Strong oleochemicals demand forecast

RENEWABLE NEWS

Strong oleochemicals demand forecast

Figure 1: US bleachable fancy tallow prices

Source: WSJ Cash Markets Figure 2: Lauric oil prices

The global oleochemicals market has seen high feedstock prices, logistics hit by COVID restrictions and severe weather, with strong demand expected ahead, the 13th ICIS World Oleochemicals Conference heard on 23-24 June.

Major feedstocks for oleochemicals are palm oil, lauric oils (palm kernel oil and coconut oil), soyabean oil and tallow.

In terms of palm oil production, LMC International head of Southeast Asia Julian McGill said that while droughts in 2019 would continue to have an effect in 2021, 2022 should see high palm oil output if there were no weather shocks.

Weaker production had helped keep prices high, with world crude palm oil (CPO) prices rising from US$800 in November 2020 to as high as US$1,200 now.

Indonesian biodiesel demand has been crucial in mopping up a lot of the country’s palm oil production but the export tax used to fund the biodiesel programme has also meant much lower prices in the world’s largest palm oil producing country, according to McGill.

Export taxes had also altered processing margins by giving huge incentives to refine, changing relative prices (palm olein was now often US$60/tonne cheaper than CPO) and encouraging more processing and exports of fatty alcohol and split fatty acids, he said.

Fatty acids – In terms of the fatty acids market, prices in Europe shot up significantly between fourth quarter 2020 to second quarter 2021, with both tallow and palm oil fractions shooting up in value by €655/tonne on average, Samantha Wright, senior editor manager at ICIS said.

Palm oil-based fatty acid supply was hit by vessel delays from Asia – caused by a lack of ships and workers resulting from COVID-19 restrictions – and extreme hikes in freight costs. Demand for palm-based fatty acids also increased as a result of severe shortages in tallow fatty acid.

The US fatty acid market also saw vessel delays and high freight costs from Asia, and low soyabean oil supply.

“Looking forward to third quarter 2021, continued vessel delays are expected and it is unclear when this will ease and imports return to normal. As a result, palm-based fatty acid availability is expected to remain tight.”

Raw tallow production from meat processing may not increase as soon as expected despite restaurants re-opening, due to a backlog of frozen meat, Wright said.

“As biodiesel demand for raw tallow has been rising steadily and shows no signs of abating and as hydrotreated vegetable oil (HVO) gains traction in Europe, we may see snug supply become the norm for tallow-based fatty acids.”

Fatty alcohols – In terms of fatty alcohols, Lucas Hall, markets editor, ICIS, said the market would face pressure from bullish feedstocks and strong demand.

Martin Herrington, president, North America, IP Specialities, said there had been a steady and relentless increase in lauric oil prices since the second quarter of last year (see Figure, 2 above).

“To make a tonne of C12-14 alcohols, you need 1.7 tonne of PKO. That increase in price from US$700 to $1,500/tonne of PKO is even more extreme when translated into the cost of making fatty alcohol.”

Hall said HVO production was keeping feedstock demand extremely firm. Global HVO capacity was expected to nearly double in the next two years with US policies behind 85% of capacity additions globally. North American HVO production would grow to 9.5bn litres/year in 2022 from 1.9bn litres/year in 2020.

Hall said the fatty alcohol market had also experienced a tight shipping market which was particularly pronounced in the USA because its production was located furthest from feedstock to plant.

There is only one US producer of fatty alcohols, located on the West Coast, but its feedstock has to be imported by sea, according to Herrington. Remaining fatty alcohol demand is met by imports coming into New York and New Jersey and a few ports on the Gulf of Mexico. Also on the Gulf were several petrochemical alcohol plants located at Louisiana.

Hurricanes last summer struck the Gulf of Mexico coast, hitting synthetic alcohol plants, fatty alcohol ethoxylate production and the ports bringing in half of the USA’s fatty alcohol and oleochemicals supply.

In February, severe cold weather hit Texas, impacting the surfactants supply chain and disrupting road and rail shipping.

Hall said synthetic alcohol producers Sasol and Shell were still in force majeure following last year’s hurricanes and the country was now coming up against the Atlantic hurricane season, which could impact production.

