Strong Demand Outlook for Oleochemicals

The 13th ICIS World Oleochemicals Conference in June revealed a strong demand ahead for the global oleochemicals market, which has seen high oils and fats feedstock prices, logistics hit by COVID restrictions and severe weather. Major feedstocks for oleochemicals are palm oil, lauric oils (palm kernel oil and coconut oil), soyabean oil and tallow.  
LMC International head of Southeast Asia Julian McGill said the droughts in 2019 would continue to have an effect in 2021 but should see improved palm oil output in 2022 if there were no weather shocks. Weaker production had helped keep prices high.  On lauric oils, Martin Herrington, president, North America, IP Specialities, also noted a steady and relentless increase in prices since the second quarter of last year. 
At the fatty acids market, prices in Europe shot up significantly between fourth quarter 2020 and second quarter 2021, with oleic acid prices seeing the biggest hike, and both tallow and palm oil fractions shooting up in value by €655/ton on average, Samantha Wright, senior editor manager at ICIS said.  Palm oil-based fatty acid supply was hit by vessel delays from Asia, caused by a lack of ships and workers resulting from COVID-19 and extreme hikes in freight costs.  Demand for palm-based fatty acids also increased due to severe shortages in the tallow fatty acid market. The US fatty acid market also saw vessel delays and high freight costs from Asia. Raw tallow production may not increase as soon as expected despite reopening of restaurants, due to backlog of frozen meat resulting in new meat production.  
On fatty alcohols, Lucas Hall, markets editor, ICIS, said the market would face pressure from bullish feedstock and strong demand.   Vegetable oil stock levels were at multi-year lows and production had not yet begun to come back at a rate to replenish these. Hydrotreated vegetable oils (HVO), according to Hall, was keeping feedstock demand extremely firm and global capacity is expected to nearly double in the next two years.  US policies were behind 85% of capacity additions globally.  Elsewhere, new projects would expand capacity by 12% from 2020-2022 in Europe and 32% in the Asia/Pacific Region.  “At full capacity, HVO will account for 11% of global biofuels production in 2022, more than doubling the 2019 HVO share.”  Meanwhile, synthetic alcohol producers Sasol and Shell were still in force majeure following last year’s hurricanes. 
On glycerin, prices of crude glycerin had nearly doubled from around US$300/ton in early January to US$600/ton in June, Helen Yan, senior editor at ICIS, said.  Glycerin is a by-product of biodiesel and oleochemical production, with output typically about 10% of the capacity of both processes.  More than 60% of crude glycerin came from biodiesel production, 30% from fatty acids and the remainder from fatty alcohol. Global glycerin demand is expected to grow 4-8% annually on average, depending on the region and application.  Africa, the Middle East and Asia would be the main regions driving consumption. Demand for glycerin in food, pharma and cosmetics would show moderate growth.