Surfactants strategies

09 August 2002 00:00  [Source: PCE]

 
Success in the surfactants market depends on a focused strategy and a wide product range, according to industrial analysts Frost & Sullivan. In Southeast Asia - still recovering from the financial crisis of the late 90s - growth is slow but steady, with the highest growth in the nonionic and cationic segments

In a recent report on the Southeast Asian surfactant market, Frost & 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 - 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 applications. The anionic surfactants are generally 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 are used 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 at $335m in 1999 and it is projected to grow by a compound growth rate of 4.8% to $464m by 2006. During the latter part of 1997, the market was affected by financial crisis. In 1998, the growth rate recorded negative and it recovered slightly in 1999, driven by export-oriented manufacturers. Southeast Asia 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 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 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, in 2003.

Consolidation in likely 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

Anionic surfactants are the largest surfactant type used in the Southeast Asian market. They accounted for 68.5 % of the total market in 1999. They 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
  • low cost of anionic surfactants
  • local supply
  • 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
  • share loss from high-end anionic surfactants to cheaper nonionics
  • lower purchasing power of consumers of end products
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 revenue 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, users, particularly in the detergent industry, are switching from high-end anionic surfactants to cheaper nonionic surfactants. 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 CAGR of 6.7% to $107m by 2006.

The nonionic market is projected to show the highest growth rate among all surfactant types. Nonionic surfactants are preferred because they are more compatible in different formulations and they are also reported to be more environmentally friendly. They are 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.

Market drivers

  • export demand for end-user products
  • switch from high-end anionic surfactants to nonionics due to better compatibility
  • certain enhancing properties when compared with the anionic surfactants
  • more intraregional trade
  • growing demand for multifunctional surfactants

Market restraints

  • unstable economic and political climate
  • falling profit margins of suppliers
  • depreciated currencies inflating prices of surfactants
  • lower purchasing power of consumers of end products
Cationioc surfactants

The cationic and amphoteric surfactants are in the development stage in Southeast Asia. The cationic segment accounted for just 7% of market revenue 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 recently introduced in markets like Thailand and the Philippines. There are also a lot of 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 CAGR of 5.7% to $35.9m by 2006. The cationic market shows the highest growth rate in Thailand, Philippines and Malaysia.

Market drivers

  • growth of softener industry
  • large presence of personal care manu-facturers
  • growth in local and export demand for personal care products like hair conditioners and shampoos
  • mild and performance enhancing properties

Market restraints

  • unstable economic and political climate
  • lower consumer purchasing power of personal products
  • lack of local supply at the moment, so higher imported prices act as a restraint.
Amphoteric surfactants

The amphoteric segment accounted for less than 5% 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 amphoteric segment is driven largely by the growth of personal care products in Southeast Asia.

In 1999, the total amphoteric market was estimated at $13m. It is projected to grow by a CAGR of 5.2% to $18.8m by 2006.

Market drivers

  • large presence of personal care manufacturers
  • growth in local demand for personal care products
  • local supply
  • extremely mild property

Market restraints

  • unstable economic and political climate
  • lower consumer purchasing power of personal products
  • high prices
  • lack of wider applications
Conclusions

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. Important strategies include:

  • proximity to the end-user in order to recognise 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.




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