rink and a flock of albino peacocks, as well as a £76million, 44,000sq ft home in Palm Beach - the reported wedding venue - as their homes

• Despite being born into wealth, Nicola's siblings have also carved out their own successful careers, with her brother Brad, 32, an ice hockey player, and Will, 35, an American actor, and sister a former figure skater

• Nelson used to commute to work from Bedford to downtown New York in a helicopter until he lost a legal battle with his neighbours about the noise

An Interesting Alliance

So, my finely honed business instincts tell me (plus I really, really hope) that this family angle will continue in some way to play a role in A. S. Nelson’s pursuit of Marmite Maker Unilever. Let’s see. If nothing else, Unilever might think they have Peltz problems but they should consider what it would be like as a young couple to have Nelson Peltz as your father-in-law and Victoria Beckham as mother-in-law. Puts your problems in perspective now, doesn't it? Although, hmm.. maybe they kinda already do

Tell me what you want, what you really really want!

On to Surfactants News: This month, as always, most of what you read here is provided courtesy of my partners, the great ICIS, with whom I also co-produce the World Surfactants Conference… so..

As things are so volatile today for the obvious reasons, I am starting at the end of February (& early March) and working backwards for the news. If the early February news seems irrelevant or largely superseded, I’ll just skip it.

On March 2nd, the talented and prolific Lucas Hall of ICIS reported in depth on the supply chain situation for US fatty alcohols and fatty acids: US fatty acids and alcohols markets face major upward pressure from higher feedstock costs against the backdrop of supply chain concerns globally.

• US contract survey fatty acid prices held steady pending feedback

• US Q2 fatty alcohols contracts face upward pressure amid bullish feedstock costs

• Prices face upward pressure on bullish costs pressures, supply concerns

• Feedstock prices bullish amid supply chain disruptions globally

Fatty Acids
US contract survey prices were held steady pending further feedback.

March tallow-based acids face upward pressure from higher average bleachable fancy tallow (BFT) costs in February.  March C16 palmitic acid costs face upward pressure from higher feedstock costs across the oil palm complex against the backdrop of balanced supply and demand rationalization/destruction in the market.  February tall oil fatty acid (TOFA) prices face upward pressure from higher feedstock costs, tight supply and strong demand.  Multiple chains of US fatty acids are tight, including C8, C10, C8-10, C14, tallow based C18-oleic and stearic acids, and TOFA.  Tallow-based stearic acid markets are tight following the fire at the packaging facility at PMC Biogenix's US Memphis, Tennessee, site.  The fire has put increased demand on tollers and imports to make up for the shortfalls as PMC Biogenix makes repairs in the short-to-medium term.

TOFA markets are tight alongside tight supply of competitive tallow-based C18 oleic markets in the domestic market.

Clear enough trend for you?

Fatty Alcohols

US Q2 fatty alcohols contracts face upward pressure from higher feedstock costs across the oil palm complex against the backdrop of supply chain concerns globally.

Discussions for Q2 contracts have been heard at a sharp premium from Q1, tracking the above pressures.  Multiple chains of US fatty alcohols are tight, including C8, C10, C8-10, C16-18 blends and C18, depending on the supplier.  Mid-cut alcohol supply has been ample to meet demand following supply chain disruptions in the latter-half of 2021 that prompted some players to increase their volumes for Q1. While some players have carryover volumes heading into Q2, increased uncertainty given increased geopolitical uncertainty is prompting some players to hedge alongside major upward pressure in upstream feedstock markets

And another one

Feedstocks

Feedstock costs are bullish. A major disruption in Ukrainian sunflower supply to Europe with the Russia-Ukraine conflict has put major upward pressure on global palm, soybean and canola markets in recent days.  Palm markets have been under upward pressure in recent weeks because of new export curbs being implemented in Indonesia to help curb local cooking oil prices.  Coconut oil (CNO) is trading at a discount to palm kernel oil (PKO), encouraging more CNO in the feed-slate. CNO produces about the same amount of C12-C14 and C16 alcohols, but significantly less C18, pushing C18 production tighter.

