Global Market Outlook on N-Paraffin
Global demand of N-Paraffin is anticipated to reach 3.7 Million MT by end of 2021 mainly driven by the demand from LAB market. Though N-Paraffin demand is anticipated to grow at a CAGR of 1.6% Y-o-Y until 2018, industry has to operate at 92-94% to meet the global demand until 2020.
N-Paraffin – Global Market Dynamics (2015-2021F)
- Capacity and Supply: Unfortunately, the planned capacity additions announced by Vietnam and Saudi Arabia suppliers have not come online, topped upon by a recent fire accident in an Iranian petroleum plant which has resulted in supply shortage of normal paraffin in the market for LAB buyers/consumers. The situation is expected to stabilize within this year. Suppliers operating at higher operating rates of 92-95% would only then result in meeting the growth demand
- Demand: N-Paraffin demand is anticipated to grow significantly by 1.8% Y-o-Y until 2018 in Middle East and Asia Pacific countries owing to the increasing demand of laundry detergents in the region. Growing economies such as India, China, Brazil and Saudi Arabia are expected to be the key demand driving regions of N-Paraffin owing to the low-penetration rate of detergents and increasing consumption of LAB
- N-Paraffin Trade: Exports from Saudi Arabia, Qatar and South Korea continues to remain crucial owing to the better availability and lower feedstock values. However, since the GCC crisis, the long-term credibility of imports from Qatar is expected to be questionable
N-Paraffin Global Capacity Analysis
There are no capacity additions announced by N-Paraffin producers. Moreover, the capacity additions announced earlier that were to be active by this year are delayed, and this is causing supply tightness in the market. The capacity additions by PetroVietnam and Riyadh Oil Factory in Vietnam and Saudi Arabia once active will help to increase the feedstock supply for LAB by 2019
- Capacity Share by Region: After the capacity addition by PetroVietnam (~75,000-100,000 MT) and Riyadh Oil Factory (90,000 MT), MENA and APAC together will hold a capacity share of 65-66% , while Western Europe will continue to be the key exporter of N-Paraffin after MENA
- LAB Capacity Addition: Thai Oil Co., Ltd & Mitsui (100,000 MT/Year), Riyadh Oil Factory (120,000 MT/Year) and Entekhab Investment Development Group (40,000 MT/Year) are the three companies that are expected to bring online its LAB capacity by 2018. Sonatrach is expected to bring online its LAB capacity by 85,000 MT/Year, however the supplier is yet to decide the start date of the plant.
- Future Capacity Additions with Backward Integration: Riyadh Oil Factory is the only company which is expected to bring both N-Paraffin and LAB capacity with the capacity of 90,000 MT/Year and 120,000 MT/year respectively. This capacity addition in Saudi Arabia will increase the capacity share of MENA region to 24.4% during 2019
N-Paraffin – Global Demand by Application
LAB continues to be the predominant downstream application of N-Paraffin, accounting for about 83% of global demand of N-Paraffin mainly driven by the growing demand from surfactants industry in APAC and MENA region
- N-Paraffin Market Share: LAB will continue to be the key downstream industry of N-Paraffin owing to the improving demand from growing economies such as APAC and MENA. Whereas, the demand from short chain Chlorinated Paraffins is anticipated to decline owing to the stringent regulations in North America
- Threat of Substitute for LAB: Though few detergent players have tested MES, an oleo chemical and a substitute for LAB, there is no dynamic shift happening with in this segment. Threat of substitute for LAB is low owing to fall in feedstock crude prices during 2015 and the other reason is the better performance and the biodegradable properties of LAB
- MES - Present Trend and Future Scope: If the manufacturers are not able to implement the complex drying technology for MES, the final product is partly hydrolysed to unstable di-salt. This reduces the overall capacity utilization significantly to 40-50% . Although the manufacturers have implemented the technology in NA, MES plants are being run at low utilization rates of below 50% due to lack of demand.