Intense competition challenges oxo alcohols

24 February 1997 00:00  [Source: ICB]

Increased investment in the Far East in oxo alcohols and derivatives production is likely to stimulate intense competition in the region. This will immediately spread to other regions in an environment of increased market globalisation.

Several new plants have been built recently to supply the area's need but, although demand is growing by 7-10%/year on average, with the number of planned projects the area will be in net surplus if they all proceed.

The effect, according to Inge Pettersson, senior vice president for oxo alcohols at Neste Oxo business, would be that exporters into the region from the US and Europe would lose out 'in an intense competition with local manufacturers'.

The main outlets for oxo alcohols are in phthalate plasticisers for PVC and in coatings applications, accounting for half and 40% of output respectively.

The former can expect only moderate growth in developed markets, such as the US, western Europe and Japan, say 2-3%/year, while in Asia (east of Iran) growth of 5-10%/year can be expected over the next ten to fifteen years.

Coatings applications can expect slightly higher growth in North America and Europe, between 4-5%/year, but the same in Asia. Other uses, although at 10% of total, insignificant in volume terms, will show growth in all regions, up to 7%/year in Asia and a lower 3%/year in developed regions.

In the mid-1990s, explains Pettersson, North America had sufficient capacity to meet demand and supply South America and Asia. Total exports are around 10% of production and future demand can be met by moderate investments in existing plants.

In Europe, there has historically been a substantial surplus of capacity over demand for both primary oxo products and derivatives.

Asia has been the exception, so far, excluding Japan, which is a mature and saturated market and is self-sufficient. The rest of the region imported close to 550 000 tonne of products last year, predominantly from the US (120 000 tonne) and western Europe (350 000 tonne), with the balance from the Middle East (80 000 tonne).

Taken with local production capacity of 1.35m tonne/year and an 82% operating rate, this is enough to satisfy local demand of 1.7m tonne in 1996.

The projects listed in the table illustrate why this import situation is set to change. Imports will decline through to the year 2000, dropping to around 250 000 tonne before recovering again to 1996 levels by 2005, when demand is expect to be over 3m tonne.

As Pettersson concludes: 'The overall global situation for oxo products presents planners and investors in all regions with a huge challenge. How do we satisfy the needs of our customers and ourselves without destroying shareholder values.

NEW OXO ALCOHOL CAPACITIES IN ASIA FOR 2000 ('000 TONNE/YEAR)
Company, location	Product	Capacity
Lucky, South Korea	2-EH, 2-PH	40+40
Hanwha, South Korea	2-EH, n-but	90+8
Formosa, Taiwan	2-EH, n-but	150+20
Eastman, Singapore	2-EH, n-but	100+10
Oxonol, Thailand	2-EH, n-but	100+100
Jilin, China	2-EH, n-but	50+10
Shanghai, China	2-EH, n-but	50+20
Qilu, China	n-but	50
Reliance, India	2-EH	65
Eternal Buana, Indonesia	2-EH, n-but	100+20
BASF/Yangzi, China	oxo alcohols	250*
BASF/Petronas, Malyasia	oxo alcohols	250*
Exxon, Singapore?	--	100*
Other	n-but	25
Total		1058 (1768*)
* Scheduled for 2005.2-EH: 2-ethyl hexanol; 2-PH: 2-propyl hexanol; n-but: n-butanol

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