Finally, vessel space may be further constrained with increased demand for energy imports in Europe given the disruptions to supply from Russia. While some importers use carriers that only handle vegetable oils and oleochemical products, increased vessel demand may nonetheless put further upward pressure on freight rates.

Meanwhile in Europe, fatty acids and fatty alcohols second-quarter contract discussions are ongoing, while shortages continue to plague the market.  In the fatty acids market, tallow-based negotiations are off to a slow start as players were waiting for producers to announce available volumes. Initial talks have now begun with early settlements heard for stearic acid.  Palm-based discussions have been ongoing for several weeks and while some market participants were waiting to check tallow prices, most palm fatty acids players are now negotiating final volumes.  Availability has been limited since 2021 due to vessel delays and high freight costs from Asia. Most players do not see these logistical issues easing before the second quarter of 2022.

Fatty acids and fatty alcohols market participants are keeping a close eye on the Russia-Ukraine conflict as this is already driving up crude oil and vegetable oil prices. Any impact on the fatty acids and alcohols markets are as of yet unknown.  In the fatty alcohols market, second-quarter discussions are in very early stages, with no settlements taking place this week.  There have been a lot of enquiries about available volumes for the second quarter, though most negotiations have not progressed to discussing prices yet.  Supply constraints continue to be a concern, with at least one producer already sold out of material for the second quarter.  Some players are focusing on captive use instead of selling on the market due to very high demand for downstream alcohol ethoxylates and other surfactants.  Tightness in the fatty alcohols market is also caused by vessel delays and high freight costs from Asia.  The majority of both fatty acids and fatty alcohols second quarter settlements will have taken place by the end of March or early April.

Also in Asia, Fatty Alcohols follow the same trajectory as reported by ICIS’ Helen Yan: Asia's fatty alcohols offers continue to increase on the back of rising cost of upstream palm oil and supply disruption due to Indonesia’s export restrictions.

• Upstream markets surging amid heightened Russia-Ukraine tensions

• Shipments delayed, limited spot availability in Indonesia

• Market impact of Indonesia export curbs likely short term

Spot offers for mid-cuts C12-14 fatty alcohols climbed this week to $3,050-3,200/tonne FOB (free on board) SE (southeast) Asia, market sources said.  On 16 February, spot C12-14 prices were assessed at an average of $2,835/tonne FOB SE Asia, up $20/tonne from the previous week, ICIS data showed.

Near historic highs

“It is a crazy market now with the escalating Russia-Ukraine tensions impacting the crude and palm oil markets,” a regional producer said.  Brent crude oil breached $99/bbl on 22 February and palm oil spot prices spiked to more than Malaysian ringgit (M$) 6,000/tonne ($1,432/tonne), he said.  But we may see some calm in the market if there is a US-Iran nuclear deal,” the producer added.  Supply of fatty alcohols has tightened as regional major Indonesia has introduced a domestic market obligation (DMO) policy for its producers, thereby curbing exports of palm oil derivatives, market sources said.

“We cannot guarantee any shipment due to the DMO policy. China customers are looking for more cargo[es] and are willing to pay to ensure supply security for April shipments,” the producer said.  Indonesian companies must now show proof of their domestic sales of crude palm oil (CPO) and/or refined, bleached and deodorised palm olein in accordance with the DMO requirements to secure export approvals for palm oil products.  The DMO policy was implemented in late January, under which CPO exporters must allocate 20% of their shipments to the local market, to rein in soaring domestic cooking oil prices in Indonesia.  Cooking oil prices in Indonesia have surged recently due to rising demand ahead of the Muslim Eid-ul-Fitr holidays - which mark the end of the Muslim fasting month of Ramadan - in early May, market sources said.

The DMO policy was subsequently extended to include palm oil derivatives. From 15 February, Indonesian suppliers have to apply for export permits under the new rules.

“Around 1.3m tonnes of fatty alcohols in Indonesia will be impacted by the DMO policy and this will put upward pressure on prices,” a second regional producer said.

A third supplier said: “If the DMO policy lasts more than four weeks it will be very challenging for the market indeed as the disruption in supply will be more severe.”

