The alcohols conundrum: Bill Lavers attempts to cut through the confusion. (Focus On...

Next to fatty acids and glycerine, fatty alcohols - otherwise commonly referred to as detergent alcohols - are the third major commodity product of the oleochemicals industry, being widely traded in bulk from one part of the world to another. They can be made from both natural oils and fats

In an attempt to start with some fundamentals, a search for definitions leads immediately to a certain amount of further confusion. Some take the view (including this journal) that fatty alcohols is a term that can be used to describe any alcohol that could be made from natural (animal and vegetable) oils and fats; meanwhile others suggest that the term should only be used in connection with those derived from natural oils and fats, and so the term detergent alcohol has been coined, to cover products that are mainly broadly similar, and in many cases exactly the same.

But, while many alcohol products derived by petrochemical routes are identical to their oleochemical counterparts, this definition also includes some products that cannot easily be made from natural oils and fats. And, whether or not they are made from fatty or petrochemical raw materials, they are not all used for detergent production either, although the vast majority are. So a further term - higher alcohols - has also been used as an all-inclusive `catch-all' definition.

Apart from the differences in terminology - and perhaps arising from it - analysts and industry specialists, when quantifying markets and assessing trends, also draw their lines in different places.

For example, in their report Higher Alcohols: Market Forecast to 2010, published in 2000, industry consultants Colin A Houston & Associates define higher alcohols as C12 alcohols and above (C12+). This report indicates that global demand for higher alcohols was 1.6M tonne in 1998 and predicted that this would grow to 2.1M tonne by 2010, based largely on surfactant demand, representing 75% of consumption. Meanwhile, at the ICIS-LOR Oleochemicals conference in 2000 (see previous OFIs), Procter & Gamble's Bill Griesser, defining the alcohols in question as C12-18 products, estimated that world capacity was at that time 2.1M tonne, split roughly 50:50 between natural and synthetic (petrochemical) origin. Griesser forecast that about 500,000 tonnes of extra capacity (ie 25% existing global capacity at the time) would come on stream by the end of 2002, of which about 200,000 t/a has now done so.

WORLD DEMAND

At this year's ICIS-LOR meeting (2001), by contrast, Adrian Ding of FOI Industries, Indonesia, defined fatty alcohols as `C12-16 alcohols with a high degree of linearity.' Meanwhile, taking his definition as `C6+linear and semi-linear alcohols,' Sasol's Tom O'Brien estimated current world demand (in 2000) as just over 2.1M tonne, rising to a possible 2.9M tonne in 2010. Using the same definition, O'Brien put worldwide nameplate capacity at just over 2.5M tonne last year, rising to 2.8M during 2002.

Regardless of the precise definition, therefore, there is a good consensus that about 300,000 tonnes of further alcohol capacity is due to come on stream in 2002, namely the following projects:

Shell   130,000 t/a
Sasol   120,000
Kao      50,000.

So, by the end of this year, global capacity to produce these alcohols will indeed have increased by roughly a quarter since the late 1990s, and the balance of new capacity has been tipping in favour of the petrochemical (`synthetic') routes rather than the `natural' route. Indeed, of the new capacity due on stream this year, only the Kao project (less than 20% of total new capacity) is based on natural oils and fats, even though the price of lauric oils have been in the doldrums since 2000.

On the face of it, world capacity at the end of 2002 will be ample to accommodate increases in consumption for some time to come, with estimates of demand growth ranging from 2-5% per year over the coming years. Recent estimates (O'Brien, ICIS-LOR 2001) suggest average growth rates of 2.5-3%, although some sectors may grow faster than others.

Looking towards the longer term, however, a number of factors are likely to affect the implementation of further new capacity. Growth rates approaching 5% per year, for example, imply an increase in demand of the order of 50% between 2000 and 2010; and growth rates of half this mean that the current spate of capacity addition will become fully utilised before the end of the decade.

As further new capacity additions are contemplated, what feedstocks are likely be chosen and what factors will affect these decisions? The attractiveness and suitability of feedstocks go hand in glove with the performance of alcohols themselves.

