A bubble of growth

25 July 2002 00:00  [Source: APC]

Analysis of the surfactants market in Southeast Asia shows an increasing demand for surfactants although the region is still feeling the effects of the Asian financial crisis. Market globalisation is forecast if the region becomes a Free Trade Area in 2003
 

Success in the surfactants market depends on a focused strategy and a wide product range, according to industrial analysts Frost and Sullivan.

In a recent report on the Southeast Asian surfactant market, Frost and Sullivan says companies looking to make a successful foray in this market or looking to expand their presence in the market, should factor in the changes expected to occur in the market caused by globalisation. This will bring about threats to companies that are unprepared, and opportunities to those companies that have correctly assessed its impact on the industry.

Surface active agents (surfactants) are organic chemicals soluble in water or solvents that change or modify the surface properties between two surfaces - either a liquid/liquid or a liquid/solid interface. Surfactants are generally segmented as anionic surfactants, nonionic surfactants, cationic surfactants and amphoteric surfactants.

These categories of surfactants have similar chemical structures, namely a hydrophobic (water-averse) and a hydrophilic (water-attracted) portion. However they differ due to the presence of electric charges in the hydrophilic part of the molecule. Anionics bear negative charges, cationic have positive charges, nonionics are neutral and amphoterics contain both types of charges.

These four surfactant types have different properties, which decide their different applications. The anionic surfactants are generally very good at cleaning and they are cheap. Hence they find the largest use in all kinds of detergents and other applications. Nonionic surfactants are used in smaller quantities than the anionic surfactants and are preferred for their environmental friendliness and compatibility. In Southeast Asia, they find usage mainly in detergents and industrial auxiliaries including agrochemicals, oil drilling, chemicals and textiles. Cationic surfactants are mild and have unique antiseptic properties and find use in personal care and softeners. Amphoteric surfactants are the mildest and are primarily used in personal care products.

The market size for surfactants for Southeast Asia and Australia was estimated to be about $335m in 1999 and it is projected to grow by a compound growth rate of 4.8% to $464m by 2006. The surfactant market was affected by the financial crisis that set in during the latter part of 1997. In 1998, the growth rate recorded negative and it recovered slightly in 1999, driven by export-oriented manufacturers.

The Southeast Asian region is yet to recover fully from the financial crisis and continues to face political uncertainties in Indonesia, the Philippines, and Thailand.

Frost & Sullivan expects the market to make a continued slow and steady recovery from the economic crisis with higher growth anticipated at the end of the forecast period.

Market drivers

The key market drivers are:

  • Increased output of end-user industries
  • Growth of the softener and personal care industry
  • Growing export demand for end-user products
  • Growing demand for multifunctional surfactants and blends
  • Greater local supply
  • Demand for more environmentally friendly products and increased usage of raw materials like coconut oil and crude palm oil in the manufacture of surfactants.
Market restraints

In 2000, the market was still restricted by the repercussions of the economic crisis. The major restraints that are limiting growth of the Southeast Asian surfactants market are:

  • Unstable political and economic climate
  • Depreciation of the local currencies in the foreign exchange
  • Rising price of raw materials
  • Low purchasing power of consumers
  • Falling profit margins of suppliers, particularly in the commodity market.

The state of the economy plays an important role in the surfactant industry, as its end-user industries are reliant on economic conditions. In the case of countries like Indonesia, political instability is preventing the economy from stabilising and the end-user industries from making a recovery. The currency also plays an important role in determining surfactant prices to end-users and the margins for manufacturers and suppliers. In 2000, the margins of manufacturers were growing thin due to the prevailing weak currencies and the continued rise in the price of oil.

It will be interesting to see how the market responds to globalisation. The Southeast Asian region is expected to become a free trade area, the ASEAN Free Trade Area (AFTA), in 2003.

It is likely to gain consolidation in the industry, companies would be acquired or operations of individual companies would be consolidated since all tariff barriers are likely to be removed. This would allow a flood of cheap imports to come into the region that competes fiercely with domestic producers. Frost & Sullivan also expects some type of non-tariff barriers to be erected in Southeast Asian countries, that would in turn protect domestic industries.

Analysis by major segment
  • Anionic surfactants

    The anionic surfactants are the largest surfactant type used in the Southeast Asian market. They accounted for 68.5 % of the total market in 1999. Anionic surfactants are mainly used in household and industrial detergents.

    In 1999, the total anionic market was estimated at $230m. This segment is projected to grow by a compound annual growth rate (CAGR) of 4% to $303m by 2006. The anionic market is expected to grow in line with the GDP growth rates as well.