A major buyer, however, said: “DMO seems to have passed over a little bit as we don’t see any issues with the supplier shipments, and they seem to have got export parcels.”

Demand for fatty alcohols is usually stable, with their main use in the production of detergents and surfactants. They are also components of cosmetics, foods, and industrial solvents.

Domestic Market Obligations

Right at the back end of the supply chain, some not great news for users of palm oil and its derivatives (including many surfactants) from Jim Fry of LMC as published in Indonesia’s Palm Oil Today magazine: The global supply of palm oil will see only "minimal growth" in the 2019-2022 period, due to production issues caused by unfavourable weather and labour disruption in Malaysia, said Jim. "It will take another 12 months before Southeast Asian palm oil output is running ahead of its level at the end of 2019," Fry said, despite improved output expected out of Indonesia in the second half of next year. "In other words, I anticipate three full years with no growth," he told a virtual conference recently. 

No Growth

In LAB markets, ICIS also reports bullish sentiment: Linear AlkylBenzene markets in Asia and India remain firm amid elevated upstream costs. Participants general expected further strength in the market from cost push with offers for March cargoes expected firmer.

• Elevated costs to bolster LAB

• Availability snug from regional maintenance

• Buyers stock up in anticipation of further upside

In southeast Asia, sellers targeted March cargoes at $1,800/tonne CFR (cost & freight) SE (southeast) Asia and above amid eroded margins. Buyers were heard lobbying for parcels in the mid-to-high $1,700s/tonne CFR SE Asia.  “Upstream costs have increased sharply in recent weeks and margins of LAB are squeezed,” said a producer in Asia.  The Chinese market has also revived in earnest as downstream plants ramped up output after the Winter Olympics. Demand for LAB in the local Chinese market was said likely to fully return in March and digest the current length in the market. Meanwhile, scheduled maintenance across Asia, India and the Middle East in the quarter continue to stoke concerns that availability might be curtailed just as demand emerges.

Not as pronounced as on the palm side

In the area of sustainable surfactants, ethylene oxide based on corn-derived ethanol is of continuing and increased interest. An excellent article by the insightful Al Greenwood of ICIS looks into this area. The whole article is worth a deep read, but here’s a few highlights.

ICIS ran a cost analysis that compared Asian naphtha-based ethylene with Asian ethanol-based ethylene. The ethanol route proved costlier, even when ethanol prices were below those for ethylene. The following chart shows the comparison.

Ethanol gets Interesting

Another indication of the costs involved with ethanol dehydration is the decisions taken by chemical companies. In the US, during the advent of shale gas, petrochemical companies built new ethane crackers. They did not build any ethanol dehydration units to take advantage of the nation's bounty of corn-based ethanol.

However, demand for sustainability - and not strictly plastics and chemicals - is what is driving demand for ethanol's use as a chemical intermediate.  In November, Braskem said that global demand for its renewable PE is well above its current production capacity.  Renewable PE is attractive because it can act as a carbon sink. Plants combine atmospheric CO2 and water to produce the sugar that microbes ferment to produce ethanol. Fermenting sugars emits CO2, although this can be used as a product or chemical feedstock.  Synthetic biology company LanzaTech ( a  speaker at one of my recent conferences) addresses the CO2 emissions by gasifying biomass and other wastes. Its bacteria can ferment the resulting carbon monoxide (CO), hydrogen and CO2 and convert the gases into ethanol. Two commercial-scale plants in China are already using LanzaTech's technology and more should start up later this year.

Given the interest in sustainability, companies are evaluating new ethanol-to-chemical projects. Clariant and India Glycols created a joint venture to produce surfactants made from ethanol-based ethylene oxide (EO).  And of course there is the well documented move to Croda into Bio EO at their DE ethoxylation plant. There are many other areas, including aviation fuel where ethanol can be used and this has knock-on effects for chemicals. More news to come in this area for sure.