FATTY ALCOHOLS AND THEIR USES

Fatty alcohols of the type under discussion here are used predominantly in the production of surfactants; mainly alcohol sulphates (sulphonates), ether sulphates and ethoxylates, but also alkylpolyglycosides. There are some other uses too, including the production of fatty nitriles.

The Colin A Houston study indicates that around 75% of fatty alcohols - or higher alcohols - is for surfactant usage, and the Table below gives an indication of how important this category is compared to other, exclusively petrochemical surfactant products such as alkylbenzene derivatives.

According to P&G's Greisser (ICIS-LOR 2000), C12-18 alcohols are the ones mainly used in mainstream detergent/surfactant applications such as washing and cleaning. The C8-10 products have other uses, including agricultural preparations such as sprays and liquid treatments.

Of this C12-18 spectrum, Greisser suggests that generally C12-14 products are used where more sudsing is required, while C18 products have greater grease cutting power. Of course there are non-detergent uses too, including cosmetics, where surfactant properties are needed for other purposes, including emulsification, emolient and water-binding tasks.

As far as performance goes, there is wide agreement that there can be no difference between petrochemical and oleochemical derived product that are chemically identical; that is to say the linear - or mainly linear - alcohols and their derivatives with the same carbon chain lengths.

But there are (petrochemically derived) semi-linear products that can have a performance advantage, especially with the trend towards lower washing temperatures, according to Sasol's O'Brien (ICIS-LOR 2001). Furthermore, O'Brien says that monomethyl branched semi-linear alcohols will have an even bigger performance advantage in detergent applications in the near future, and he sees a higher rate of future growth for these.

Although everyone speaks about using `renewable resources' these days, recent experience has taught us that the `natural' label does not sway consumers unless there is a cost and/or performance advantage too. Since even the `natural" route to these alcohols involves considerable chemical processing, the emotional pull of the natural origin qualification works only in very few sectors, of which cosmetics is still undoubtedly one and food applications probably another.

For the most part, however, the choice of raw material and process route is about the balance between cost and performance, and cost probably remains the biggest factor in the mainstream bulk sector.

The choice of raw material therefore boils down to evaluating availability and relative price of the various raw materials, together with the technologial costs (transformation costs) associated with individual processing routes.

PROCESS ROUTES (see chart page 10)

Fatty alcohols - predominantly linear products - can be made from natural oils and fats, via the production of fatty acids and/or methyl esters. The lauric oils - palm kernel oil (PKO) and coconut oil (CNO) - are the principal raw materials for the C12-14 range (the biggest category), while palm oil and tallow are the key oils and fats sources for C16-18 derivatives.

A similar - and some would say wider - range of alcohols can be made by the petrochemical route, from ethylene, linear alpha olefins (LAOs) and internal olefins (using the Zeigler, modified Zeigler and oxo/hydroformylation technologies). Molecular chains with odd numbers of carbon atoms and - as we have seen above - branched chain products, some of which are said to have performance advantages, can also be made easily this way.

Sasol, which is a relatively recent entrant to the international alcohols market, having acquired the Condea/Condea Vista businesses, is about to introduce a new base feedstock for fatty alcohols production - coal. Sasol has pioneered advanced Fischer-Tropch techology (originally developed in Germany decades ago) to exploit South African coal deposits as chemical feedstocks, and is due to commission its new alcohol production facility at Secunda later this year. The Fischer-Tropch technology converts coal into liquid hydrocarbons and gases. These materials are not dissimilar to the feedstocks for petrochemicals factories based on mineral oil, and so alcohols can be produced by oxo/hydroformylation of alpha olefins extracted from the Fischer-Tropch reaction products.

FEEDSTOCK CHOICE

Apart from technology and performance considerations outlined above, raw material avail. ability and likely price trends will also be important factors to consider for the future.

