Global Market Outlook on Soap Noodles
Asia is the largest producer of soap noodles globally owing to easy access to raw material palm and lauric oils while EU supplies are predominantly met by imports and local production in EU remain weak, owing to less availability of raw material and industry know-how. Production of soap noodles to grow at CAGR of 3% and demand of soap noodles to grow at CAGR of 1.6% leading to sluggish demand. However feedstock prices play a major role in achieving the margins and price fixation.
- Soap Noodles production revived from the lowest utilization rates in 2015 to 96% in 2017 and it is expected to run 100% in the near term
- Though there is a constant supply of noodles in the market, influence of feedstock veg oils and caustic soda prices trigger the prices of soap noodles to reach as high as USD 820/MT in 2017
- Buyers constantly show less buying interest for the product over the past year leading to less demand and oversupplies and hence fall in prices
- These fall in prices trigger sales and along with feedstock price increase thereby surging soap noodle prices.
Large soap manufacturers are outsourcing the soap production to increase their focus on branding and promotional activities. This eventually supported the steady growth of captive and toll/long-term contract based production of soap noodles, resulting in less merchant supply.
- Captive market: Most of the soap formulators and contract manufacturers produce their own soap noodles and hence commercial sales of noodles remain low
- Toll manufacturing & Long term contracts: The merchant market is again split between toll manufacturing, long term contracts and the free merchant market. Approximately 15% of the total soap noodle produced is actually tied up with long term contracts and toll manufacturing.
- Present availability: Only 18% (approx. 0.8MMT) of soap noodles is available in the market for trade, of which around 0.45MMT are palm based and 0.35MMT is tallow base. 60% of the available stock in both category is fatty acid based and 40% is saponification route based soap noodles
- Future Outlook: Whether it is captive or merchant, or both visible or invisible market, Asia is expected to be the largest producing region. In terms of total merchant noodle capacity, over 50% is contributed by Malaysia and Indonesia. Although their shares are comparable, Malaysia's share of the traded noodles is much higher than that of Indonesia's.
Soap Noodles–Prices to Trade Range Bound
Price of soap noodles to trade in the range of USD 800-850/MT driven by its feedstock palm/tallow and fatty acid prices. As the margins of the industry looks slim, prices could not go beyond USD 880/MT in 2018..
- Lower availability of soap noodles had resulted in higher prices of soap noodles (USD 900-960/MT) during 2016 and the trend smoothened in 2017 leading to price range of USD 750-820/MT
- The increase in prices of palm and lauric oils by 4-6% in 2017 has led to price volatility of soap noodles amid lull demand situation. In addition caustic soda prices also surged by 60% in 2017 leading to higher prices for soap noodles as the manufacturers could not sell the product for negative margins.
- Some players reduced the prices of soap noodles intermittently to push their products during mid year. Most of the suppliers produced based on the demand and hence could control cost increase and absorb raw material price increase.
Emerging Trend: Impact of Glycerine Prices
High purity supports the use of fatty acids over vegetable oils as a feedstock for soap noodles production. Despite 5-10% higher production cost, fatty acid based soap noodles production is highly profitable due to higher yield rates. Increased dependency on fatty acids has pushed the soap noodles margins and prices to trend in line with the fatty acid’s market.
- Major players like Wilmar, KLK, Musim Mas started producing soap from fatty acids moving from vegetable oils
- Hindustan Unilever has also started sourcing soap noodles made from fatty acids from Indonesia for their white soaps, which are of higher purity
- The market for fatty acid based white soaps is growing in regions like European Union, Japan and United States
- Evyap the top soap manufacturer has set up a soap noodle producing unit in Pasir Gudang, Malaysia to manufacture soap noodles from fatty acids and not tallow or vegetable oils