If you’re a buyer, or seller, of surfactants you are familiar with the across the board rise in prices. Here, for illustration is a recent announcement from Indorama as published by ICIS. No surprises. Indorama is seeking price increases of 3-8 cents/lb ($66-176/tonne) on all grades of ethylene oxide (EO) derivative products in March, according to a customer letter.   Products listed include ethanolamines, alcohol ethoxylates, surfactant blends and others.  US EO production constraints have tightened the availability of downstream products. The global ammonia supply/demand balance is loosening, with prices coming off record highs.  US Q2 fatty alcohols contracts face pressure from soaring feedstock and freight costs.

Quarterly earnings time and supply chain disruptions continue to be felt – particularly at by Stepan where Q4 net income fell 44% year on year to $17m.  Furthermore, the prior-year Q4 benefited from a one-off $13m insurance recovery related to a plant outage at Millsdale, Illinois in 2020, the company noted.

SURFACTANT BUSINESS
Operating income fell to $32.4m, from $43.3m in Q4 2020, primarily due to supply chain disruptions and lower sales volume.  Global Surfactant sales volume decreased 9% on lower demand for cleaning products in the consumer products business, partially offset by higher demand for products sold into the institutional cleaning and functional product end markets.

POLYMER BUSINESS
Operating income fell to $12.9m, from $22.8m, primarily due to supply chain disruptions and the non-recurrence of two events that benefited Q4 2020: the Millsdale insurance recovery, and a partial settlement received from the Chinese government as compensation for a government-mandated shutdown of Stepan’s China JV in 2012.

SPECIALTY PRODUCT BUSINESS
Operating income fell to $2.1m, from $5.2m, primarily attributable to order timing differences within Stepan’s food and flavour business and lower volume within the medium chain triglycerides (MCT) product line.

OUTLOOK
"Looking forward, we believe that demand for our products will remain strong but that the company will continue to be challenged by the same external factors that impacted us during 2021,” said CEO Quinn Stepan. Surfactant volumes within the institutional cleaning, agricultural and oilfield markets are expected to grow, and “we also remain cautiously optimistic” that consumer consumption of cleaning, disinfection and personal wash products will improve slightly in 2022, after significant de-stocking in 2021, the CEO said.  The Polymer business is expected to grow as well in 2022 as long-term prospects for rigid polyols remain attractive because of energy conservation efforts and more stringent building codes, he said. In the Specialty Product business, results should improve slightly year on year, the CEO added.

In capacity news: Eastman completed the expansion of two plants in Ghent, Belgium, and Pace, Florida, US, that make tertiary amines, the US-based specialty chemicals producer told ICIS earlier in February. Eastman did not disclose the size of the expansions or their costs.  The projects increased capacity at Ghent and improved production flow at Pace, making it the world's largest tertiary amine unit, Eastman said. The projects expanded output of mostly dimethyldodecylamine 1214 (DIMLA 1214).

Demand for tertiary amines had increased because of rising consumer demand that was caused by the coronavirus pandemic, Eastman said.  Tertiary amines are used to make surfactants in liquid dish soap, hard-surface cleaners and antibacterial wipes and sprays.

Cleaning Remains Popular

In other earnings news, a similar story from Galaxy as reported in ICN. Galaxy Surfactants Limited, a leading manufacturer of performance surfactants and specialty care products with over 210 product grades used in the Home and Personal Care industry, has announced its Q3 FY22 revenue of Rs. 930.9 crore, an increase of 37.3% whereas profit was Rs. 45.6, down by 46.5%. 

Commenting on the performance U. Shekhar, Managing Director, Galaxy Surfactants Limited said, “The supply-driven volatility that impacted our Q-2 performance continued in Q-3. Rising input costs along with supply chain constraints, be it in terms of on-time container availability or port congestion severely impinged our ability to service our customers. While Volumes have remained flat Y-o-Y, the decline in EBITDA/MT impacted our overall performance significantly. Both these factors need to be understood in the global context. 

"Rising feedstock prices combined with availability issues and higher lead times impacted our operations. This when combined with the volatility we have been experiencing in the export markets on account of on-time availability of containers and rising freight costs have proved to be the worst possible mix. This has not only impacted our ability to service the underlying demand but also led to significantly higher cost of operations. This, we believe, will continue till H-1 FY 22-23," commented Shekhar.  

