14 December 1998 00:00 [Source: APC]Oleochemical companies in Asia enjoyed the boom in demand for personal care products, cleaning up for more than a decade. Jo Winter reports on how the Asian crisis has impacted their businesses
Some of the major growth areas for chemical companies in Asia in recent years have been in personal care products, detergents, agrochemicals, polymerisation and coatings, textiles, and industrial cleaners. The household products sector is currently the key growth area of the global oleochemicals/surfactants business, driven mainly by household laundry detergent - these products are being formulated with increasing amounts of surfactants. Other key product applications in the consumer market are dishwashing liquids, fabric conditioners, and toiletries and cosmetics, including shampoos and bath preparations. In the detergent and personal care sector, in particular, there has been a move away from using petrochemical-based surfactants to products based on natural raw materials such as oils and fats, which has driven the oleochemicals sector.
Oleochemicals are a highly versatile chemical grouping as they are characterised by long molecular chains and high functionality. They can offer enormous freedom to tailor performance to achieve the desired result and are widely used in high-performance and speciality products. Virtually all the ingredients are derived from oils and fats with natural, renewable non-mineral sources and in their processing, companies deliberately avoid harsh treatments.
By 2000 world fatty alcohol capacity is forecast to be some 1.8m tonne, of which over 50% is likely to come from 'natural' oils and fats. Filipino company United Coconut Chemicals believes that world capacity of 'natural' fatty alcohols will be as much as 980 000 tonne by 2000, with Asia accounting for half. Alkyl polyglycosides (APGs) are now a major end use of fatty alcohol, and their importance is expected to increase. Henkel has a capacity of 25 000 tonne in the US and Europe, Akzo Nobel has been promoting their use in industrial cleaners, and Union Carbide has been producing them for both the industrial and the domestic detergent market.
It is a major market. Next year it is expected that the oleochemicals market in the EU alone will be worth over $3bn. The main oils used are coconut, palm oil and palm kernel - the source for which is predominantly the plantations of Southeast Asia. Another source is tallow. In Europe, the market is dominated by two companies: Unichema, formerly part of Unilever and now part of ICI, and Henkel. Unichema produces more than 500 000 tonne/year of oleochemicals from natural oils and fats at its sites across Europe, the US and Asia. Henkel also has a worldwide presence and produces over 10 000 products. Many companies are now moving away from the use of petrochemical-based products and are increasing capacity in more 'natural' ones derived from oils and fats.
###7196###Technology is keeping up with the trend. Kvaerner Process Technology has recently set up its first plant in the Philippines using its natural detergent process (NDA). A second plant is now planned for Taiwan. The company says that this NDA process is a natural progression of its existing esterification technology, which was first developed for the production of 1,4-butanediol from maleic anhydride. In the NDA process, fatty acids from coconut and palm kernel oil-derived feedstocks are esterified with methanol. Fatty acid methyl esters are formed, which are then hydrogenated to produce crude alcohols which are then refined. Prime Chem, a Filipino coconut oil producer, chose the technology for a plant that is designed to produce 30 000 tonne/year of detergent alcohols. KPT says that there is a definite trend throughout the world towards more environmentally friendly detergents. Southeast Asia is no exception it says, with Indonesia, the Philippines and Malaysia, which produce the raw materials, particularly good opportunities for growth. In the Philippines, detergent products made with domestic coconut oil surfactants are actually favoured by law. Earlier this year the United Coconut Associations of the Philippines (Ucap) petitioned the Supreme Court to stop the import of petrochemical-based detergents. The chairman of Ucap, Jesus Arranza, said that he was concerned about the prospect of countries that have suffered devaluation since last year dumping petrochemical-based detergents on the Filipino market. Arranza said that 60% of detergents sold domestically 'must be made of surfactants manufactured from coconut oil to protect the environment and the crucial coconut industry'.
According to a report from Colin A. Houston & Associates, in 1988 oils and fats provided feedstocks for only 40% of higher alcohols. In 1994, this figure had risen to 54%, as a result of some 317 000 tonne of new alcohol capacity, mostly oleochemical, brought onstream in Asia between 1992 and 1994. This recent rapid build-up of new oleo alcohol plants is over and there will be a slow period now until the next wave of new capacity comes onstream in a few years. Nevertheless, as growth slows with new supplies, the worldwide market continues to remain competitive as it adjusts to this greater share of oleoalcohols - and as competing materials, like linear alkylbenzenes, are being offered at attractive prices.
