Supply tightens but prices stable for now
By Staff -- Purchasing, 1/15/1998
Buyers expect prices for oleochemicals to remain stable in 1998, but price pressure will grow toward the end of the year and availability should tighten.Oleochemicals are fat-based chemicals encompassing materials such as fatty acids, glycerine, fatty alcohols, and fat-based surfactants. They are used in a broad range of products in industries as diverse as soaps and detergents, packaging, paints and coatings, and cosmetics. For example, in the cosmetics and toiletry industry, oleochemicals serve as emollients, softeners, and emulsifiers.
One of the larger oleochemicals is glycerine, used in an array of markets including food processing and personal care products. Glycerine has a commodity-type name-recognition advantage, but does face competition from rival materials including sorbitol. Right now, the glycerine situation looks good for buyers in 1998. The material is in good supply, and prices look set to decline for at least the first half of 1998. According to Purchasing's monthly transaction price survey, glycerine (99.5% natural refined) dipped to 55(cent)/lb in fourth quarter 1997. Buyers forecast prices to slip further, to 53(cent)/lb in second quarter '98.
Where demand is growing
Demand for oleic acids should grow 4.8%/yr through 2000, according to a study by The Freedonia Group, a market research firm located in Cleveland, Ohio. Oleic acids, which are made from tallow, palm oil, or tall oil are used primarily in cosmetics/personal care products, textiles, industrial lubricants, and chemical intermediates. Lower grades of oleic acids face stiff competition from lower-priced tall oil fatty acids, which have similar attributes.
Another area of growth is in cosmetics and toiletries, where oleochemical use will rise at around 6%/yr through 2000. This is mostly driven by consumer demand for this industry to provide more mild and naturally-derived products, according to Freedonia.
Fatty acids get tight
Fatty acid demand remains strong, with key growth projected for the plastic additives and food additives markets. Some producers say consumption is growing as high as 6%/yr. Buyers have reported tightening supply for fatty acids, and in the fall of '97 leadtimes were extended. Buyers say prices should be firm in 1998.
Fatty acids are produced from several different processes, and not all fatty acids are oleochemicals. Most are manufactured from animal fats or vegetable oils. Tallow, a beef processing by-product, is the most common fatty acid feedstock. The vegetable oil feedstocks are most often coconut or canola oils. Major fatty acids include oleic acid, capric acid, linoleic acid, and stearic acid. But fatty acids are also produced from tall oil, a kraft paper mill by-product.
Key producers of oleochemicals include Croda, Henkel, Procter & Gamble, Unilever, and Witco.
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