Producers rush to meet changing needs
By Albert Genna -- Purchasing, 1/15/1998 2:00:00 AM
Surfactants seem to be in a constant state of transition. Buyers continue to seek specialty products, and manufacturers are scrambling to meet customer drives toward environmentally friendly, multi-functional products, low-foam and low-sudsing surfactants, and blends.
On the supply side, growth remains steady but buyers shouldn't have to prepare for any major price shocks in the near term. Growth in specialties generally exceeds that of established products, with some specialty surfactants seeing annual growth as high as 20%. And major suppliers are moving quickly to achieve global presence.
Surfactants are found in an broad array of consumer and industrial products. They perform as detergents, wetting and foaming agents, dispersants or penetrants, and are used in household detergents and cleaners, personal care products, industrial and institutional cleaners, and industrial processing applications. Some surfactants are high-volume commodities, such as linear alkylbenzene sulfonate (LAS). But many are specialty products with very specific applications.
Big gains for specialties
Surfactant demand in the U.S. is projected to increase at 3.2%/yr through 2000. Many large volume-commodity surfactants are growing at 2%-3%/yr, but demand for smaller volume specialty surfactants is shooting up as high as 20%/yr for some products. Some market analysts forecast even stronger future growth for certain specialty products.
In years ahead, changes in the way detergent products are formulated will further increase demand for specialty surfactants. "We see very large growth ahead in household markets," agrees Nancy Morlino, associate director for specialty chemicals at Lonza Inc.
"Specialty surfactants go into a broad base of different markets and provide unique functions," says Morlino. "There is a demand for new technologies, especially from household markets," she says. When a consumer product is reformulated to provide mildness, better cleaning, or antibacterial properties, it often is specialty surfactants that are used.
Reformulation is likely to increase at a rapid pace. For example, new regulations will force consumer washing machines to use less water. These redesigned machines will change the types of detergents used, and require less, but better performing surfactants. "New washing machines will impact formulation and the types of surfactants used," says Neil Burns, vice president of marketing at Pilot Chemical Co. The new formulations will need to perform in low-water with less foaming, while still providing effective cleaning. "In the longer term it will impact what we develop," Burns says.
There also will continue to be increased production of liquid detergents and a push for lower-foaming or sudsing products, according to a recent study on surfactants in detergents conducted by the Freedonia Group, a market research firm located in Cleveland, Ohio. According to the study, anionic surfactants will continue to dominate the market, but the need for multifunctional surfactants will grow more rapidly. These higher priced products can serve additional needs, such as germicides or softeners. Demand for surfactants in detergent applications will grow 3.2%/yr through 2001, according to the study.
"In laundry, liquid formulations continue to grow more rapidly than powder," says Ed Buening, director of global L & CP at Stepan. "This benefits surfactants due to higher levels in liquids than in powders."
Another growing area is blends. "We see many customers interested in component blends, especially in the personal care areas," says Buening at Stepan. Most component blends consist of the entire base-surfactant system--all the customer needs is to dilute, and add fragrances and dyes.
But while liquids are booming in end-use markets, at least one company sees a future in dry versions of their own ingredients. "We see a lot of potential for our products in dry form," says Burns at Pilot. "The dry products are more compact, and can be all active ingredients." Other areas Pilot expects to see grow are dried sodium LAS, and mild surfactants. In fact, Pilot has just formed a marketing agreement with Lamberti of Milan, Italy to supply mild surfactants such as alkyl gluco esters. "Pilot will build up the business using imported products, and plan for domestic capacity later," says Burns. Other areas are growing from a continued segmentation of household products and a resurgence in bleach formulated products.
Prices may rise slightly
Rising raw materials costs put surfactant producers in a bit of a margin squeeze over the last couple of years. Some specialty surfactant products did see higher prices in 1997. Many producers say surfactant prices should start to move up in 1998, but buyers say the increases won't be very dramatic. Some producers are looking for hikes in the 3%-5% range.
"Surfactant prices will go up, because across-the-board major feedstock prices are likely to rise in 1998," says Burns at Pilot. Major feedstocks for surfactants include benzene, ethylene, coconut oils and palm oils.
Some companies have increased prices recently. Stepan, for example, raised prices for surfactants on January 1. Stepanol alcohol sulfates, Steol alkyl ether sulfates and Stepanate hydrotropes increased by 1(cent)/lb. Bio-soft sulfonic acids increased by 2.5(cent)/lb. Accosoft fabric softener quats, Ninol alkanolamides and BTC 50% active biocidal quats increased by 3(cent)/lb. Eighty-percent active biocidal quats increased by 5(cent)/lb. Blends and derivatives of these products increased accordingly.
Pilot Chemical boosted prices in December by 1-3(cent)/lb, depending on the product. Calsoft LAS-99 linear akyl benzene sulfonic acid increased by 2.5(cent)/lb. Calsoft F-90 flake boosted 2.5(cent)/lb. Calfoam 30% active alcohol sulfates and ether sulfates increased by 1(cent)/lb. Calfoam 60% products increased by 1.5(cent)/lb and 70% products by 2(cent)/lb. Calamide Amides will increase by 3(cent)/lb and CalBlend, Calfoam, and Calsuds blends by 1.5(cent)/lb.
Air Product and Chemical also raised prices. "We had a nominal 4% price increase in 1997 to cover changes in raw material and production costs," says Ken Oster, marketing manager for Surfynol Surfactants America.
