Oleochemicals Report 2019

Threats & Opportunities

Brochure
How are key market drivers evolving?
Brent crude and crude palm oil prices

US$/tonne
1,100
Synthetics retain their advantage,
1,000 despite strong palm oil output
900
800
700
600 Brent crude oil prices have rebounded since 2014 and
500
have once again reached around $500/tonne ($70/bbl).
400
300 Indonesian palm output increased dramatically in 2018,
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 H1
2019
leading to a supply glut and pushing prices to parity with
Brent Crude Indonesian Crude Palm Oil
crude oil.
Palm kernel oil price premiums over ethylene
Yet, US ethylene prices are at record lows, while palm
kernel oil (PKO) trades at a large price premium to
US$/tonne Price premium (US$/tonne) ethylene – for the fifth consecutive year, despite the
1,800 750
1,600 600
recent decline in PKO prices.
1,400 450
1,200 300
1,000 150
800 0
600 -150
How are these upstream prices underpinning the
400 -300 production and consumption of oleochemicals?
200 -450
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 H1
2019
PKO Price Premium over Ethylene US Ethylene PKO

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Against this backdrop, LMC’s 2019 Oleochemicals Report asks:
• How long will the glut in palm oil and palm kernel oil last?

• Will lauric oil prices remain permanently low?

• What are the prospects for further oleochemical expansions?

• Will competition from synthetic fatty alcohols limit natural fatty alcohol profitability?

• Could sustained low ethylene prices entice US petrochemical players to produce fatty alcohols?

• To what extent has the US-China trade war affected fatty acids, fatty alcohols and their derivatives?

• How do the business models adopted by oleochemical and chemical producers differ? To what extent are these
businesses integrated into raw materials?

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LMC’s Oleochemicals Report is widely regarded as
the industry benchmark.
Expertise in raw materials, biodiesel and glycerine
combined with analysis of fatty acids,
fatty alcohols and downstream chemical derivatives
delivers an authoritative market outlook.

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The Report Content

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Oleochemicals 2019 – scope of the report
The Main Report presents LMC’s industry analysis, split into seven topics:

1. Raw materials: supply, demand, sustainability & price

2. Fatty acid marketplace: capacities, demand, supply & trade

3. Fatty alcohol marketplace: capacities, demand, supply & trade

4. Prices & forecasts: fatty acids, fatty alcohols & glycerine

5. Production costs: fatty acids & fatty alcohols

6. Profitability: by key offtake product & location

7. Business models: threats & opportunities in the marketplace

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1: Raw materials: supply, demand, sustainability & price
We examine the core factors underpinning the supply, demand and prices of the main oleochemical feedstocks:
palm stearin, tallow, palm kernel oil (PKO), coconut oil (CNO) and ethylene.

Record Indonesian palm oil output has contributed to a glut and resulted in weak palm oil and palm kernel oil prices.
Coconut oil prices have also declined dramatically, as copra production in Indonesia and the Philippines recovered from
the El Niño, causing lauric oil prices to more than halve since 2017.

Strategic questions addressed: Oleochemical feedstock prices

• What are the causes of the palm and lauric oil US$/tonne
supply glut and how long will it last? 1,800

• Does limited potential to expand oil palm area mean 1,600

that low prices are only temporary?
1,400

• Is crude oil still relevant to vegetable oil prices? (We 1,200

forecast feedstock prices to 2030 @ $40, $60 and
$80/bbl crude oil.) 1,000

800
• Are lauric oil prices (PKO/CNO) competitive against
crude oil and ethylene? 600

• Will sustainability pressures continue to inhibit the 400

palm sector? 200

Jun-16 Jun-17 Jun-18 Jun-19
• How will these trends affect oleochemical Coconut Oil Palm Kernel Oil Palm Stearin
US Tallow Brent Crude Oil US Ethylene (Spot)
production?