With demand from the industrial sector and cleaning back in full swing and lagging imports, upward pressure in the third and fourth quarter this year was likely.

Glycerine – In the glycerine market, crude glycerine prices had nearly doubled from around US$300/tonne in January to US$600/tonne in June, said Helen Yan, senior editor at ICIS, adding that more than 60% of crude glycerine resulted from production of biodiesel and 30% from fatty acids.

Brazil was a major exporter of crude glycerine and the slashing of the country’s blending mandate from 30% to 10% in April meant less glycerine supply for the year.

The market would also see strong demand from the epichlorohydrin (ECH) sector, due to outages hitting production of ECH and liquid epoxy resin (LER), the main application for ECH. Outages included US Olin’s force majeure in Texas in February affecting ECH and LER output; Hexion’s LER force majeure in Netherlands in April; China’s Kukdo Chemical (Kunshan)’s LER unit closure since the end of October 2020; Inovyn’s ECH April maintenance in France; and US Olin’s second force majeure in May.

RENEWABLE NEWS Cargill partnering HELM to construct BDO facility

Global agribusiness giant Cargill announced on 8 June that it was partnering with German chemicals logisti cs, distributi on and marketi ng company HELM to build a US$300M commercial-scale renewable butanediol (BDO) facility.

As part of the deal, both companies would invest a combined US$300M to build the BDO facility at Cargill’s existi ng corn refi ning operati on in Eddyville, Iowa. The plant would initi ally produce 65,000 tonnes/year of QIRA 1,4 BDO, made through the fermentati on of plant-based sugars. It was due to be operati onal in 2024.

QIRA could be used in the manufacture of spandex and other polyester-based chemical fi bres as well as biodegradable plasti cs, polyurethane coati ngs, sealants and arti fi cial leathers, Cargill said.

More sustainable surfactants

German chemical giant BASF is expanding its range of palmbased surfactants with Roundtable on Sustainable Palm Oil (RSPO) certi fi cati on, off ering European customers more than 150 palm-based surfactants, the company said on 30 June.

“With our expanded range of RSPO-certi fi ed surfactants, we are helping our customers meet their ambiti on to use certi fi ed, sustainable palm kernel oil (PKO)-based products and reduce carbon in their value chain,” BASF senior vice president, Home Care, I&I and Industrial Formulators Europe, Soeren Hildebrandt said.

BASF said it had sourced PKO exclusively from RSPO-certi fi ed sustainable sources since 2020. By 2025, it planned to extend its voluntary certi fi ed sourcing commitment to include signifi cant intermediates based on palm oil and PKO, such as fatt y alcohols and fatt y acids. BASF produces palm oil-based ingredients for cosmeti cs, detergents and cleaning agents, and industrial applicati ons. The fi rm said the majority of its palm products were based on PKO and its derivati ves.

IN BRIEF

INDIA: Swiss speciality chemicals company Clariant has fi nalised its joint venture with India Glycols (IGL) to manufacture renewable ethylene oxide (EO) derivati ves, Clariant announced on 1 July. The 51-49% joint venture, originally announced in March, would operate under the name Clariant IGL Specialty Chemicals Private Limited. IGL manufactures green technology-based, speciality and performance chemicals as well as oleochemicals such as fatt y acids, fatt y alcohols, fatt y amines, castor oil and hydrogenated castor oil ethoxylates.

EUROPE/JAPAN: Finnish renewable fuels producer Neste and leading plasti cs, chemicals and refi ning company LyondellBasell (LYB) have agreed a long-term deal to make polymers and chemicals from renewable feedstocks, Neste announced on 17 June. LYB would process Neste RE, a feedstock made from bio-based sources such as waste and residue oils and fats, into polymers at its Wesseling plant in Germany.

Neste also announced on 20 May that it would supply Japan’s Mitsui Chemicals’ Osaka works site with its RE hydrocarbons, allowing it to produce renewable ethylene, propylene, C4 fracti on and benzene, and process them into basic chemicals such as phenol, or plasti cs such as polyethylene and polypropylene.