With growing interest in using palm oil and tallow as the basis for biofuels, it would be foolish to assume that one or other of these commodities will not be available in sufficient quantity and appropriate price for the needs of the oleochemicals sector throughout the foreseeable future. Ample supply of oils and fats at modest price levels, at least for the C16-18 range, seems secure.

Compared to other oils and fats, a comparatively large proportion of lauric oils - about half the world output, is used in oleochemicals production (for both fatty acids and fatty alcohols). Recent estimates (Ding ICIS-LOR 2001) suggest that fatty alcohols account for about 25% of global lauric usage. Future usage in this application, however, depends on availability and price. As we have already noted, lauric oil prices have been low for the past couple of years, yielding profitable performance for established producers using this route at present, but in the past the prices of these oils have been remarkably volatile. Indeed, while the average annual prices since 2000 have been in the $250350 range, throughout most of the 1990s the annual average was between $650 and 750, with peaks much higher than this level. It is here that we find the reason for so few new lauric-based projects nowadays; the prospect that such price trends could be repeated in future would be a major disincentive, except possibly to new players basic in lauric feedstocks.

Future availability of lauric oils depends primarily on the growth in palm oil output (which drives PKO production). It has recently been estimated (by Ding ICIS-LOR 2001) that availability for lauric oils will exceed 5M tonnes a year in 2005, up from 4.2M in 2000 and from less than 2.5M in 1990.

WILL PAST PRICE PEAKS RETURN?

Ding suggests that such an expansion in supply will ensure that past price peaks will not be repeated anytime soon. He predicts that lauric oil prices will remain in the $300-450 range for the foreseeable future, in stark contrast to past experiences.

According to recent reports in the chemicals press, both ethylene and LAOs are in global oversupply, and it will take some years before this situation is changed (see Oleo News in this issue). Ethylene demand depends mainly on the requirements of the polymer industry, and LAOs have a wide range of uses, of which polymers and lubricants are major ones. Production of alcohols from these materials accounts for only a fraction of their use.

Similarly, the production of LAOs, and thereby alcohols, from coal is also a relatively minor use, since coal can be the basis for as wide a range of chemicals as petroleum. As we have seen, Sasol is the first to produce detergent alcohols from coal, but is identified as a very competitive and low cost producer of olefins (LAOs) for whatever purpose they are used.

Also on the horizon is the prospect of new LAO production in the Middle East (see Oleo News OFI January 2002). Saudi Basic Industries (Sabic) and German engineering firm Linde have developed a new, lower cost one-step production process; and one of the stated products of the new Saudi LAO production is detergents.

AN ASIAN DILEMMA

To sum up, it is important to note that the supply and availability of none of these raw materials is dependent on the needs of the fatty alcohols market, but is rather the consequence of other industrial factors. According to latest forecasts, none is likely to be in short supply anytime soon.

Interestingly, Sasol's Secunda plant is well placed for the Asian market and this 120,000 t/a facility is expected to be highly competitive. It is too early to say anything concrete about the impact of future Saudi LAO capacity, which could come on-stream as early as 2004.

With the North American and EU markets for fatty alcohols now considered mature, the Asian market is set to become the major growth centre for alcohol consumption within the coming years, even though a significant proportion of current Asian alcohol production is shipped to EU and US user destinations at the present time.

Asia is currently the world's largest market for fatty acids, now accounting for some 40% of world fatty acid consumption, and it seems only a matter of time before the fatty alcohol market moves the same way. While Asia is clearly basic in palm oil, PKO and CNO, it is by no means a foregone conclusion that the new alcohol capacity that will serve this market will all be palm/lauric based. High prices, even for short periods, have done their damage in the past, but some say these trends will not be repeated. We shall see.

