The World Oleochemical Industry

PIPOC 2017, Kuala Lumpur, November 14-16th

Dr Caroline Midgley, LMC International

© 2017 LMC International. All rights reserved. www.lmc.co.uk

Recent developments in fatty acids
Capacity more than doubled in the period 2004-2016

Global fatty acid capacity (‘000 tonnes)

14

12

10
Million tonnes

0
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
North America Europe South East Asia
Rest of Asia South America Rest of World

© 2017 LMC International. All rights reserved. Oleochemicals Report 2017 3

Recent developments

• Permata Hijau finished construction of a new 200,000 tonne fatty

acid plant in Indonesia.
• Dua Kuda in China expanded, doubling their fatty acid capacity to
300,000 tonnes.
• Iffco in Malaysia expanded their fatty acid production by 150,000
tonnes.
• KLK Oleo in China raised fatty acid capacity by 115,000 tonnes.
• At the end of 2016, Kao and Apical announced a JV to build a
100,000 tonne fatty acid plant in Indonesia.

© 2017 LMC International. All rights reserved. Oleochemicals Report 2017 4

Plants are usually located close to ports….

Fatty acid plants in Asia, 2016 (Capacity > 100,000 tonnes)

China, Jiangsu:
China, Tianjin: - Deyuan Goake
- Wilmar - Nantong Kangqiao Chemical
- Wilmar
China, Shandong: !
- Shuangpengchem China, Rudong:
- Rugao Shuangma Chemical (Double Horse)
China, Zhangjiagang: !
- Dongma Palm Industries
India, Mundra: China, Rugao Port:
- KLK ! !
- Adani Wilmar ! ! - Teck Guan
!
!
China, Zhejiang: ! China, Shanghai:
- Nice Group - Wilmar

China, Juaxing Port:

! India, Valia: !
- Zhejiang Jiahua
- Godrej Industries
! Malaysia, Prai:
- IOI Acidchem China, Guangdong:
- Wilmar
!
Malaysia, Rawang:
Indonesia, Medan: - Palm-Oleo
- Ecogreen
- Musim Mas Malaysia, Klang: Malaysia, Pasir Gudang:
India, Taloja: - Permata Hijau Palm Oleo - Palm-Oleo - Evyap
- VVF - Socimas - Iffco
- IOI Pan-Century
!
! - Natural Oleochemicals (Wilmar)
Indonesia, Sei Mangkei !! ! - Pacific Oleochemicals
- Unilever ! !
! !

Indonesia, Kisaran:
- Nubika Jaya

Indonesia, Pelintung: ! Indonesia, Gresik:

Indonesia, Dumai: !
- Wilmar - Wilmar
- AAA (Asian Agri)
- KLK Indonesia, Jakarta:
- Sinarmas Cepsa - Dua Kuda
- PT Dinuo Indonesia

© 2017 LMC International. All rights reserved. Oleochemicals Report 2017 5

..but in US are located close to tallow supply

Fatty acid plants in the Rest of the World, 2016 (Capacity >100,000 tonnes)

Netherlands, Gouda:
Germany, Emmerich:
- Croda
- KLK Emmerich

U.S., Chicago: U.S., Ohio: !

!
- Vantage !
- Emery !
- Akzonobel
Belgium, Ertvelde:
! - Oleon
!
! !
Germany, Düsseldorf:
! U.S., Massachusetts: - KLK Emmerich
- Twin Rivers Technologies

Spain, Barcelona: !
- Cailà & Parés
U.S., Tennesee:
- PMC Biogenix

Saudi Arabia, Jubail:

- SABIC

! Brazil, Camaçari:
- Oxiteno

© 2017 LMC International. All rights reserved. Oleochemicals Report 2017 6

Growth in capacity has outpaced growth in demand

Fatty acid consumption by region

10

7
Million tonnes

0
2005 2007 2009 2011 2013 2015 2017
North America Europe South East Asia China
Rest of Asia South America Rest of the World

© 2017 LMC International. All rights reserved. Oleochemicals Report 2017 7

In 2016, the biggest losers were Indonesia and China

Global fatty acid production, spare capacity and utilisation rates, 2016

3,500 100%

3,000 90%

2,500 80%
Capacity ('000 tonnes)

Utilisation rate
2,000 70%

1,500 60%

1,000 50%

500 40%

0 30%
Indonesia China Malaysia EU-28 US India Brazil
Production Spare Utiilisation

© 2017 LMC International. All rights reserved. Oleochemicals Report 2017 8

Who will survive in the future?

