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 (75 percent market share in 2019), due to the increasing focus on sustainability factors, is expected to drive the oleochemicals demand from natural oils

• The production size of Western Europe is $1,152 per MT while the production size of North America is higher at $1,365 per MT. The production size of the Asia-Pacific region is $900 per MT. 

• The top suppliers of oleochemicals are Wilmar, BASF, IOI Group, and Kuala Lumpur Kepong Berhad (KLK).

• The best sourcing regions for different regions differ. For Asia, Indonesia and Malaysia are the best sourcing regions while for Africa they are Malaysia, Indonesia, and China. 

• EU’s best sourcing regions in the oleochemicals market include Indonesia and Malaysia and for the U.S. the best sourcing regions are China and Indonesia. 

• When it comes to key fatty acids producing countries, Asia takes the top spot at 72 percent followed by the EU at 14 percent, and North America at 10 percent. 

• The key producing countries of fatty alcohols in the oleochemicals industry include North America, Asia, and the EU. North America produces 21 percent, Asia produces 50 percent, and the EU produces 23 percent. 

• The key importing countries of oleochemicals include the U.S., Italy, China, Netherlands, and Germany. They import 9 percent, 7 percent, 14 percent, 11 percent, and 8 percent respectively. 

• The exporting countries in the oleochemicals market include Indonesia, Malaysia, Netherlands, Germany, and the U.S. They export 27 present, 25 percent, 11 percent, 9 percent, and 6 percent respectively according to the report. 

Contract structure

• Personal care companies contribute to 26 percent of the oleochemicals demand and have better buying power. This provides them the opportunity to revise the contract prices frequently, based on the price trend.

• Food & beverages and pharmaceutical industries predominately procure light-cut fatty acids, which is of the less-supplied groups. This limits their negotiation power and frequency of price revisions.

Buyers Negotiation Power

• The light-cut fatty acids follow the demand trends. However, light-cut buyers may have an opportunity to negotiate during the harvest season and weak demand period.

• Medium cut aligns with the feedstock prices, and it offers better price visibility and negotiation opportunity.

• Scope for excess supply provides a better negotiation opportunity for heavy-cut buyers.

Fatty Acid –Feedstock Preference

Palm and tallow have a major composition (more than 40 percent) of heavy-cut fatty acids and negligible light cut and lauric acids. On the other hand, PKO and CNO have a wide mix of all the fatty acids. This has positioned PKO and CNO as the preferred feedstock in the oleochemical industry. To stay competitive, the basic and downstream oleochemical manufacturers are shifting from synthetics to natural feedstock, like PKO, CNO, and tallow.

Fatty Alcohol –Production Methodologies

Catalyst consumption is lesser in the Lurgi process/Wax ester route compared with the other two processes, namely the Davy process/Acid route and Ester route. Thus, the catalyst cost, and thereby, the overall production cost is reduced by around 50 $/MT at the same fatty alcohol yield rate of 48 percent.

Feedstock Trade Analysis –PKO and CNO

PKO is the most traded commodity (3 MMT) among the oleochemical feedstock, due to its ample availability and premium quality of the end products. Southeast Asia is the major exporter (50–55 percent), and the US and the EU (35–60 percent) are the major importers of both PKO and CNO. China also imports a significant amount of PKO (23 percent), majorly for soap production

Global Fatty Acid –Supply–Demand Analysis

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.

Market Outlook (2018)

• Generally, heavy-cut, mid-cut, and light cut accounted for 65 – 70 percent, 17 – 20 percent, and 6 – 10 percent, respectively in 2018.
• The expected increase in palm production levels by YoY is likely to support fatty acids supply in the market.
• High CNO prices vs. PKO in 2017 was likely to intensify scarcity in the short-chain fatty acids (C8-C10) and glut supply in the long-chain fatty acids (C16- C18) market.
• Switch to PKO and lower CNO production in the Philippines largely impacted the light cut fatty acid market by 0.04 MMT.
• Demand in the emerging markets, like India and Thailand, was likely to witness an increase in the upcoming years, due to increasing awareness and per capita income.

Market Overview

Asia drives the global oleochemical market. The US and the EU are facing tallow insufficiency, hence, opt for synthetic feedstock The growing environmental and regulatory pressures on surfactant manufacturers are driving the natural and renewable raw materials usage Lower prices of lauric oils make it a more attractive feedstock for oleo chemicals than palm and tallow, as they lead to better quality soaps Fatty alcohol market is likely to grow by 4.5% in the next five years. Profitability in fatty alcohols is lesser compared to fatty acids.

Key factors tracked for oleochemicals prices estimations: Total annual production, capacity utilization, cost components (fixed, operating & overhead costs), and profit margins. The cost drivers of the oleochemicals industry include the fixed cost and raw material cost. The fixed cost accounts for 20 percent while the raw material cost accounts for 75 percent. The contract length is between 1 to 2 years according to the oleochemicals market report. Price lock occurs between September and November while the pricing frequency is between 1 to 3 months. 

For heavy-cut oleochemicals, the buyer negotiation power is high and this applies to the light-cut oleochemicals too. Mid-cut oleochemicals have a medium buyer negotiation power. The report dives into oleo chemicals industry according to specific region and oleochemicals procurement. It also throws light on the various oleochemical companies and how they will impact the industry. The trends are delved into and the oleo chemicals market share is discussed.

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.