LAS is the most common commodity surfactant. Prices declined in 1997. Contracts dipped from a high of 57(cent)/lb in the first quarter, to 52(cent)/lb in the second and third, according to data from Purchasing's monthly survey of chemical buyers. By November, contracts had fallen to 51(cent)/lb. The path was similar for spot prices: They fell from 54(cent)/lb in the first quarter to 51(cent)/lb in the second and third. By November, spot prices had fallen to 50(cent)/lb. Expect tags to regain some ground in 1998. According to buyers, contracts for LAS will rise to 53(cent)/lb by the second quarter of '98. Spot tags will grow to 51(cent)/lb.
Raw materials hold the key
Prices for the raw materials that make up surfactants rose in 1997. Primary feedstocks for surfactants include ethylene, benzene, olefins, and alcohols. According to Purchasing's monthly survey, a monthly survey of buyers, ethylene contracts rose in 1997. Tags for ethylene hit 24(cent)/lb in the first quarter of '97, growing to 96(cent)/lb in the second and third quarters. Tags were holding at 25(cent)/lb in October and November. But buyers project slightly better conditions ahead-- ethylene prices are forecast to dip to 23(cent)/lb by second quarter 1998.
U.S. contract prices for benzene, another major surfactants feedstock, hit $1.10/gal in the first quarter of 1997--the highest quarterly average in two years. Tags fell for the remainder of the year, down to $1.03/gal in the second quarter, and to 98(cent)/gal in the third. Prices began to grow slightly toward the end of '97--up to $1.00/gal in October and November. But buyers expect prices to hold here in early 1998, but rise through the second and third quarters.
Oleochemical-based raw material prices also have been on the upswing, according to producers. Vegetable oil prices remain high. Tallow prices are firm, but have come down slightly over 1997. "Fatty acids have had price pressure," says Chris Garvey, business manager for Industrials at ICI Surfactants. Specialty surfactant prices moved upwards in '97. Fatty acids are a major component for some specialty surfactants, along with natural oils and other derivatives. But specialty prices will walk a fine line in 1998. Raw materials tags will likely head up, but there is enough capacity in the industry that surfactant tags will not fly up too much.
Industry consolidates, looks global
There has been some significant consolidation among some of the major players in the surfactants industry. There are currently near 200 manufacturers in the U.S. producing surfactants, a number which many expect to decrease sharply as international markets heat up. Increasing globalization will bring U.S. producers into more competition with overseas suppliers, and also require U.S. manufacturers to have a strong overseas presence.
Some surfactant producers are the large detergent companies such as Procter & Gamble, Lever Bros., and Colgate-Palmolive. These companies often produce surfactants for internal use. Most companies who market surfactants are large chemical/petrochemical manufacturers. These include Air Products and Chemicals, basf, Condea-Vista, Dow, DuPont, Henkel, ICI, Rhodia (formerly the chemicals and fibers businesses of Rhone-Poulenc), Shell and Union Carbide. Many offer an array of commodity and specialty surfactants. Other companies, such as Pilot, Lonza, Stepan and Witco pursue more specialized surfactants.
basf's presence in surfactants is growing considerably. In August, the company acquired PPG's surfactants business including facilities in Appleton, Wis.; Pasadena, Texas; Folcroft, Pa.; Gurnee, Ill.; and Lesquin, France. And in October, basf bought the surfactants business of Olin Corp.'s Doe Run facility in Brandenburg, Ky. Olin will produce surfactants for basf at the facility. Olin retains ownership of their disulfonate surfactants.
Lonza sold their Long Beach, Calif.-based commodity surfactants business to Stepan in the Spring of 1997. Lonza kept their specialty surfactants business. Stepan is also planning some debottlenecking at its Fieldsboro, N.J., plant for fourth quarter '98 for sulfonation and betaine.
Worldwide capacity looks good, and projects seem on the horizon. In mid-1997, Rhodia agreed with Bejing Chemical Industry Group to create a joint venture to manufacture surfactants for China. The venture, called Beijing Rhone-Poulenc Eastern Chemicals Co. Ltd. will be located at Beijing 's site and start up in third quarter 1998. The facility will manufacture a wide range of surfactants, including ethoxylates and sulfates.
Pilot Chemical recently expanded capacity at a plant in Cincinnati, Ohio, for alpha-oelum-sulfates used in liquid soaps.
ICI Surfactants is looking at increasing the output of its Atlas Point plant. The company is reviewing plans for ethoxylation capacity expansion for 1998.
Not just soaps & detergents
Surfactants do not just go into soaps and detergents. "There is a huge industrial segment as well," says Garvey. ICI's Industrial surfactants are used as paint additives, plastic additives, in oilfield and textile applications.
"The overall demand seems to be growing at slightly better than GNP," says Garvey. "But the mix is changing, and fast growing niches are being created." The main drivers are customer demand for improved products, and environmental considerations. "From our standpoint, customers are requiring new surfactants for the new products they're formulating to meet environmental needs," he says.
On the industrial side, demand looks good too. "We expect demand for surfactants in coatings and inks to match the general industry growth rate of 3%-4%/yr," says Oster at Air Products. "There is still conversion from solvent-borne to water-borne systems. This will cause a slightly greater than nominal growth in the coatings, inks, and adhesives market."
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