Sustainability is key to surfactants markets

Keen to be green

21 January 2008 00:00  [Source: ICB]

Heavily eroded margins may be causing consternation among surfactant producers,but many have realized that going green can help wash away their troubles

Andy Brice/London

JUST AS raw material costs and energy prices have increased over the past year, so too has the trend toward more sustainable and innovative products within the surfactants sector.

Led by consumer demand and pressure from retailers, producers are developing more environmentally friendly products and investing heavily in new formulations.

"Sustainability is nothing new, but it has really taken hold in the past year," says Brian Sansoni, vice president of US-based trade group The Soap and Detergent Association (SDA). "This is a significant time for surfactants and for the cleaning industry in general there have always been innovations, but manufacturers are now being encouraged to talk more about them. The whole sustainability umbrella poses both challenges and opportunities, although with the rise in energy and fuel prices, there are probably more challenges at the moment."

The past year has been particularly galling for surfactant producers, who have been unable to reclaim their rapidly depleting margins, despite repeated attempts to raise their prices. As with all other markets, the firming energy complex has taken its toll. Crude oil prices continue to set new records, having surged to near $100/bbl from around $60/bbl last January. Gasoline numbers, meanwhile, are currently hovering around the $800/tonne mark from $540/tonne at the start of 2007.

"Rising raw material costs such as those for ethylene and lauric oils, as well as energy prices, are a serious burden on each company, especially in the specialty chemical industry," says Josef Koester, marketing director for Care Chemicals NAFTA, at German specialty chemical firm Cognis. "Although we have made all efforts to absorb and countermeasure rising costs to contain price increases to customers, increases were unavoidable, in order to cope with the significant economic impact from the cost increases."

GOING GREEN EARNS THE CASH

Through the growing emphasis on sustainability, however, the past year has seen manufacturers adjust their focus. "Our approach to innovation has been to try to position new products today in the direction that the market will move tomorrow," says David Del Guercio, business director for household care North America, at Germany-based Evonik Industries. "This does not in all cases achieve greater profitability, but helps us remain a leading supplier for the future."

Back in September 2007, at the 6th Asian Soap and Detergent Association conference in Taiwan, Tony Frencham, general manager and global business director for US major Dow Chemical's Fabric and Surface Care, said that consumers were now looking beyond cleaning and convenience.

"We have been hearing from brand owners and retailers, and through them from their customers, that they want performance and to lower resource consumption. At Dow, we are addressing this need by offering raw materials that use fewer resources in their manufacture, including many made from renewable resources, as well as working with brand owners to formulate products that allow consumers to use less water and energy."

Given the price pressure from petroleum-based surfactants, companies are starting to concentrate more on oleo-based products. However, this is not without its problems, either - oleochemicals are also suffering from soaring feedstock prices.

"We have seen raw material costs escalate dramatically over the last two years. For fats and oils, which have traditionally been significant raw materials for oleochemicals, this has particularly been the case in the last year," says Del Guercio.

"Due to the biofuel development and growth over the last few years, we now not only have the concern regarding continuously escalating prices, but we may see the day for fats and oils when supply does not meet demand. Fats and oils costs are reflecting their value as raw materials for fuels, which means as crude oil costs move, so will oleochemicals."

The European Oleochemicals and Allied Products Group (APAG), a sector group of industry association the European Chemical Industry Council (Cefic), warns that there are growing concerns within the industry that the increasing number of subsidized uses of animal fats as an energy source may mean Europe is unable to meet demand this year due to a feedstock shortage.

MORE HARM THAN GOOD?

It is also easy to forget that producing biodegradable products can be just as energy intensive and damaging to the environment. For example, there are concerns over the production of palm oil, due to deforestation and the threat to the natural habitat of orangutans.

Dow is among the many producers promising a lighter ecological footprint, using natural, renewable raw materials to meet this upturn in demand. The firm is about to launch a seed oil-based surfactant called Ecosurf SA, a new generation of patented, biodegradable, nonionic surfactants that offer performance improvements over typical seed oil-based surfactants currently available. Applications include paints and coatings, household, industrial, or institutional cleaners, and high-efficiency laundry products.

"We're breaking ground here," says Carlos Silva Lopes, global marketing director, Dow Fabric & Surface Care. "We've seen far more interest in the environment, not only in Europe but in the US too. There has been an unmistakable shift toward natural source surfactants - and that's taking a share away from synthetic-based products."

Renewable content products such as propylene glycol renewable and Dow's cellulose-based water-soluble polymers were welcomed last year, along with the announcement of its hydroxyethyliminodiacetic acid biodegradable chelant.

Similarly, Cognis Care Chemicals launched Plantapon SF, a mild, natural-source surfactant base that does not contain sulfates, ethylene oxide (EO) or preservatives. Applications include environmentally friendly body cleansing products, facial washes, baby care and shampoos.

Its Dehypound Advanced, meanwhile, provides a better cleaning performance without needing builders or solvent.

"Consumers are becoming more and more sophisticated and so are the formulations. It's not driven by industry, it's driven by society," says Lopes. "People still want things to be clean - that's the basic premise - but there is also now a need for convenience and the newest trend - 'wellness'. People want to know that they are using a product that is not damaging to the environment. This has become very important in the cleaning sector. The surfactants markets are pretty mature, but this is a breath of fresh air."

Sansoni agrees. "It isn't just about what the formulators demand anymore, it's all about the retailers. Big retailers are reacting to pressure to be more sustainable it's in their best interest to produce in an energy-efficient way as it affects their bottom line."

Among the most identifiable examples of this is the proliferation of liquid concentrated detergents in the US, which have gained huge support and popularity. A few months ago, retail giant Wal-Mart North America announced that it would sell only these kinds of detergents this year.

Manufacturers may also find the implementation of the much-publicized EU Reach legislation and other new regulations impact their efforts to innovate, diverting much-needed funding and time.

"It's a continual challenge, and with the regulatory regimes, such as Reach, we have our hands full," says Sansoni. "Research and development is the lifeblood of surfactants companies, but if you have to comply with Reach you're not going to be able to do that for free. Compliance costs time and money. The next few years will certainly be interesting."

"We're at a crossroads but I do think the industry will rise to the challenge," he says. "There is every reason to be optimistic, but we're under no illusion that it's going to be easy. At the end of the day, it's great if it's green, but it has still got to clean."

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