    In 2006, this product segment is likely to remain the largest but its share is expected to drop slightly in favour of nonionics, which are more environmentally friendly and compatible in different formulations. Among other markets, Thailand is expected to record the maximum growth at 7%/year. The growth in Thailand is not only due to a relatively more stable political and economic climate but also due to export-oriented user industries. The Philippines has been losing share to other markets. This is due to the relocation of certain end-user industries to Thailand because of the poor political and economic situation, and high energy costs. Singapore and Australia are generally declining markets for surfactants in general, because they have become high cost manufacturing centres for end-users.

 

  • Market drivers
  • Presence of large multinational end-users including Unilever, Colgate Palmolive, Kao, Procter & Gamble, Johnson & Johnson
  • Export demand for end-user products
  • More intra-regional trade
  • Improvement in living standards
  • Government regulations (In the Philippines the government regulation to encourage usage of coconut oil has driven demand for such coconut oil-based surfactants)
  • Market restraints
  • Unstable economic and political climate
  • Falling profit margins
  • Depreciated currencies inflating prices of surfactants
Nonionic surfactants

Nonionic surfactants are the second largest surfactant type used in the Southeast Asian market. They accounted for 20.3% of the total market in terms of revenues in 1999. In Southeast Asia, nonionic surfactants are largely used in industrial auxiliaries, which include agrochemicals, textiles, paper, oil drilling and emulsion polymerisation. In Thailand, there is a switch from high-end anionic surfactants to cheaper nonionic surfactants, particularly in the detergent industry. With the growth of powder detergents, particularly concentrated ones, nonionics are expected to find greater usage. In 1999, the total nonionic market was valued at $67.9m. It is projected to grow by a compound annual growth rate of 6.7% to $107m by 2006.

The nonionic market is projected to show the highest growth rate among all surfactant types. It is expected to grow well in almost all the developing markets. Nonionic surfactants are preferred because they are more compatible in different formulations and they are also reported to be more environmentally friendly. They are quite mild, and having no charge, do not irritate the skin. In industrial applications, they are used as foam boosters, emulsion stabilisers and as primary emulsifiers. Growth for nonionics is expected to be from all applications.

Cationic and amphoteric surfactants

The cationic and amphoteric surfactants are in the development stage in Southeast Asia. The cationic segment accounted for just 7% of the market in terms of revenues in 1999 but these chemicals are speciality chemicals and are high margin generators unlike the bulk anionic segment.

The cationic segment is driven largely by the growth of softeners, which have been introduced in markets like Thailand and the Philippines. There are also many personal care manufacturers in Southeast Asia and they are expected to drive the demand for these surfactants.

In 1999, the total cationic market was estimated at $24m. It is projected to grow by a compound annual growth rate of 5.7% to $35.9m by 2006. The cationic market shows the highest growth rate in Thailand, Philippines, and Malaysia.

Meanwhile, the amphoteric segment accounts for less than 5% of the market. The surfactant market is still recovering from the economic crisis with all segments making a slow recovery in 2000-2001. There is expected to be higher growth in the future as end-user industries like the textile and agrochemicals recover. The highest growth is forecast to be in the nonionic and cationic segments, but the anionic segment would continue to be the largest.

Most anionic and nonionic surfactants are largely commodity surfactants, which are price sensitive and competitive. As profit margins are getting squeezed, large commodity suppliers need to focus on high growth applications, providing value-added service or expanding their product range to include specialities where the margins are higher. Competing on price alone will not be an effective strategy. Some important strategies include:

  • Proximity to the end-user in order to recognize the needs, product technology trends, and problems of the end-users at an early stage
  • Customer orientation rather than product orientation, in order to supply the customer with solutions and concepts
  • Internationalisation to provide same standard in service, advice, and know-how worldwide
  • Global partnership with clients in fundamental research and production
  • Customisation of solutions with concern for health and environment.

Total surfactant market: end-user breakdown

Detergents

Fabric care
Laundry detergents
Fabric softeners
Carpet cleaners

Hard surface cleaners
All purpose cleaners
Bathroom cleaners
Dishwash detergents

Personal care

Hair shampoos and conditioners
Lotions
Toothpastes
Cosmetics
Baby care products

Industrial auxiliaries

Textiles
Agrochemicals
Paints and coatings
Gypsum wall board
Construction
Metal working
Emulsion polymerisation
Oil drilling
Waste paper recycling
 

 





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