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2: Fatty acid marketplace: capacities, demand, supply & trade
We present key metrics for the fatty acid sector including:

• Supply and demand volume analysis and forecasts (2005-2030)

• Trade volumes plus import tariff tables

• Producer capacities and capacity utilisation rates

Analysis is on a global and regional level as well as by major producing/consuming country.

Strategic questions addressed:

• What, and where, are the prospects for expansion, despite overcapacity?

• How will the US-China trade war affect the industry?

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3: Fatty alcohol marketplace: capacities, demand, supply & trade
We present key metrics for the fatty alcohol sector including:

• Supply and demand volume analysis and forecasts (2005-2030)

• Producer capacities and capacity utilisation rates

• Trade and policies

Analysis is on a global and regional level as well as by major producing/consuming country, with datasets split by
synthetic vs natural.

We evaluate the sector’s strategic outlook to 2030, including the ongoing strong competition between natural and
synthetic.

Questions addressed:

• Are Shell and Sasol expansions on track?

• How will end-use markets react to new supply?

• What are the implications if new-build US crackers include fatty alcohol production?

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4: Prices & forecasts: fatty acids, fatty alcohols & glycerine
Raw material and crude oil price linkages are well established, but oleochemical price relationships are less clear-cut. We
analyse the correlations and the dynamics underpinning them.

Short chain fatty acid prices have continued their descent over the past year. How low can they go?

Oleochemical prices We present price forecasts to 2030

@ $40, $60 and $80/bbl crude oil for:
US$/tonne
5 • C8-10 fatty acids
5

4
• C12-14 fatty alcohols
4

3
• C16-18 fatty alcohols

3
• Commercial stearic acid
2

2 • Crude and refined glycerine

1

0
Jun-16 Jun-17 Jun-18 Jun-19
TP Stearic Acid C12-14 Fatty Alcohols
C16-18 Fatty Alcohols C8 Fatty Acid
C10 Fatty Acid C8-10 Fatty Acid Cut
Refined Glycerine

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5: Production costs: fatty acids & fatty alcohols
Production costs are estimated for fatty acids and natural fatty alcohols (via fatty acid intermediate) for plants sized at:
50,000 mtpa, 100,000 mtpa and 200,000 mtpa.

For each key producing country, the major feedstock consumed is analysed:

• Fatty acids: palm stearin in Asia

tallow in the US and Germany
Natural gas prices in selected countries
• Fatty alcohols: PKO and CNO in the
US$/million btu
Philippines, US and Germany
11

Production costs are presented for 2014-2018 on a per- 10

tonne-of-fatty acid/fatty alcohol basis.
9

Costs are broken down into: 8

• Labour 7

• Energy 6

5
• Feedstock
4
• Chemicals
3
• Depreciation
2
2014 2015 2016 2017 2018
Malaysia Indonesia China US Germany

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6: Profitability: by key offtake product & location
We calculate the full costs of accessing major demand markets (EU, US, China and India), taking into account logistics and
import tariffs.

By combining logistics costs with our production cost estimates, we evaluate profitability by location.

Examples of our analysis include evaluating: C12-14 fatty alcohol profitability

• Profitability of SE Asian fatty acid producers selling Profitability (US$/tonne)

stearic acid in China, US and EU – how do they
compete against local producers?

• Indonesian, Malaysian, US, EU, Indian and Chinese

fatty alcohol profitability by feedstock – which
optimises margins?

PKO CNO PKO PKO PKO PKO CNO CNO PKO

China Germany Germany India Indonesia Malaysia Philippines US US

Where in the world will producers benefit most from access to raw materials and/or markets?

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7: Backward integration – an advantage going forward?
Unique to LMC’s Oleochemicals 2019 Report is an analysis of upstream and downstream integration within the fatty
acid/derivative market (acids, alcohols, soap noodles & metal soaps, fatty amines, esters and ethoxylates).

