Price and market trends: Fatty alcohol supply glut hits market

19 April 2013 09:21  [Source: ICB]

As new capacities come on stream amid poor demand conditions, prices are falling in Europe market

The much anticipated fatty alcohol oversupply is starting to take its toll on prices in Europe.

In the space of a year, mid-cut fatty alcohol prices in Europe have dropped around 39%. According to ICIS data, second quarter C12-14 contract prices in 2012 averaged €1,875/tonne FD (free delivered) NWE (northwest Europe).

 Emery Oleochemicals' immediate focus areas include home and personal wellness products

Copyright: Rex Features

This year's second-quarter contract business is yet to be finalised, with many buyers opting to hold back from negotiations in the hope of a further decline to prices.

Participants in Europe are currently discussing mid-cut alcohols at around €1,150/tonne FD NWE, although buyers are confident prices could fall even further.

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.

Meanwhile, fatty alcohol production capacity is forecast to grow by around 520,000 tonnes, an increase of more than 30% during 2013.

Although there are expectations that there will be further opportunities within India and the Far East to absorb some of this excess capacity, many suggest this alone will not be enough.

Participants expect the five plant start ups in Asia this year will instead add further to a market in which a glut of material already exists.

With immense downward pressure being placed on to prices, European suppliers are tentative over future growth.

Concerns over debt in the eurozone continue to stifle demand from many end-user markets, and suppliers remain uneasy over future prospects.

Some suggest they would rather shut down operations than continue selling fatty alcohols at a loss.

Meanwhile, other companies, such as Emery Oleochemicals, have started to change their approach.

The Malaysia-headquartered organisation continues to expand into the specialty oleochemicals sector, and is on target with its plans to switch from a 70/30 commodity/specialty portfolio, to a 50/50 portfolio by 2015.

By switching focus, the company's CEO, Kongkrapan Intarajang, remains confident of success in Europe.

Despite ongoing doom and gloom in the region, Intarajang believes there are other opportunities for oleochemical businesses to succeed.

Emery's immediate focus areas will concentrate on home and personal wellness products, as well as green polymer additives.

"Our investments in Europe are intended to further our business mainly in the green polymer additives market where we see continued growth with its need for high-performance solutions in white goods (for plastics, rubber/insulation), housing and construction, as well as food packaging," he said.

Emery's Loxstedt facility will begin commissioning in Q3, 2013, and Intarajang believes the company's investment in this region will be well placed to tap into the opportunities of an evolving eastern European market.

"Our Loxstedt plant will serve many industries including automotive and construction. These two industries are particularly strong in east Europe and represent a significant growth opportunity for our green polymer additives platform," he said.

In the home and personal wellness sector, Emery's joint venture with Italy's ERCA Group has led to the creation of an ethoxylation plant in Moerdijk, the Netherlands. The plant has been commissioned since February this year, and will provide low to high mole ethoxylates for the European market.

While the cyclical nature of commodities continues to take a hold of the fatty alcohols sector, Intarajang is certain that businesses can still achieve success in the midst of a downturn.

"By 2016, the global specialty chemicals market is forecast to have a value of $980bn, an increase of 27.7% since 2011," said Intarajang.

"By becoming less dependent on the cyclical scenario of the commodities sector, I'm confident of success in the specialty segment," he added.

By: Neha Popat
+44 208 652 3214

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