Chemical Profile: Tall Oil

24 October 2005 00:01  [Source: ICB Americas]

 

Producer	Capacity
Arizona Chemical, Panama City, Fla.	82,000
Arizona Chemical, Port St. Joe, Fla.	91,000
Arizona Chemical, Savannah, Ga.	200,000
Eastman Chemical, Franklin, Va.	91,000
Georgia-Pacific, Crossett, Ark.	118,000
Hercules, Burlington, Ontario	18,000
MeadWestvaco, Charleston Heights, S.C.	105,000
MeadWestvaco, De Ridder, La.	91,000
Old World Industries, Clear Lake, Texas	780
PD Glycol, Beaumont, Texas	640
Shell, Geismar, La.	1,260
Sunoco, Claymont, Del.	120
Total	798,800

*Tons per year of fractionation capacity in terms of crude tall oil (CTO) input. CTO originates as tall oil soap, which is separated from recovered black liquor in the Kraft pulping process. The soap is converted to CTO by acidulation with sulfuric acid. The tall oil is then fractionated by distillation to produce tall oil fatty acids (TOFA), rosin and pitch. Most plants can operate beyond their indicated capacities.

In July of this year, International Paper disclosed that it was restructuring its business portfolio. Several holdings were identified as potential divestitures, including IP’s pine chemicals business, Arizona Chemical.

 

In 2003, Eastman Chemical closed its 68,000 ton Savannah, Ga., plant and expanded capacity at Franklin, Va., from 64,000 to 91,000 tons—a net decrease of 41,000 tons. Both facilities were acquired from Hercules the previous year, though Hercules retained its CTO fractionation facility in Burlington, Ontario, Canada, for captive consumption. The Burlington facility has around 18,000 tons per year of CTO fractionating capacity.

 

Profile last published 1/27/03; this revision 10/24/05.

 

DEMAND

2003: 535,000 tons; 2004: 547,000 tons; 2008: 560,000 tons, projected. Demand equals production plus imports (2003: 26,000 tons; 2004: 46,000 tons) less exports (2003:170,000 tons; 2004: 225,000 tons).

GROWTH

Historical (1999–2004): -0.5 percent (negative) per year; future: 0.5 percent per year through 2008.

PRICE

Historical (1999–2004): High, $109 per ton, crude tall oil, Southeast tanks, works, frt. equald.; low, $90, same basis. Current: $95 to $105, same basis. Source: CMR

USES

Tall oil rosin, 33 percent; tall oil fatty acids, 30 percent, tall oil pitch, 28 percent; distilled tall oil, 9 percent. 

 

MARKET PERSPECTIVE

Three years ago, the CTO market in the US was vastly oversupplied, but it is now in balance. On the supply side, kraft pulping was up as industry pulp mill utilization hit 92 percent in 2003, driven by the robust economy, and the rate has since maintained at 90 percent. Because CTO is a by-product of the production of wood pulp from Southern pine trees, demand for pulp, rather than for TOFA, largely drives CTO supply.

Combined with the consolidation of CTO refining capacity by Eastman Chemical, the increased pulp production could have exacerbated the CTO oversupply situation of the previous period. But greater export demand from Europe and the burning of CTO for fuel by pulp mills have balanced the market.

Export volumes have risen sharply since 2003. CTO exports in 2003 were up 60 percent over the prior four year average export volumes, and in 2004 they rose another 30 percent over 2003. Thus far in 2005, exported CTO is up 25 percent over the same period last year. More than 60 percent of the exported CTO goes to just two countries—Sweden and the UK.

Some producing mills have been using CTO as an alternative energy feedstock because of continued high petroleum oil costs. As crude petroleum oil prices hover at around $60 per barrel, CTO as a fuel competes with its chemical feedstock use.

Demand for TOFA, TOFA derivatives, and tall oil rosin-based resins has been picking up because of improved economic activity. Price increases in vegetable oil-based fatty acids, especially in the C18 oleic fatty acid market, have made TOFA more competitive in the fatty acids market. For instance, linseed oil supply is in a tight spot following the one-two punch of continued strong demand and last year’s bad flaxseed crop in Canada and North Dakota. The price of linseed oil, currently 75 cents per pound, has risen 50 percent since April.

OUTLOOK

Demand growth for CTO is projected to be 0.5 percent per year for the forecast period, in anticipation of improving TOFA demand owing to firmer pricing in the competing vegetable oil sector. However, uncertainty of future energy costs is a concern. As fuel oil increases in price, more CTO will be consumed at the producing sites, which in turn will drive up the price of CTO. Escalating exports could also cause the market to tighten and drive up prices. Either of these possible scenarios could turn the modest growth into modest decline.

 —Mark Kirschner

ICIS Copyright © Reed Business Information 2009

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