CURRENT AND FUTURE ISSUES AND CHALLENGES FOR THE OLEOCHEMICAL INDUSTRY

Transcription

1 CURRENT AND FUTURE ISSUES AND CHALLENGES FOR THE OLEOCHEMICAL INDUSTRY Presentation to PIPOC Oleochemicals Conference 2011 by Alan Brunskill, Senior Oleochemical Consultant, LMC International KL Conference Centre, 15th November 2011, Kuala Lumpur, Malaysia

2 Agenda Capacity Capacity ownership Market Growth Major Issues Biofuels, Taxes/Duties etc, Economy, Sustainability What s next?

3 Global Fatty Acid Capacity by Region 2010/11 capacity - ca 9.0 million tons SE Asia 40 China 22 India 7 ROA 3 Europe 13 N America 11 ROW 4

4 Global Fatty Alcohol Capacity by Region Total 2010/11 ca 3.7 million tons SE Asia 31 China 20 India 4 ROA 2 Europe 23 N America 15 ROW 5

5 Million Tonnes Historic and forecast fatty acid consumption volumes, by region ( ) North America Europe South East Asia Rest of Asia South America Rest of the World

6 Million Tonnes Historic and forecast fatty acid production volumes, by region ( ) North America Europe South East Asia Rest of Asia South America Rest of the World

7 Million Tonnes Historic and forecast fatty alcohol consumption volumes, by region ( ) North America Europe South East Asia Rest of Asia South America Rest of the World

8 Million Tonnes Historic and forecast fatty alcohol production volumes, by region ( ) North America Europe South East Asia Rest of Asia South America Rest of the World

9 Capacity Ownership % Capacity owned by raw material producers Fatty acids 60 Fatty alcohols - 25 (50)

10 Problems affecting Oleochemicals The economy Biofuels - Oil Price effect Biofuels - Disappearing feedstock Biofuels - Glycerine Export/Import taxes/anti-dumping tax Sustainability

11 The Economy Bankers one way risks only: they get the bonuses, tax payers/investors pay the penalty Politicians no business experience. Yet we elect them to run our countries Economists only have hindsight Auditors/Ratings Agencies never spot the big problems Is it any wonder we are in a mess?

12 Biodiesel effects Oils and fats prices Glycerine price/availablility Raw material availability

13 Biodiesel Growth By 2020 conventional biodiesel will have grown to Mt Glycerine generation will grown to ca 6 Mt glycerine, (2011 ca 3 million) Other types of biodiesel will consume additional fats and oils, e.g. Neste process Total oils and fats consumption for fuel will be above 50 Mt

14 Million Tonnes Biodiesel production volumes ( ) North America Europe South East Asia China India Other Asia South America Rest of the World

15 Until 2006, year-on-year changes in CPO prices used to be fairly easily explained in terms of MPOB stock changes. Year-on-Year Price Change, M$/tonne Year-on-Year Stock Change, '000 mt Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Price Change Stock Change

16 Year-on-Year Price Change, M$/tonne Year-on-Year Stock Change, '000 tonnes The relationship has broken down since mid ,000 1,600 1, ,200-1,600-2,000 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Price Change Stock Change 1, ,000

17 US$ per tonne Brent nominal crude prices plotted against ethylene, US$ per tonne 1, , , , Ethylene Brent crude

18 Biodiesel use in Germany and the US, reacts quickly to swings in the biodiesel premium over diesel. This links biodiesel to diesel prices. Monthly Biodiesel Demand, '000 tonnes Premium, US$ per tonne Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 US + German Demand Average US & German Biodiesel Premium -100

19 EU Prices, US$ per tonne Edible oil prices vs crude oil ,250 2,000 1,750 1,500 1,250 1, Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Brent Crude Palm Oil Soy Oil Rapeseed Oil PKO Coconut Oil

20 US$ per tonne Other oils vs crude oil 1,400 1,200 1, Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Brent Crude Olein Tallow Stearin PFAD

21 Biodiesel Effect on Oils and Fats Availability US position tallow rated better than vegetable oils on greenhouse gas emissions. European position tallow gets a double tax benefit for biofuels in some countries Neste type technology can use any oil as feedstock (TO, PFAD, PS, Tallow, Soya, Rape) Net effect - In addition to the vast quantities of fats and oils taken from traditional uses, the price advantage of the cheaper feedstocks favoured by oleochemicals will be prejudiced and some may just disappear

22 US$/tonne In the EU biodiesel market, used cooking oil methyl ester is now by far the most expensive, with tallow ME just ahead of rapeseed ME. 1,800 1,600 1,400 1,200 1, Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 FAME 0 RME (B100) PME (B99-100) Tallow ME UCOME

23 Glycerine Price - Biodiesel effect Long term low prices due to massive volumes from biodiesel New uses only stop this being an absolute disaster Too high prices turn off new uses Rapid price cycling as non-traditional uses come on and off due to price fluctuation

24 Million Tonnes Historic glycerine production volumes, by sector, North America Europe South East Asia Rest of Asia South America Rest of the World

25 EU Crude Glycerine, $ per tonne The biodiesel production growth has kept crude glycerine prices in check, when other commodity prices have been strong. 1,400 1,200 1, EU Crude Glycerine EU CPO

26 EU Crude Glycerine, $ per tonne Refined glycerine has settled at a premium of over $400 above crude glycerine prices, and have now fallen well below CPO prices. 2,000 1,800 1,600 1,400 1,200 1, EU Crude Glycerine EU CPO EU Refined Kosher Glycerine

27 Indonesian Export taxes Keeps a cost advantage for domestic industry Disadvantages the rest of the world Will there be retaliation? (Import duties, anti-dumping taxes, quotas) Unnecessary capacity may be built in Indonesia causing spare capacity elsewhere (on a global basis)

28 The new Indonesian export tax system has reduced the export taxes on RBD palm stearin by approximately half Export tax rate, % 25% 20% 15% 10% 5% 0% < >1250 New tax structure Previous export tax structure

29 At the same time, the Indonesian government has introduced relatively high export taxes on PFAD, after a long period with no such taxes Export tax rate, % 25% 20% 15% 10% 5% 0% < >1250 New tax structure Previous export tax structure

30 Anti Dumping Duties on Alcohols Formal complaint by two European producers EU puts variable anti-dumping tariffs on Malaysian, Indonesian and Indian producers A number of the affected producers claim not to have shipped alcohol to the EU in the period in question One complainant has now withdrawn Users are upset, producers are upset

31 Sustainability Issues Land use, Raw materials, Pipeline, Storage, Traceability, etc. But does the ultimate consumer really want it? NO, the ultimate consumer wants no more deforestation and safe raw materials, doesn t care about the rest and certainly doesn t want to pay for it For oleochemicals the danger is being hijacked by the edible/biofuel industry problems

32 What s next? Geographic expansion? - Indonesia, China, India, South America Contraction? US, Europe Downstream activities? - surfactants, consumer products. Green chemistry - new ways of making chemicals from natural sources.

33 An explosion of new names, along with some familiar players

34 Thank you for your kind attention Acknowledgements: LMC International, Oleoline/HBI, Industry Players; Biofuels Digest; BIO; Biorefining Week; Benson Ford Research Center; & ICIS