"Amidst the gloom, India has been the bright spot for us. Structural uptick in volumes is clearly visible with the current volumes being nearly 10% higher than the pre-COVID average. We have begun operationalizing our new specialty CAPEXs. These should become fully operational by April 1st, 2022," said Shekhar. 

"While the external scenario remains extremely uncertain, internally we are taking the necessary steps to enhance our performance, stability, and delivery. To conclude, we at Galaxy strongly believe the executional challenges we are facing today are in reality laying the foundations for our next decade of growth. While the last two quarters have been challenging, we believe the worst is behind us and we should see better quarters going ahead,” added Shekhar. 

Bright India

And finally, huge personnel news from Stepan. On February 17th the company announced that F. Quinn Stepan, Jr. will retire as Chief Executive Officer of the Company on April 25, 2022. Stepan goes on to note in a press release that - Mr. Stepan will continue to serve as non-executive Chairman of the Board assuring an effective transition. Scott Behrens, currently President and Chief Operating Officer, will succeed him as President and CEO. The Company expects that Mr. Behrens will be nominated for election to the Board of Directors at the 2022 Annual Meeting….. During Mr. Stepan's tenure as CEO, which began on January 1, 2006, the Company has seen significant growth. Sales increased over 50 percent and net income increased from $13 million in 2005 to a record $138 million in 2021. Likewise, shareholder value has grown exponentially from a year-end market capitalization of $142 million in 2005 to $2.8 billion in 2021 and from a Company common stock price of $13.44 per share on December 30, 2005, to a recent 52 week high of $139.30 per share.  Truly a transition between eras at Stepan. Best wishes to Quinn and Scott!

End of News - Begining of some musical musings

Speaking of the Spice Girls..So I was at a wedding a couple of weeks ago. Daughter of friends of ours. Once the wedding band got cracking, the top song for dancing was most likely this one .

It is a classic right? What struck me as how intently and seriously the ladies of all ages danced and mimed to this song, while the hapless husbands (husbands are always hapless on the dance-floor – why is that? ) did their best to .. er .. well,.. be present. As a card-carrying hapless husband myself, I was only able to dodge this one by my rapt interest in the groom’s grandmother’s knitting story, which I simply had to hear the end of. I was not so lucky when the execrable line dances came round. Any case, what made the Spice Girls so great? Depends who you ask I suppose. The tunes are catchy. Voices auto-tuned to perfection. The lasses themselves are comely, let’s say. Appealing to a range of tastes; posh, scary, sporty etc.. a shrewd demographic play by their creators. But there’s more. I’m not sure they invented Girl Power, but the Spice Girls perfected and exemplified it in the popular culture. They weren’t the first for sure. Maggie Thatcher springs to mind as the ultimate expression of 80’s girl-power. And then of course Elizabeth I, 400 hundred and odd years prior. But both of them lacked the sort of laddish boisterousness that  Posh and friends brought to the 90’s girl-culture.

Here’s another classic: See the skyline? I’m guessing then that the video was shot in Jersey City. Well, you can check out the camera angle for yourself in May if you like.

So let’s wrap this up. Is it possible that Nelson finds himself somewhat inspired in his latest endeavour, via his new association with girl-power icon Victoria? It’s possible, sure. Right now, Nelson and Alan are in the “Tell me what you want / I’ll tell you what I want” stage of the relationship as the circle each other, trying to get a sense of strengths and weaknesses. Then pretty soon, Nelson will deliver the demand for shareholder value “If you wanna be my lover, you have got to give, Takin' is too easy, but that's the way it is”. Then we’ll see. To be continued....

A lot of work to justify a couple of videos? True. So here’s a couple more.

Here - the ultimate girls-next-door on a generic Northern (British) street (note the flat cap in case you didn’t get it)

And now for quintessential American (note the cowboy hat, Caddy and Nascar in case you didn't get it) scene. No audience went uncatered for. Marketing genius no?

That's it. Thanks for indulging!