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Strategic directions: the UPS and downs
FOCUS ON SURFACTANTS A MONTHLY REPORT FROM CAROLINE EDSER APRIL 2013
STRATEGIC DIRECTIONS: THE UPS AND DOWNS
In this issue
RAW MATERIALS
2-3
Oleochemicals: BASF in partnership to pursue sustainable coconut oil Alkoxylates/other
SURFACTANTS
3-4
New sulfonation plant for KLK
ASSOCIATED PRODUCTS
4
AkzoNobel launches multifunctional rheology modifiers
APPLICATIONS
4-5
Household & personal care Health
MARKET REVIEWS
5-6
Bathroom product market trends in Europe and the USA
COMPANY RESULTS
6-7
The latest financial data from Unilever, Huntsman, Kao, Procter & Gamble and others
COMPANY NEWS
7
Jyothy-Henkel merger nears completion
EVENTS
SURFACTANTS
AN INTERNATIONAL NEWSLETTER MONITORING TECHNICAL AND COMMERCIAL DEVELOPMENTS FOR ALL SURFACE ACTIVE AGENTS ISSN 1351–4210
8
Following the success of its World and Asian surfactants conference series, ICIS held its first event addressing the European surfactants market last September in Budapest, Hungary. The meeting had four principal themes, as outlined by chairman Neil A Burns in his introductory remarks: strategy, sustainability, feedstocks and markets. Here we highlight the conference’s coverage of the first of these themes. One strategy that is increasingly being employed by companies at or near the source end of the surfactants value chain is the pursuit of long-term stability through downstream portfolio expansion. Thus, a producer of basic oleochemicals might expand into derivatives and beyond via joint ventures or acquisitions. For example, oil palm plantation firm Kuala Lumpur Kepong (KLK) bought nonionic surfactant producer Dr Kolb [Focus on Surfactants, Mar 2007] and palm oil trader Wilmar acquired a majority share in Natural Oleochemicals [ibid, Sep 2010]. Taking the joint venture (JV) route, Malaysia’s Emery Oleochemicals recently teamed up with Italian ethoxylation firm ERCA [ibid, May 2011] to form ERCA Emery Surfactants. The JV’s director of operations Giancarlo Guantario in his presentation ‘Moving downstream – an Asian and European venture in surfactants’ examined the rationale for the deal. He outlined the key market restraints and drivers shared by producers of oleochemicals and surfactants, before detailing the competitive advantages the partners
SURFACTANTS
anticipate from the downstream move. He concluded that the downstream strategy is not only ‘viable and sustainable’ for both ERCA and Emery but also imperative for both companies’ growth. Also focusing on ethoxylates, Saudi Arabia’s SABIC has taken a different tack, opting to diversify its own operations to open up downstream opportunities. The company is the largest producer of ethylene oxide (EO), with an 11% share of global capacity. 54% of all surfactants consumed require EO as a raw material, and the demand for EO derivatives (EOD) as a whole is expected to grow at a CAGR of 5.3% over the next few years, according to figures cited by SABIC spokesman Claudio Brandao. The company’s geographical location in the highgrowth Middle East & North Africa region, its R&D capabilities and existing integration into natural fatty alcohols and other ethoxylate chain starters were other factors in its decision to embark as a new EOD player, he said. SABIC will initially manufacture fatty alcohol ethoxylates (3, 7 & 9 EO) and polyethylene glycols (200, 400, 600 & 1500), with the range to be expanded stepwise into higher ethoxylation grades and other chain starters. SABIC, KLK, Wilmar and Emery, among others, were all discussed further in Neil Burns’ entertainingly titled presentation ‘Attack of the 50 foot surfactant company’. This dealt with the related strategic ploy of vertical integration, whereby
SURFACTANTS
SURFACTANTS
FOCUS producers of surfactants (and even formulated products) acquire or own raw material assets. The chief drivers for this approach include tax issues, such as avoidance of tax on intermediates, seeking control of more of the value chain, and economies of scale and scope. BASF with its ‘Verbund’ principle is a wellestablished example of this strategy but in the surfactants field Sasol and Huntsman are similarly well-endowed, with ethoxylation and sulfonation capabilities vertically integrated with EO, LAB and ethylene assets. While KLK, SABIC and Emery are recent entrants to the ranks of the vertically integrated, the strategy is not universally appropriate. Croda and – before its acquisition by BASF – Cognis both chose to go the opposite way and divest their oleochemicals operations. The increasing importance of emerging markets for the future growth of surfactants and related industry sectors is a common theme, in market reports, conference presentations and in these pages. Discussion of the mature markets tends to focus on economic woes and comparatively restricted growth rates. Sven Abend of Kolb Distribution, part of the KLK group, posed the question: ‘Is Western Europe still an attractive market opportunity?’ From the surfactants supplier’s perspective, the regional market is beset by problems of volatile raw material prices, uncertain demand leading to inventory issues, complex and everchanging regulations, and the need to provide ‘reliable and credible solutions for customers and consumers along the entire value chain’. Abend acknowledged that this situation is not likely to change, but argued that appropriate upstream and downstream partnerships, combined with innovation to meet fast-changing market needs, will allow companies such as Kolb to meet the challenges. More on market trends in Europe in upcoming issues but meanwhile a quick mention: ICIS is currently organizing its 2nd European Surfactants Conference to be held this September in Brussels, Belgium. Caroline Edser
2
ON
S U R FA C TA N T S
RAW MATERIALS Oleochemicals Partnership sets out path to certified sustainable coconut oil in the Philippines A programme to develop a certified coconut oil supply chain to enhance sustainability and improve the livelihoods of 2500 coconut growers in the Philippines has been launched. It is a result of a partnership between the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, BASF and Cargill. The partnership is co-financed by the German Federal Ministry for Economic Cooperation and Development (BMZ) through its programme develoPPP.de. The certified coconut oil supply chain programme focuses on smallholder coconut growers in the southern Philippine island of Mindanao. It aims to raise farmers’ incomes by improving productivity and coconut oil quality. It also will introduce the Sustainable Agricultural Network (SAN) standards as a basis for Rainforest Alliance Certification for coconut production. Farmers have already started the first phase of Good Agricultural Practices training for coconut production. They will be provided with newly designed coconut dryers to improve the quality of copra (coconut meat) and coconut oil. In addition the project helps provide greater healthcare access for coconut farmers to the country’s health insurance programme, PhilHealth. By working with Small Coconut Farmer Organizations (SCFOs), other cooperatives and by leveraging the project’s financial support, 2500 coconut farmers have enrolled in PhilHealth with a reduced enrolment fee. This will provide new healthcare coverage for an estimated 12,500 to 15,000 Filipinos. ‘We are proud to see this programme come together. Contributing to the sustainability requirements of our supply chain by helping to set criteria and introduce a certification scheme for our home and personal care business is a core part of our corporate social responsibility efforts,’ says Harald Sauthoff, BASF VP global procurement Natural Oils and
Oleochemicals. Local resources, including the Notre Dame Business Resource Center Foundation Inc (NDBRCFI) in General Santos City, will also play a key role in the project. They will assist with knowledge transfer and capacity building efforts for local farmers and cooperatives, helping to ensure project benefits continue beyond the initial phases of project implementation. There are 3.5 M hectares dedicated to coconut production in the Philippines, which accounts for 25% of total agricultural land in the country. The Philippines ranks near the top in global coconut production with more than 15 bn nuts produced per year. Coconut products contributed almost $2 bn in export revenues to the Philippines in 2011. Coconut oil is used mainly in food products, while coconut oil derivatives are used in the home and personal care industry. The Philippine Coconut Authority estimates that there are over 3 M coconut farmers and workers, and up to 25 M more Filipinos working in various coconutbased enterprises in the country. Original Source: BASF SE, D-67056 Ludwigshafen, Germany, tel: +49 (0) 621 600, website: http://www.basf.com (5 Feb 2013) © BASF 2013
Malaysia cuts CPO export tax Malaysia’s export tax on crude palm oil (CPO) was to be cut from the current rate of 23%, effective 1 Jan 2013. The new export duty was expected to fluctuate monthly between 4.5% and 8.5%, depending on international prices. In fact, for the first two months of 2013 a zero export duty was applied. The duty-free export of CPO would ‘perhaps’ be continued if the price of CPO remains below the threshold of Ringgit 2250/tonne, according to the Plantation, Industries and Commodities Minister. The action is intended to allow Malaysia to compete with Indonesia, which reduced its export duties on CPO in Oct 2011. Malaysia had a high stockpile of 2.63 M tonnes as of end Dec 2012. On the other hand, Indonesia has increased its palm oil export duty to 9% in Feb 2013 from 7.5% in Jan 2013. Original Source: Oils and Fats International, Jan 2013, 29 (1), 2 (Website: http://www.oilsandfatsinternational.com/) © Quartz Business Media Ltd 2013. Original Source: The Star, 5 Feb 2013, (Website: http://www.thestar.com.my/) © Star Publications (M) Bhd 2013
