Prices to rise slightly in 1999, but supplies will be available
By Staff -- Purchasing, 1/14/1999
Buyers expect prices for oleochemicals to rise slightly in 1999, but availability should remain good throughout the year.Oleochemicals are fat-based chemicals, and include such materials as fatty acids, glycerine, fatty alcohols, and fat-based surfactants. They are used in a variety of industries including soaps and detergents, packaging, paints and coatings, and cosmetics. Within these industries, they are used in an array of applications--such as emollients, emulsifiers, and softeners.
One of the largest commodity-type oleochemicals is glycerine. Glycerine is used in markets including food processing and personal-care products. Glycerine tags are in good shape right now, according to Purchasing's monthly transaction price survey.
Glycerine (99.5%, natural refined) prices fell through 1998, down as much as 25¢/lb lower than 1997 prices. Contracts fell to an average of 49¢/lb in the second quarter of last year and held there through the fourth quarter. Spot tags also declined, but remained a few cents/lb higher than contracts. Buyers expect prices to increase this year, with spot tags jumping to an average of 55¢/lb by the second quarter, and 58¢/lb by the end of the year. Contracts are also forecast to increase, but only in the second half of the year, rising to an average of 53¢/lb by year's end. Although rising, average prices are still projected to remain significantly lower than 1997 levels.
Demand for oleic fatty acids will show the quickest growth due to increased use in cosmetics and personal-care products, textile production, and as lubricants and chemical intermediates. Other areas that should show strong growth include coconut-oil-type fatty acids, which are increasing in popularity especially in the personal-care area. They provide mildness and moisturizing benefits and are increasing in use as a substitute for tallow-based fatty acids.
Environmental demands push fatty acids
Demand for fatty acids will continue to be strong, growing at 3.4%/yr through 2002, according to a recent study by The Freedonia Group. Main reasons: Environmentally improved versions of lubricants, paints, and detergents will boost fatty-acid use, as will consumer demand for natural ingredients in food and personal-care products.
Most fatty acids are made from animal fats or vegetable oils. The beef-processing by-product tallow is the most common fatty-acid feedstock. Vegetable-oil feedstocks include coconut, palm, or canola oils. Observers say vegetable-oil feedstock prices should be fairly stable in 1999, with the one question mark hanging over coconut oils. Not all fatty acids are oleochemicals. Fatty acids are also produced from tall oil, a by-product of kraft paper manufacturing. Tall oil fatty acid prices increased 1¢/lb in the second half of 1998. According to buyers, a 1¢/lb increase is ahead for 1999. Spot and contract tags are projected to increase to an average of 27¢/lb in the second quarter--and will stay at that level for the rest of the year. Slowdowns in kraft paper production are blamed for that rise.
Major fatty acids include oleic acid, capric acid, linoleic acid, and stearic acid, and are broken down into saturated and unsaturated categories. Saturated fatty acids have a greater process stability and lower tendency toward autoxidation. Unsaturated fatty acids often carry a price advantage, but have some process instabilities.
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