###7197###In spite of the continuing Asian crisis, Asian producers are trying to keep in the game. Earlier this year the Asian Development Bank (ADB) approved an additional loan and equity investment of up to $4.8m for Primo Oleochemicals Inc (Prime Chem) of the Philippines. The Manila-based ADB also agreed to restructure and reschedule existing loans to Prime Chem, including one funded by the Asian Finance and Investment Corp. The funds will be used to run a 50 000 tonne/year plant at Panganiban, south of Manila, which converts coconut oil into oleochemical products for the domestic and export markets.
Malaysia too is now a major world producer (and top exporter) of palm oil and fats. According to a report presented by the Chemical Industries Council of Malaysia last month at the 28th Asean Chemical Industries Club (Acic) conference, Malaysia intends to press its advantage in oleochemical production - including fatty acids, fatty alcohols, methyl ester and glycerine.
The industry believes that the business will continue to achieve strong growth on all three continents, even in Asia where the crisis has resulted in some sectors suffering a plunge in activity while others show little change. Generally, China, Hong Kong and Singapore have not been as badly affected and Thailand and Malaysia are showing signs of starting to recover. However, Indonesia and Korea are still badly hit by ongoing problems in their respective economies.
The potential in the Asian market means that international producers have not been deterred. Witco announced plans in April to construct an oleochemical derivatives facility in Malaysia to manufacture consumer and functional surfactants for sale and distribution throughout the Asia-Pacific region. The company expects to complete construction by the third quarter of 1999 with operations to begin by the end of the year. Witco's oleochemicals and derivatives are used in a wide range of consumer products such as shampoo, conditioner, body lotions, shaving cream, clothes softeners and other household and personal care products. According to Georg Urban, Witco group vice president, oleochemicals and derivatives: 'The Asia-Pacific's growing affluence represents a tremendous opportunity for Witco in these markets and this facility represents tangible evidence of our willingness to invest in our derivatives business. We will manufacture our most advanced consumer and functional surfactants using low-cost, locally available, renewable resources at the plant in Malaysia.'
In May ICI announced that ICI Surfactants would merge with the ex-Unilever Unichema oleochemicals business, creating a business with $1.2bn in turnover. The new combined surfactants, lubricants and oleochemicals business will operate in its new form and with its new name, Uniqema, from January 1999. ICI is confident that personal care and polymers and coatings are good growth areas for the business and that the merger will allow the company to offer a wider range of products.
Personal care is an extremely competitive market. Established products have to be continuously improved and new products must have distinctive and obvious advantages. Unichema says it is working on new developments in cosmetics science to help customers develop mild, natural and high-quality products. Recent innovations include: low colour, low odour ingredients based on captive raw materials such as isostearic acid and dimer acid; an enzymatic process for producing new esters under mild conditions, allowing new, natural concepts; the world's first consistent supply of squalane from a vegetable source and new, multifunctional ingredients that can combine moisturising and conditioning with cleansing. Their products are also offered in polymers, pharmaceuticals, lubricants, and catalysts.
According to Ken King, marketing manager of Unichema Asia-Pacific: 'The economic downturn has affected everybody. The automobile industry, construction industry, plastic industry... you name it. Unichema has managed to insulate itself to an extent because of its wide geographic spread, its insistence on quality and its strong customer relationships - however, the crisis has affected our results.' The company remains committed to the market though, and King adds: 'We are opening a regional technical service centre for personal care and an Asia-Pacific regional personal wash application and technical service centre at our plant in Klang, near Kuala Lumpur. The new facility will allow us to grow further in this market.'
Peter Milsted, group vice president for Unichema Asia-Pacific adds: 'Unichema is not presently building new plants in the Asia-Pacific region, but we are working on existing plants and expanding productivity by removing bottlenecks and adopting new "in-house" technology which speeds up reaction and processing times. The equipment for these projects is sourced from all around the world. As to future plans we are looking at a number of opportunities for expansion in the Asia-Pacific. We also now have access to a number of new and flexible plants in the Asia-Pacific as we integrate our operations with colleagues in ICI Surfactants.'
Akzo Nobel has increased the proportion it owns of the surface chemistry business joint venture Akzo Nobel Oleochemicals, and is establishing a regional marketing centre in Singapore. The company has increased its share in the fatty acids joint venture, based in Pasir Gudang, from 50% to 65%. Joint venture partner Lam Soon Group of Singapore retains the remainder. The regional marketing centre will start up on 1 January 1999. The aim is eventually to set up a regional surface chemistry business unit. Akzo Nobel intends to buy production sites to support the long term ambitions of the Asian unit.
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