Fatty alcohols -- major producers

Natural            Synthetics

Procter & Gamble   Shell
Cognis             Condea
Kao                BP Amoco
Salim              Mitsubishi
Cocochem           Jilin
Atofina            Fushun
Godrej             Exxon
Rhodia/A&W         BASF
(now Huntsman)

Total capacity:
1,010,000 tonnes   1,100,000 tonnes

Source: Procter & Gamble, 2000
New projects

Recently announced expansions:
* Condea -   120,000t completed in 2000
* Kao -       50,000t for 2002 startup
* Shell -    130,000t for 2002 startup
* P&G -       30,000t completed
               50,000t planned
* Sasol -    120,000t for 2002 startup

Total:       500,000t - 25% increase

Source: Procter & Gamble, 2000
World higher alcohol end markets, 2000

Alcohol           22%
Ethoxylate

Alcohol Ether     31%
Sulfate

Alcohol           22%
Sulfate

Other             25%

Source: Colin A Houston & Associates, 2000

Note: Table made from pie chart.
World - Major Surfactant Consumption
Estimate, 2000
(million metric tons)

Alcohol ethoxylates        0.9
Alcohol ether sulfates     1.0
Alcohol sulfate            0.5
Alkylbenzene sulfonates    3.4
Alkylphenol ethoxylates    0.7
Others                     3.9
Total                     10.4

Source: Colin A Houston & Associates, 2000
Oil          Country      1990       1995       2000       2005

Coconut oil  Philippines  1,656,270  1,614,000  1,352,600  1,700,000
             Indonesia    NA         600,200    837,500    800,000
Palm kernel
oil          Malaysia     827,233    1,036,538  1,384,685  1,621,000
             Indonesia    NA         396,000    665,000    1,070,000
Total                     2,483,503  3,646,738  4,239,785  5,191,000

Source: A Ding, ICIS-LOR 2001
                          1990       1995       2000       2005F

Total lauric oil supply   2,483,503  3,646,738  4,239,785  5,191,000
Malaysian oleochemical
demand                    145,000    589,000    825,000    1,074,000
Indonesian oleochemical
demand                    30,000     95,000     100,000    197,500
Philippines oleochemical
demand                    75,000     105,000    105,000    140,000

Total oleochemical demand 250,000    789,000    1,030,000  1,411,500
(Malaysia, Indonesia, Philippines)

Source: A Ding, ICIS-LOR 2001

Sasol - aiming for world class

Since the 1970s, Sasol Chemical Industries Ltd has been identified as the major chemicals player in the world basing its production operations on coal. Exploiting South Africa's indigenous coal resources, during the past 30 years it has developed and improved the Fischer-Tropch gasification technology to the point where it has become a world, class chemicals supplier.

Until 2000, however, 80% of the company's sales has been generated from its production based in South Africa, and so a new strategy was needed to achieve its aim to become a fully world class player. Recently, the company's stated goal has been to derive more than half its revenues from markets outside South Africa, and it has embarked on a major acquisition strategy to achieve it. A big step in this strategy was the acquisition last year of the Condea/Condea Vista chemicals businesses with operations in both Europe and North America, and also farther afield.

Now the task of integrating its $1.2 billion Condea acquisition is virtually completed, recent reports suggest the company is still intent on investing heavily in global expansion. Further acquisitions are still on the cards, not only in the US and Europe, but also in the Far East and South America according to Ralph Havenstein, group managing director of the Johannesburg based company. It intends to secure global leader ship positions in three main fields - alpha olefins and derivatives (including surfactants); polymers; and solvents.

Previously a producer of petrochemical surfactants, Condea purchased the Contensio oleochemieals business in Germany from Huls (now Degussa) in June 1998. Now the Condea/Condea Vista businesses have been integrated with Sasol's own operations, Sasol's olefins and surfactants business is headquartered in Frankfurt, Germany. Sasol now considers itself the leading global player in the markets for non-ionic surfactants (such as ethoxylates), and sulphate/ sulphonate based anionic surfactants.

Analysts suggest that the company's domestically produced (in South Africa) chemicals are particularly competitive in global markets. Among the new projects coming on stream at the company's Seconda production complex is a 120,000 t/a detergent alcohol plant, due in production in June 2002.

Sasol is also investing in the Temane, Mozambique natural gas field and a 900-km pipeline to take the gas to Secunda, due to begin operating in 2004.