Cost curve for the production of stearic acid (average 2014-2016)

1,200
EU, US & ROW

1,150
Production cost (net of glycerine) stearic

India and China
1,100

1,050
acid (US$/tonne)

1,000

950
South East Asia
900

850

800
0 2,000 4,000 6,000 8,000 10,000 12,000 14,000
Cumulative capacity ('000 of tonnes)

Cumulative Capacity Stearic Acid Price, SE Asia (FOB)

© 2017 LMC International. All rights reserved. Oleochemicals Report 2017 9

Recent developments in fatty alcohols
Capacity will continue rising out to 2020

Global fatty alcohol capacity by region

5.0

4.5

4.0

3.5
Million tonnes

3.0

2.5

2.0

1.5

1.0

0.5

0.0
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
North America Europe South East Asia
Rest of Asia South America Rest of the world

© 2017 LMC International. All rights reserved. Oleochemicals Report 2017 11

Recent developments

• Sinarmas Cepsa began operations at their 160,000 tonne fatty

alcohol plant (based on acids) in Indonesia this year.
• In Indonesia, Musim Mas opened a new 150,000 tonne fatty
alcohol plant in Batam.
• In the US, Shell expanded their synthetic alcohol capacity in 2016
by adapting an existing unit.
• Shell also intend to expand cracker capacity and are expected to
construct another fatty alcohol plant.
• Also in the US, Sasol is building a new cracker and 200,000 tonne
synthetic alcohol plant which may start-up in 2019.
• In August 2017, BASF closed its fatty alcohol plant in Cincinnati.

© 2017 LMC International. All rights reserved. Oleochemicals Report 2017 12

There are no synthetic plants in Asia

Natural fatty alcohol plants in Asia, 2016 (Capacity >100,000 tonnes)

China, Liaoning:
- Liaoning Huaxing Chemical Group Japan:
! - New Japan Chemical

!
!

!
India, Valia:
China, Lianyungang:
- Godrej Industries ! - Lianyungang Yihai

Thailand, Rayong: China, Jiangsu:

- Global Green Chemicals - Teck Guan
! - Deyuan Gaoke

!
Malaysia, Pulau Pinang: China, Zhejiang:
- Fatty Chemical (Kao) Malaysia, Kuantan: - Zhejiang Jiahua
- FPG Oleochemicals - Zhejiang Heng Xiang Chemical
!

Malaysia, Klang:
India, Taloja: - Emery Rika
!
- VVF - KLK Oleomas
Philippines, Jasaan:
!
! - Pilipinas Kao
!
!
!
Indonesia, Medan: !
- Musim Mas

Indonesia, Dumai:
- Sinarmas Cepsa
!

Indonesia, Batam: Indonesia, Gresik:

- Ecogreen - Wilmar
- Musim Mas

© 2017 LMC International. All rights reserved. Oleochemicals Report 2017 13

Synthetics are located in US, EU & South Africa

Fatty alcohol plants in the Rest of the World, 2016 (Capacity >100,000 tonnes)

Germany, Dusseldorf:
- BASF

United States, California:

United Kingdom, Stanlow:
- Procter & Gamble Germany, Brunsbüttel:
- Shell
- Sasol
United States, Cincinnati:
! ! Germany, Dessau-Roßla:
- BASF !
! ! - Ecogreen
!

