Growth in personal care

Demand for personal care products is rising in China, due to increasing disposable incomes and product innovation

China is a signficant global producer of oleochemicals and also imports large volumes of raw materials for oleochemical production. The growth of the personal care market and increasing consumer demand for ‘natural’ products will drive further development of this market Lim Teck Chaii, Desmond Ng

China is both a significant producer and user of oleochemicals worldwide.

In 2020, the country produced 1.7M tonnes of fatty acid, 307,000M tonnes of fatty alcohol, 193,000M tonnes of fatty amines, 724,300M tonnes of glycerine and 190,000M tonnes of soap noodles. China also imported a large volume of these oleochemicals products (see Table 1, p26).

The key factors driving oleochemicals growth are end-use industries such as personal care, food and beverages, soaps and detergents, paints and plastics.

These industries will continue to develop in the coming years, along with China’s economy, propelling the oleochemicals industry.

Growing concerns about the use of petroleum feedstocks in chemicals has also contributed to higher usage of oleochemical products.

In China, the raw material used for oleochemical production is mainly palm oil and its derivatives. Manufacturers are likely to increase their production of basic oleochemical products such as fatty acids, fatty alcohols, fatty amines and glycerine to meet rising demand.

Growth of industry

Oleochemical production began as a backyard industry with numerous smallscale and inefficient plants.

When China undertook the initiative to liberalise its economy and joined the World Trade Organization (WTO) in 2001, various oleochemical companies invested in the country and transformed the industry. Currently, there are more

than 10 modern oleochemicals production plants in China (see Table 2, p26).

The plastic and rubber industries are the major consumers of stearic acid, which is the widest consumed fatty acid in China. These two sectors account for 40% and 15% of total stearic acid consumption respectively.

Fatty alcohols are mainly used in the production of surfactants, which account for 85% of China’s fatty alcohol consumption.

Personal care products

Among the sectors that utilise oleochemicals, personal care has good growth potential.

Demand for personal care products is rising due to increasing disposable incomes and product innovation.

China’s personal care product market was forecast in a Statista report to grow at a compound annual growth rate (CAGR) of 4.7% from 2015 to 2021. Statista also projected that revenue is expected to grow by 8.7% annually from 2022 to 2025 and reach US$78.5M by 2025 (see Figure 1, p26).

Personal care products include hair care, skin care, creams, gels and ointments, with manufacturers looking at ways to increase vegetable-based ingredients in their applications as consumers become more concerned about potential adverse effects from petroleum-based ingredients.

These concerns have also led to rising market demand for organic ingredients.

Another major sector that could potentially benefit is the prospect of higher use of palm-based methyl ester in the renewable energy sector.

China is the world’s largest global emitter of carbon dioxide. In 2019, the share of the country’s global CO2 emission was 27.92%. As the country heads towards more clean energy use, there will be rapid expansion of its renewable energy sector.

From 2009 to 2019, China’s energy production from coal and crude oil has been reduced from 77.3% and 9.9% to 68.6% and 6.9% respectively.

The country’s green energy production rose from 206.23 gigawatts in 2009 to 758.63 gigawatts in 2019.

In the absence of a mandate for biodiesel, the use of palm-based methyl ester as biodiesel in the country is insignificant. Palm-based biodiesel usage will depend on its competitiveness relative to diesel. It may require Malaysia to promote the use of palm-based biodiesel for the Malaysian palm oil industry to benefit from the growth of the country’s renewable sector.

Industry factors

Raw material prices

Price fluctuations for raw materials in recent years have led to increased uncertainty and pressure on oleochemical enterprises in China, particularly as almost all the raw materials are imported.

For instance, due to lower than expected crude palm oil (CPO) output in Malaysia, as well as slower growth in Indonesia since 2020, the price of refined, bleached and deodorised (RBD) palm stearin surged from an average of US$520/tonne in May 2020 (fob Malaysia) to US$1,107.50/tonne in October 2021, an increase of 113% in 17 months. This led to many producers slowing operations as their profit margins fell or disappeared.

China’s environmental action plan

At the United Nations General Assembly in September 2020, China pledged to attain peak carbon dioxide emissions reduction by 2030 and carbon neutrality by 2060. Since then, various measures have been taken by provincial and local governments to implement the commitment. On 27 October 2021, the u

China’s oleochemical industry is highly dependant on imports of raw materials such as palm oil and palm kernel oil Photo: Adobe Stock

Products Producti on Import

Fatt y acid* Fatt y alcohol Fatt y amine Glycerine (refi ned & crude) Soap noodles 1,700,000 307,000 194,600 723,300 190,000 1,245,000 427,000 NA 1,763,000 40,000

* includes 1.08M tonnes of stearic acid output and 323,600 tonnes of import

Table 1: China’s output and import of basic oleochemical products, 2020 (tonnes)

Company Major oleochemical products produced

Yihai & Kerry Teck Guan (China) Rugao Shuangma Taiko Palm Oleo Dongma Palm Hangzhou Oils & Chemicals Liaoyang Huaxing Sasol Yihai Liangyugang

Fatt y acid, fatt y alcohol, glycerine Fatt y acid, fatt y alcohol, fatt y amine Fatt y acid, glycerine Fatt y acid, glycerine Fatt y acid, glycerine Fatt y acid, glycerine Fatt y alcohol Fatt y alcohol

Table 2: Major oleochemical companies in China

u State Council of China further released the white paper on ‘Responding to Climate Change: China’s Policies and Acti ons’, which outlines a variety of strategies, regulati ons, policies, standards and acti ons to achieve the goal set under the dual-carbon policy.

The white paper has focused on the chemical industry as one of the areas where greenhouse gas emissions should be reduced. Approval of new chemical processing projects will be more stringent, and ineffi cient plants will also be shut down. This may favour the import of oleochemical products.

Source: CCIA & Chinese Customs

Source: Malaysian Palm Oil Council

Source: Stati sta

CPO imports

China’s oleochemicals industry is highly dependant on Indonesia and Malaysia for imports of raw materials.

Between 2016 and 2020, Indonesia’s palm oil producti on grew by an average annual rate of 6.9% or 2.4M tonnes/ year to 42.7M tonnes, while Malaysia’s producti on rose at a lower rate of 2.8% or 0.4M tonnes/year to 19.1M tonnes.

Indonesia’s export duti es on palm oil and palm kernel oil favour the export of its oleochemicals products. Competi ti velypriced Indonesian oleochemicals such as stearic acid limit the expansion of demand for raw materials from Malaysia.

Conclusion

During 2012-2020, the producti on of major oleochemicals products in China registered a CAGR of 6%. This consistent producti on increase indicates that the country’s demand for raw materials will conti nue to be high.

If the industry conti nues with its current growth rate of 6%/year, it is expected that the total size of the oleochemicals market in China will reach 8.83M tonnes in 2025. This is an additi onal 2.24M tonnes of market expansion for either raw materials or oleochemicals products in fi ve years, as consumers conti nue their shift towards ‘natural’ ingredients.

Indonesia is likely to maintain its dominati on both in the exports of oleochemicals and supply of raw materials to the manufacturers or users of oleochemicals products in China due to its competi ti ve pricing and abundant feedstock. Nevertheless, Malaysia can also benefi t from the growth in China’s economy and the country’s rising need for sustainable oleochemical feedstocks. ● This arti cle is based on the report, ‘China’s Oleochemicals Market Off ers Opportuniti es for Higher Palm Based Derivati ves and Palm Fracti on Exports’, prepared by Lim Teck Chaii and Desmond Ng of the Malaysian Palm Oil Council and published in November 2021