We examine the main business models:

a) Oleochemical producers with fatty acid derivatives

b) Fatty acid producers without derivative capacity Fatty acid value chain
c) Chemical companies producing fatty acids for
internal use Backward FATTY ACID
Forward Integrated

Integrated PRODUCER
Derivatives Applications
This analysis quantifies the share of fatty acid
derivatives via oleochemical and chemical producers. Fatty Alcohols Food

Consumer
Palm plantation

We map the major oleochemical producers and identify Fatty Esters H&PC

their strategies. What advantages do oleochemical and Fatty Nitrogen

Lubricants
Oil production Derivatives
chemical producers have when they expand downstream (milling, crushing, Splitting

Industrial
refining) Separation
and what are the main obstacles? Distillation
Fatty Acid
Ethoxylates
Animal Feed
Fractionation
Hydrogenation
Glycerine Soap Rubber
Food production
Refining
(bottled oil,
Biodiesel
margarine, etc)
Other Other

Oleochemical stakeholders can leverage LMC’s insight of the fatty acid derivative
market to identify and understand threats and new opportunities.

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Executive Summary: conclusions, opportunities & risks
The Executive Summary draws together the analysis to present the key conclusions influencing the industry over the
coming decade.

It identifies the significant drivers, opportunities and risks shaping oleochemical markets over the short, medium and
long term on both a global and a regional basis.

The Report’s conclusions provide a firm basis for determining stakeholder

strategy and investment along the oleochemical value chain.

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Supporting data & information
Appendix 1: Global trade data

Regional fatty acid and fatty alcohol imports, exports and net exports by tariff code, e.g., fractionated fatty acids and
industrial fatty alcohols.

Appendix 2: Capacities & data for key oleochemical producers

Major fatty acid and fatty alcohol producer capacity data, including notable smaller players.

Upstream and downstream capabilities and strategies.

Appendix 3: LMC’s analytical methodologies

The research methods underpinning LMC’s globally respected data and forecasts of supply, demand, trade and price.

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Deliverables & Timing

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In addition to the Main Report & Appendices, you will receive:
Presentation (remote or at your offices)
• To build on the Report’s research and conclusions, a senior LMC expert will present the 2019 Oleochemicals Report –
with Q&A on aspects of the Report most relevant to your business.

Presentation Slide Deck

• Each section of the Report is outlined in a slide deck designed to facilitate your company’s discussions.

Executive Summary
• Key findings and conclusions are summarised in a concise stand-alone document.

Selected Key Data

• Key datasets are provided in Excel to clarify the Report content and to enable your own data manipulation.

Access to LMC Industry Experts

• Reasonable access to our experts for questions on the Report content and findings.

Availability
The Report is available now.

bmb605

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LMC's oleochemical clients include:
Alicorp ExxonMobil Chemical Marico Singapore EDB
Asograsas Fedebiocombustibles Marubeni Sinarmas Cepsa
BP Biofuels Fedepalma McKinsey SK Chemicals
Cargill Felda Global Ventures Holdings Mitsubishi Solvay
CEPSA Global Green Chemicals Mitsui Southern Acids
Chevron Technology Ventures Godrej Industries Oleon Stepan Company
Clariant Golden Agri-Resources Oqema Total Petrochemicals
Credit Suisse Henkel Oxiteno Toyota Tsusho
Desmet Ballestra INEOS Procter & Gamble Unilever
Eastman Chemical Company Ingevity PTT Global Chemical Vantage Oleochemicals
Ecodiesel Intrexon Reckitt Benckiser Vinythai
Emery Oleochemicals Itochu SABIC Vopak
EOC Einkauf KLK Sasol VVF
Evonik IOI Shell Chemicals Wilmar
Evyap Kraton Sime Darby and more…

For further information, please contact:

Richard Truscott (Global) +44 1865 797621
rtruscott@lmc.co.uk

Irma Darwis (South East Asia) +6010 221 8337

irma@lmc.co.uk

Andrea Kavaler (The Americas) +1 212 586-2427

akavaler@lmc-ny.com
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Oxford Other publications
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