Oleochemicals

Oleochemicals Market Analysis and Global Outlook

• The global oleochemicals market is oversupplied with 3 MMT of fatty acids and alcohols

• Preference for natural oleochemicals (69 percent market share in 2022), due to the increasing focus on sustainability factors, is expected to drive the oleochemcials demand from natural oils

Global Oleochemicals – Demand Analysis

• Asia is the largest demand market, driven by the rapid growth of end-use industries and increasing disposable income in growing economies, like India and China. The light-cut and mid-cut oleochemicals have significant demand

• The heavy-cut oleochemicals market is oversupplied and faces a sluggish demand

Largest Demand Market

• APAC is the largest regional oleochemicals market and accounted for more than 43 percent of the total market volume

• It is expected to be the most lucrative regional market for oleochemicals in the future

• It has a large consumer base with several developing economies, including Korea, China, India, and Japan

Demand Drivers

• Rapidly expanding end-use industries, such as food & beverages, personal care, and pharmaceuticals, is expected to drive the regional oleochemicals demand

• Abundant availability of key raw material, particularly in Malaysia, China, Indonesia, and Thailand, is expected to drive the market

Highly Impacted Oleochemical Category

• The prices of C8 and C10 have tremendously increased over five years, in line with the demand

• The light-cut fatty acids, being the by-products of the manufacturing process, are heavily driven by the end-use demand

• The growing awareness on MCT in dietary and medical relevance has created three-times higher growth of demand over supply

Feedstock Trade Analysis – PKO and CNO

• Trade of PKO is estimated to increase in the coming months, owing to anticipated rise in demand of oleochemicals industry. CNO imports witnessed a steep increase in H1 2022. Hence, trade is expected to slowdown in the second half of the year. Further, recent storms in Philippines is likely to slowdown coconut oil exports till mid Q4 2022. Rising demand for premium personal care products is likely to drive the demand for lauric oils from import markets like US, EU and China.

Natural vs. Synthetic Oleochemicals

The end-consumer market is shifting toward sustainable and eco-friendly products. To stay competitive, the basic and downstream oleochemical manufacturers are shifting from synthetics to natural feedstock, like PKO, CNO, and tallow.

Increasing Demand for Natural Oleochemicals

• The growing environmental and regulatory pressures on surfactant manufacturers are driving the natural and renewable raw materials usage

Asia Drives the Natural Oleochemical Market

• Asia, with the major PKO and CNO producing regions, like Indonesia, Malaysia, and the Philippines, produces and consumes natural oleochemicals

• The U.S. and the EU are facing tallow insufficiency, hence, opt for synthetic feedstock

Global Fatty Acid – Supply–Demand Analysis

Fatty acid production is expected to witness an increase in 2023, supported by revival in increase in capacity utilization rates. The global fatty acid market is expected to remain oversupplied for the next 3–5 years, due to a rapid increase in production capacity of fatty acids in the past few years and sluggish demand growth rates in China and Europe.

Market Outlook (2022 E)

Generally, heavy cut, mid cut, and light cut accounts for 65–70 percent, 17–20 percent, and 6–10 percent respectively.

• Fatty acids supply is estimated to revive in 2023 due to revival in demand from industries other than personal care, poor economic performance across key demand sectors.

• Short chain fatty acids supplies continue to remain tight, while long chain and mid chain acids supply are relatively high

• Southeast Asia is the largest producer of fatty acids contributing 4 MMT of the total production; the region uses only 1 MMT domestically, while 3 MMT is exported.

• China is the next largest producer of fatty acids, where the nation also imports fatty acids to meet its demand

Cost Structure Analysis : Oleochemicals

Net profit of an integrated supplier is 44 percent against 5 percent for a small non-integrated supplier. High margin for integrated suppliers is due to their ability to save on raw material cost, largely due to upward integration up to the plantation. This means the buyer has high scope for negotiation with large integrated manufacturers.

Key cost factors and feedstock that impact the materials

• Raw material is the key cost factor, which accounts for around 75 percent of the total production cost

• Fixed cost accounts for nearly 20 percent. Any expansions, mergers/acquisitions, and plant shutdowns create a major impact

• Key factors tracked for pricing estimations: Total annual production, capacity utilization, cost components (fixed, operating & overhead costs), and profit margins

Negotiation levers for FMCG

• Negotiation leverage is possible with larger integrated suppliers along with a wide feedstock range, high production flexibility, tailor-made specifications, and plant configuration, etc.

Feedstock Pricing Analysis

• It is unlikely that palm and palm kernel oil prices will witness a steep increase in the coming months. However, coconut oil prices could witness an upward price movement due to the recent typhoon Nalgae in Philippines. The extent of damage caused by the typhoon is still uncertain.  

Why You Should Buy This Report

The report gives details on major oleochemicals supplier profiles like KAO group, IAO group, Wilmar, BASF, etc. It lists out favorable procurement terms, key sourcing destinations. The report gives a thorough cost structure analysis, oleochemical price drivers and constraints and pricing analysis. It gives information on the emerging trends in the end-use industry and Porter’s five forces analysis of the global oleochemical market. The report gives a detailed regional outlook on the APAC, EU and North American regions. It lists out the impact of trade regulations and tariffs on the oleochemical industry and provides a thorough demand-supply analysis.