APRIL 2013
STRATEGIC DIRECTIONS: THE UPS AND DOWNS
In this issue
RAW MATERIALS
2-3
Oleochemicals: BASF in partnership to pursue sustainable coconut oil Alkoxylates/other
SURFACTANTS
3-4
New sulfonation plant for KLK
ASSOCIATED PRODUCTS
4
AkzoNobel launches multifunctional rheology modifiers
APPLICATIONS
4-5
Household & personal care Health
MARKET REVIEWS
5-6
Bathroom product market trends in Europe and the USA
COMPANY RESULTS
6-7
The latest financial data from Unilever, Huntsman, Kao, Procter & Gamble and others
COMPANY NEWS
7
Jyothy-Henkel merger nears completion
EVENTS
SURFACTANTS
AN INTERNATIONAL NEWSLETTER MONITORING TECHNICAL AND COMMERCIAL DEVELOPMENTS FOR ALL SURFACE ACTIVE AGENTS ISSN 1351–4210
8
Following the success of its World and Asian surfactants conference series, ICIS held its first event addressing the European surfactants market last September in Budapest, Hungary. The meeting had four principal themes, as outlined by chairman Neil A Burns in his introductory remarks: strategy, sustainability, feedstocks and markets. Here we highlight the conference’s coverage of the first of these themes. One strategy that is increasingly being employed by companies at or near the source end of the surfactants value chain is the pursuit of long-term stability through downstream portfolio expansion. Thus, a producer of basic oleochemicals might expand into derivatives and beyond via joint ventures or acquisitions. For example, oil palm plantation firm Kuala Lumpur Kepong (KLK) bought nonionic surfactant producer Dr Kolb [Focus on Surfactants, Mar 2007] and palm oil trader Wilmar acquired a majority share in Natural Oleochemicals [ibid, Sep 2010]. Taking the joint venture (JV) route, Malaysia’s Emery Oleochemicals recently teamed up with Italian ethoxylation firm ERCA [ibid, May 2011] to form ERCA Emery Surfactants. The JV’s director of operations Giancarlo Guantario in his presentation ‘Moving downstream – an Asian and European venture in surfactants’ examined the rationale for the deal. He outlined the key market restraints and drivers shared by producers of oleochemicals and surfactants, before detailing the competitive advantages the partners
SURFACTANTS
anticipate from the downstream move. He concluded that the downstream strategy is not only ‘viable and sustainable’ for both ERCA and Emery but also imperative for both companies’ growth. Also focusing on ethoxylates, Saudi Arabia’s SABIC has taken a different tack, opting to diversify its own operations to open up downstream opportunities. The company is the largest producer of ethylene oxide (EO), with an 11% share of global capacity. 54% of all surfactants consumed require EO as a raw material, and the demand for EO derivatives (EOD) as a whole is expected to grow at a CAGR of 5.3% over the next few years, according to figures cited by SABIC spokesman Claudio Brandao. The company’s geographical location in the highgrowth Middle East & North Africa region, its R&D capabilities and existing integration into natural fatty alcohols and other ethoxylate chain starters were other factors in its decision to embark as a new EOD player, he said. SABIC will initially manufacture fatty alcohol ethoxylates (3, 7 & 9 EO) and polyethylene glycols (200, 400, 600 & 1500), with the range to be expanded stepwise into higher ethoxylation grades and other chain starters. SABIC, KLK, Wilmar and Emery, among others, were all discussed further in Neil Burns’ entertainingly titled presentation ‘Attack of the 50 foot surfactant company’. This dealt with the related strategic ploy of vertical integration, whereby
SURFACTANTS
SURFACTANTS
FOCUS producers of surfactants (and even formulated products) acquire or own raw material assets. The chief drivers for this approach include tax issues, such as avoidance of tax on intermediates, seeking control of more of the value chain, and economies of scale and scope. BASF with its ‘Verbund’ principle is a wellestablished example of this strategy but in the surfactants field Sasol and Huntsman are similarly well-endowed, with ethoxylation and sulfonation capabilities vertically integrated with EO, LAB and ethylene assets. While KLK, SABIC and Emery are recent entrants to the ranks of the vertically integrated, the strategy is not universally appropriate. Croda and – before its acquisition by BASF – Cognis both chose to go the opposite way and divest their oleochemicals operations. The increasing importance of emerging markets for the future growth of surfactants and related industry sectors is a common theme, in market reports, conference presentations and in these pages. Discussion of the mature markets tends to focus on economic woes and comparatively restricted growth rates. Sven Abend of Kolb Distribution, part of the KLK group, posed the question: ‘Is Western Europe still an attractive market opportunity?’ From the surfactants supplier’s perspective, the regional market is beset by problems of volatile raw material prices, uncertain demand leading to inventory issues, complex and everchanging regulations, and the need to provide ‘reliable and credible solutions for customers and consumers along the entire value chain’. Abend acknowledged that this situation is not likely to change, but argued that appropriate upstream and downstream partnerships, combined with innovation to meet fast-changing market needs, will allow companies such as Kolb to meet the challenges. More on market trends in Europe in upcoming issues but meanwhile a quick mention: ICIS is currently organizing its 2nd European Surfactants Conference to be held this September in Brussels, Belgium. Caroline Edser
2
ON
S U R FA C TA N T S
RAW MATERIALS Oleochemicals Partnership sets out path to certified sustainable coconut oil in the Philippines A programme to develop a certified coconut oil supply chain to enhance sustainability and improve the livelihoods of 2500 coconut growers in the Philippines has been launched. It is a result of a partnership between the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, BASF and Cargill. The partnership is co-financed by the German Federal Ministry for Economic Cooperation and Development (BMZ) through its programme develoPPP.de. The certified coconut oil supply chain programme focuses on smallholder coconut growers in the southern Philippine island of Mindanao. It aims to raise farmers’ incomes by improving productivity and coconut oil quality. It also will introduce the Sustainable Agricultural Network (SAN) standards as a basis for Rainforest Alliance Certification for coconut production. Farmers have already started the first phase of Good Agricultural Practices training for coconut production. They will be provided with newly designed coconut dryers to improve the quality of copra (coconut meat) and coconut oil. In addition the project helps provide greater healthcare access for coconut farmers to the country’s health insurance programme, PhilHealth. By working with Small Coconut Farmer Organizations (SCFOs), other cooperatives and by leveraging the project’s financial support, 2500 coconut farmers have enrolled in PhilHealth with a reduced enrolment fee. This will provide new healthcare coverage for an estimated 12,500 to 15,000 Filipinos. ‘We are proud to see this programme come together. Contributing to the sustainability requirements of our supply chain by helping to set criteria and introduce a certification scheme for our home and personal care business is a core part of our corporate social responsibility efforts,’ says Harald Sauthoff, BASF VP global procurement Natural Oils and
Oleochemicals. Local resources, including the Notre Dame Business Resource Center Foundation Inc (NDBRCFI) in General Santos City, will also play a key role in the project. They will assist with knowledge transfer and capacity building efforts for local farmers and cooperatives, helping to ensure project benefits continue beyond the initial phases of project implementation. There are 3.5 M hectares dedicated to coconut production in the Philippines, which accounts for 25% of total agricultural land in the country. The Philippines ranks near the top in global coconut production with more than 15 bn nuts produced per year. Coconut products contributed almost $2 bn in export revenues to the Philippines in 2011. Coconut oil is used mainly in food products, while coconut oil derivatives are used in the home and personal care industry. The Philippine Coconut Authority estimates that there are over 3 M coconut farmers and workers, and up to 25 M more Filipinos working in various coconutbased enterprises in the country. Original Source: BASF SE, D-67056 Ludwigshafen, Germany, tel: +49 (0) 621 600, website: http://www.basf.com (5 Feb 2013) © BASF 2013
Malaysia cuts CPO export tax Malaysia’s export tax on crude palm oil (CPO) was to be cut from the current rate of 23%, effective 1 Jan 2013. The new export duty was expected to fluctuate monthly between 4.5% and 8.5%, depending on international prices. In fact, for the first two months of 2013 a zero export duty was applied. The duty-free export of CPO would ‘perhaps’ be continued if the price of CPO remains below the threshold of Ringgit 2250/tonne, according to the Plantation, Industries and Commodities Minister. The action is intended to allow Malaysia to compete with Indonesia, which reduced its export duties on CPO in Oct 2011. Malaysia had a high stockpile of 2.63 M tonnes as of end Dec 2012. On the other hand, Indonesia has increased its palm oil export duty to 9% in Feb 2013 from 7.5% in Jan 2013. Original Source: Oils and Fats International, Jan 2013, 29 (1), 2 (Website: http://www.oilsandfatsinternational.com/) © Quartz Business Media Ltd 2013. Original Source: The Star, 5 Feb 2013, (Website: http://www.thestar.com.my/) © Star Publications (M) Bhd 2013
APRIL 2013