OUTLOOK ’20: Europe fatty acids, fatty alcohols demand diverges on end-market performance

Author: Samantha Wright

2019/12/27

LONDON (ICIS)--The European fatty acids and fatty alcohols markets face diverging outlooks for 2020.

While fatty acids demand from the automotive industry is expected to remain limited, buying interest for fatty alcohols is set to be stable amid healthy production of surfactants anticipated for 2020.

FATTY ACIDS
Demand from the automotive industry for European fatty acids has slipped throughout 2019, with players expecting buying interest to remain low in 2020.

Fatty acids are a component in polyurethane production, which is then used in car manufacturing.

ICIS lead analyst Rhian O’Connor expects that while demand levels will remain historically low, growth will likely be seen again in the automotive industry.

She said: “[2020] should see a return to growth with expansion in most regions – albeit at historically lower rates.

“Specific risks remain, most notably international trade disputes and environmental concerns. The US is threatening a 25% tariff on global manufacturers, including those in the EU and Asia, if they do not put more production into North America. In a similar vein, China has slapped tariffs on US cars, which may increase if the trade war escalates,” she added.

These expansions could see an increase in demand for fatty acids, though the market is unlikely to see a sudden spike in interest.

Fatty acid demand for the cosmetics and personal care industries is set to be stable to strong.

There are some expectations that fatty acid consumption will rise in line with a growing population, which typically increases demand in both the cosmetics and personal care markets.

There are some concerns over possible supply levels for 2020, amid some shortages at the end of 2019.

Palm-based oleic acid supply was tight at the end of the fourth quarter, following some production issues earlier in the year.

This is likely to improve in the first quarter with most outages resolved by the end of 2019. If healthy imports continue then the palm-based market is anticipated to be well supplied for 2020.

Prices for all grades saw increases in the second half of 2019, due in part to supply issues combined with rising feedstock values.

ICIS Editorial Chart goes here

There were shortages of tallow-derived material, particularly oleic acid, in the second half of 2019 due to limited raw tallow supply.

An increased use of raw tallow for biodiesel production in Europe has put pressure on stocks.

This is likely to continue in 2020, with an increasing amount of countries focusing on second generation biofuels instead of traditional crop biofuels.

As a result, tallow fatty acid availability is expected to be short for at least the first half of 2020.

FATTY ALCOHOLS
The European fatty alcohols market is likely to see more stable demand for 2020.

The key downstream market for fatty alcohols is surfactants, which are used in applications such as detergents.

Surfactants demand is generally steady because consumption of the end-use applications is typically stable year to year.

There are still some concerns that an economic downturn is on the way. This would typically drive down demand for several products, including surfactants.

Fatty alcohols are most commonly used with ethylene oxide (EO) and propylene oxide (PO) to produce surfactants in Europe.

The traditional cracker maintenance period in the second quarter is expected to impact EO and PO supply and in turn could limit demand for fatty alcohols.

There will likely be a peak in buying interest just before and just after the maintenance period.

No major production issues are anticipated in 2020. There was one unit in maintenance in December but this was expected back on line in the New Year.

Feedstock palm kernel oil (PKO) imports remained healthy at the beginning of the fourth quarter, though a significant hike in prices seen heading towards the end of 2019 could impact the level of imports sent over in 2020.

Pictured: Detergents, an end market for fatty alcohols, in a supermarket in Germany. Source: Manfred Bail/imageBROKER/Shutterstock)