OUTLOOK ’13: Asian fatty alcohol players cautious on a few start-ups

07 January 2013 03:26  [Source: ICIS news]

By Yeow Pei Lin  Rise in Asia fatty alcohol prices Q2 possible on high upstream costs

SINGAPORE (ICIS)--The production capacity of fatty alcohols in Asia may grow by more than 30% in 2013, raising the prospect of a supply overhang in the next few years, industry sources said.

Five projects, which are mainly in the major global production centre of southeast Asia, are expected to boost the total annual nameplate capacity of Asia’s fatty alcohol market by more than 500,000 tonnes (see table)  by the end of 2013, according to a survey by ICIS pricing. The current nameplate capacity is at approximately 1.5m tonnes/year.

The slew of projects is likely to cause a supply glut in a global market that already has sufficient capacity to meet demand growth in the next few years, industry players said.

In 2011, the utilisation rates at global fatty alcohol facilities averaged less than 60%, with global demand totalling around 2.1m tonnes versus a production capacity of about 4m tonnes/year, data from consulting firm Frost & Sullivan showed.

World fatty alcohol consumption grew to 2.2m tonnes in 2012, which is still far below the global capacity levels, Frost & Sullivan estimates showed.

“Currently, there is sufficient fatty alcohol capacity to last the market for at least three years. The future expansions would lead to both excess capacity and supply,’’ Lim Jin Han, a consultant at Frost & Sullivan said.

Industry players said the utilisation rates at the Asian plants may suffer and the merchant market could see intense price competition, if all the new projects start up as scheduled next year.

Several traders and downstream alcohol ethoxylate producers in the key China market are minimising their purchases of blended mid-cut C12-14 fatty alcohols in the first quarter, ahead of the start-up of two facilities in China and Indonesia. This particular blend makes up 60-70 % of the total global fatty alcohol production.

Indonesia’s Musim Mas may start up its 100,000 tonne/year facility in Medan in the first quarter, market sources said. China Sanjiang Fine Chemicals is scheduled to begin trial production at its oleochemical complex in Zhejiang province in February or March, sources added.  The Chinese manufacturer’s complex will be able to produce up to 135,000 tonnes/year of fatty alcohols and 60,000 tonnes/year of fatty acids.

In addition, the downstream production activity in China is expected to be slow in the first quarter because of the Lunar New Year holiday on 9-15 February, Chinese sources said.

“Demand will likely rebound in March at the earliest and this will depend on the global economic conditions, which are very uncertain at the moment,’’ a Chinese trader said.

The more sanguine market participants said the global supply glut may not be as bad as feared. 

“The producers will secure tolling agreement and ethoxylation partners to help absorb the additional fatty alcohol capacities,’’ a market player said.

Outside Asia, SABIC’s 83,000 tonne/year fatty alcohol plant, which is due to start up towards the end of 2013, will supply feedstock to its downstream ethoxylation plant as part of an integrated development at Al Jubail, Saudi Arabia.

The long-term prospects of the global fatty alcohol market remain positive, especially in Asia, Lim of Frost & Sullivan said.

Lim expects global demand to expand at a compound annual growth rate (CAGR) of 3-4% from 2012 to 2020, driven largely by rising Asian consumption.

India and China will lead the growth in Asia, with an estimated 6-8% CAGR during 2012-2020, Lim said.

The prospects for blended C12-14 fatty alcohols, which are used mainly in the detergents market, are bright as consumers in these two key Asian markets continue to shift towards liquid laundry detergents, Lim added.

Growth opportunities in north America and Europe are more limited because of the weak ethoxylate market in both regions, Lim said. Europe’s alcohol ethoxylate market size has been relatively stagnant since 2009, he noted.

North America will continue to be a big market for synthetic alcohols in the near term, Lim added. The availability of low-cost shale gas in Canada and the US, he said, will likely ensure that synthetic alcohol supplies remain more competitively priced in relation to natural alcohol supplies.

Asian fatty alcohol plant start-ups in 2013

Company

Capacity (1,000 tonnes/year)

Location

Start-up schedule

Musim Mas

100

Medan, Indonesia

1H 2013

Wilmar

144

Gresik, Indonesia

1H 2013

China Sanjiang Fine Chemicals

135

Zhapu, Zhejiang province, China

1H 2013

Kuala Lumpur Kepong

100

Klang, Malaysia

2H 2013

Pilipinas Kao

40

Jasaan, Philippines

2H 2013

Total

519

 

 


By: Yeow Pei Lin



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