Netherlands, Rozenburg: Germany, Marl:

- Wilmar !
! - Sasol
!
!
France, Boussens:
! - BASF

Italy, Augusta: !
United States, Louisiana:
- Sasol
- Sasol
- Shell Chemicals

Saudi Arabia, Jubail:

Legend: Brazil, Camaçari:
- Oxiteno - SABIC

Natural !

Synthetic South Africa, Secunda:

!
- Sasol

© 2017 LMC International. All rights reserved. Oleochemicals Report 2017 14

There has been a resurgence in synthetic alcohols

Synthetic vs natural fatty alcohol production, 2005-2017

4.0

3.5

3.0

2.5
Million tonnes

2.0

1.5

1.0

0.5

0.0
2004 2006 2008 2010 2012 2014 2016 2018 2020

Synthetic Natural

© 2017 LMC International. All rights reserved. Oleochemicals Report 2017 15

Natural utilisation rates are expected to stay low

Synthetic vs natural alcohol capacity utilisation, 2006-2021

95%

90%

85%
Capacity Utilisation

80%

75%

70%

65%

60%

55%
2006 2008 2010 2012 2014 2016 2018 2020

Synthetic Fatty Alcohols Natural Fatty Alcohols

© 2017 LMC International. All rights reserved. Oleochemicals Report 2017 16

Most of the surplus capacity is in China & Indonesia

Fatty alcohol production, spare capacity & utilisation rates by country, 2016

800 100%

700 90%

600 80%
Capacity ('000 tonnes)

500 70%

Utilisation rate
400 60%

300 50%

200 40%

100 30%

0 20%

Production Spare Capacity Utilisation rate

© 2017 LMC International. All rights reserved. Oleochemicals Report 2017 17

Will natural producers survive in the future?
Cost curve for C12-14 natural fatty alcohol production costs
(net of co-product credits), average 2014-2016

2,000 EU, US & ROW

C12-14 production cost net of co-products

1,900

1,800
China
1,700
(US$/tonne)

1,600

1,500
South East Asia
1,400

1,300

1,200
0 500 1,000 1,500 2,000 2,500 3,000 3,500
Cumulative capacity ('000 of tonnes)
Cumulative Capacity C12-14 Alcohol Price, SE Asia FOB

© 2017 LMC International. All rights reserved. Oleochemicals Report 2017 18

Conclusions

1. Industry expansion has outpaced growth in demand with the

result that we now have considerable over capacity in both acids
and alcohols.
2. Much of the spare capacity is located in China and Indonesia
which suffers from cost disadvantages compared to other
producers.
3. China’s problem is its lack of import tariff protection on
oleochemicals combined with the need to import raw materials
4. Stearic acid plants in Europe and the US based on tallow are
often profitable but their long term viability is questionable given
the potential for tallow to be used for biodiesel (particularly in the
US)

© 2017 LMC International. All rights reserved. Oleochemicals Report 2017 19

 Oxford New York Kuala Lumpur
4th Floor, Clarendon House 1841 Broadway SO-30-8
52 Cornmarket Street New York, NY 10023 Menara 1
Oxford USA No3 Jalan Bangsar
OX1 3HJ KL Eco City
UK 59200 Kuala Lumpur
Malaysia
T +44 1865 791737 T +1 (212) 586-2427 T +603 2202 1414
F +44 1865 791739 F +1 (212) 397-4756
info@lmc.co.uk info@lmc-ny.com info@lmc-kl.com

www.lmc.co.uk

© LMC International, 2017

All rights reserved

This presentation and its contents are to be held confidential by the client, and are not to be disclosed, in whole or in part, in any
manner, to a third party without the prior written consent of LMC International.

While LMC has endeavoured to ensure the accuracy of the data, estimates and forecasts contained in this presentation,
any decisions based on them (including those involving investment and planning) are at the client’s own risk.
LMC International can accept no liability regarding information analysis and forecasts contained in this presentation.

© 2017 LMC International. All rights reserved. Oleochemicals Report 2017