INSIGHT: Recession-proof surfactants limited by feedstock issues

02 June 2010 17:33  [Source: ICIS news]

By Heidi Finch

LONDON (ICIS news)--Due to the recession, cost-cutting measures in all areas of everyday life are at the forefront of consumers’ minds and consequently even the notion of home-made detergent has recently washed to the surface.

According to an online recipe, the following will produce an effective detergent: “4 cups of water, 1/3 bar of cheap soap grated, ½ cup of washing soda (not baking soda), ½ cup of Borax, 5-gallon bucket for mixing, 3 gallons of water”.

Despite the economic downturn, however, detergents in Europe have fared reasonably well, compared to other sectors such as automotive and construction, which were severely hit at the end of 2008 and throughout 2009.

Some argue that overall detergents consumption is relatively recession-proof, as the need to clean is not a luxury.

Any negative impact on detergents demand due to the economic downturn has been minimal, say detergent manufacturers. There has, however, been a shift in buying patterns over the last year, with many consumers switching from more expensive, branded to cheaper, non-branded products.

Views on how long this shift will last are mixed. One source suggested the switch will stay for the foreseeable future, as European consumers remain cautious about spending, particularly given uncertainty about the Greek debt crisis.

However, another player said it sees a move back towards the pre-crisis status quo, following signs of a general market recovery and restored consumer confidence.

In the first half of 2010, demand has been better than expected, according to several detergent players.

This was illustrated by Cognis’ first quarter 2010 results in the care chemicals sector, where sales were 10% higher than the same period in 2009.

The improvement in demand was linked to a general recovery in the market and some stock replenishment, following the de-stocking seen at the end of 2008 and into 2009.

One surfactants manufacturer added that the loss of Shell’s ethoxylation production at Wilton, the UK, in the first quarter one of 2010 meant that other European surfactant suppliers were benefitting.

Shell had permanently shut down its NEODOL ethoxylates unit at Wilton, the UK, which was operated by Croda, after Dow ceased upstream production of ethylene oxide (EO) and monoethylene glycol (MEG) at the site. Instead, Shell had established alternative capacity by using its Geismar facilities and also through a tolling agreement with a third party producer in Europe who would supply part of their ethyoxylated volumes, according to a company spokesperson.

Croda also operated other ethoxylated assets at Wilton, which it transferred to elsewhere in Europe and also outside Europe following the loss of Dow’s EO feedstock supply at the site.

Looking further afield, another surfactants player said demand was increasing on a global scale, particularly in developing countries such as the Middle East and Africa, central Europe and Russia . This heralds a good future for the surfactants industry.

In addition, the recent rapid appreciation of the US dollar against the euro provided European manufacturers with some interesting export opportunities.

One surfactants manufacturer in southern Europe said it had seen some improved demand for exports to the Middle East and Africa due to the favourable exchange rate.

Sources said the recession was not really an issue - it was more feedstock supply constraints that were limiting momentum in the surfactants sector.

There was limited availability in several upstream products used in detergents. The European EO market was short in May and was expected to tighten further in June, due partly to a heavy turnaround programme that was afoot for the main sellers.

A similar picture was emerging in the propylene oxide (PO) market, where a number of plant maintenances in May/June was limiting both PO supply and its derivative mono propylene glycol (MPG).  The ethylene diamine (EDA) market has also been characterised by reduced availability since the start of 2010 due to a combination of planned maintenances and unexpected global developments, alongside good demand.

Detergents producers may worry where their product will come from amid a tight feedstock situation, but at least they can be confident of modest growth in demand despite the economic downturn, based on the assumption that people will always need detergents in one form or the other. And when times get tough, at least we know we always have the option of making our own homemade detergents.

For more on Shell visit ICIS company intelligence
For more on ethylene oxide and other feedstocks, visit ICIS chemical intelligence 
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By: Heidi Finch
+44 20 8652 3214

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