1. Initial Stage: Before the 1990s, China oleochemical industry mainly developed its home-grown technology and was confined to soap production and soap co-products like stearic acid and glycerol. The production scale was small and the technology was relatively backward.
2. Developing Stage: From the 1990s to the early 21st century, China’s further reform and opening up policies had created a good economic and political environment. Through introducing the advanced technologies of Germany, Italy and other countries, the production scale of enterprises was greatly enlarged and the technical level was improved, which laid a good foundation for the development of China oleochemical industry.
3. Rapid Growth Stage: Since 2003, the influx of some large multinational groups (mainly referring to those of Malaysia and Singapore) had brought in the advanced technologies and business principles. Meanwhile, many domestic enterprises began to build up or expand production devices, which greatly enhanced their production scale and concentration. Hence, the oleochemical industry entered into a rapid development period.
FIGURES
1.China industrial vegetable oils mostly rely on import from abroad, and the total import quantity is nearly 2 million tons; Palm stearin is one of the major industrial oils, and its import quantity grows year by year, but due to the high price in 2011, the import decreased a bit; The import of Coconut oil fluctuating every year mainly impacted by its price; The total imports decreased in 2011 due to the increase on the use of kitchen waste oils and animal oils within China
2. Palm stearin import by countries: Malaysia (59.78%), Indonesia (39.80%), India (0.42%)
3. PKO Import by countries: Malaysia (38.30%), Indonesia (61.06%), Others(0.64%)
4. Coconut Oil Import by Countries: PhilipineS(25.73%), Indonesia (72.74%), Others(1.53%)
APPLICATION OF OILS & FATS IN OLEOCHEMICALS INDUSTRY
1. Palm Stearin are mainly made into fatty acid, soap, shortening, candle etc., and its import quantity is impacted by the production of the above.
2. The tariff reduction of Palm Stearin favored its import activity.
3. PKO are mainly used to produce fatty alcohol (60%), and some of them are made into lauric acid, soap, candle and food as well.
4. Coconut Oil are mainly made into soap and margarine, and part of them are made into fatty alcohol. ( Only when the price gap is up to $50/t)
PRODUCTION OF OLEOCHEMICALS IN CHINA
1. At present, the number of major players on fatty acid is 17 in China, with a total capacity of 1.67 Million MT, which accounts for 80% of the country’s total oil hydrolysis capacity at 2.1 million. The rest 20% are mainly soap manufacturing equipment.
2. The players are mainly in East China, and the capacity in Jiangsu Province alone is over 900,000 tons/a, which accounts for 40% of the country’s total capacity.
3. At present, China has 8 major p layers on fatty alcohol, with the total capacity of natural alcohol at 480,000 MT, synthetic alcoh ol at 80,000 MT.
4. The players are mainly in North East and East China, which accounts for 39% and 50% of the total capacity respectively. The biggest 4 players, Liaoning Huaxing, Teck Guan (Rugao) Sasol-Wilmar, and Yangba Petrochemcials account for 82% of the total capacity. Jiahua, a chemical company, is building a 270,000 t/a facility in Zhejiang Province of East China. Zhejiang Hengxiang also expanded its capacity by another 50,000 t/a in 2013.
5. The capacity increased steadily prior to 2010. Output of fatty acid was increasing every year, especially in 2010 due to the new and
expansion in capacity that put into operation on that year. Due to fluctuation in raw materials prices, global economy turmoil, and slowdown
in China economy growth, fatty acid production in 2011 recorded marginal decline
GLYCERIN
1. Output of glycerin produced by oil hydrolysis was 130,000 tons in 2011, while the import quantity was 121,500 tons.
2. The import quantity of crude glycerin was 395,000 tons in 2011, with a growth of 19%.
3. Currently, China glycerin consumption is over 600,000 tons.
4. As a by-product of biodiesel, crude glycerin is very cheap, but the impurities in it like esters and salts make a great pressure onto the environment.
5. In recent years, more attention given to development intermediate oleochemicals products using glycerin.
6. Several epichlorohydrin facilities using glycerin has been commissioned in China, with a total capacity of almost 100,000 tons/a. Other facilities of 280,000 tons/a are under construction, and are expected to be commissioned in 2013.
7. The facilities of 1,3-propylene glycol made from glycerin are under construction now, and it’s expected that the total capacity will be 140,000 tons/a.
8. The projects of glycerin producing 1,2-propylene glycol are under development.
COMMENTS AND OUTLOOK
1. Since the Indonesian government implemented new palm oil export tariff policy, China oleochemical enterprises was facing great pressure.
2. Palm oil price remained volatile, and stearic acid market showed a clear downward trend. Some companies like Rugao Shuangma Chemical and Cambridge Olein have established palm oil plantations and oleochemical factories in Indonesia in order to develop the raw material source channels.
3. The depressing real estate industry affected the demand for glycerin, while the import of crude glycerin hit a record high.
4. The Dutch chemical giant Akzo Nobel completed the acquisition of Boxing Huarun Olecchemicals. So the two China’s fatty amine industry leaders (the other is Feixiang Chemical acquired by Rhodia) were both acquired by multinational companies.
5. Due to the weak demand of China’s domestic fatty acid downstream market, the output of stearic acid and soap grain fell.
6. Influenced by the sharp fall of nearly 60% of the lauric acid price from the beginning to the end of the year 2011, the price of natural fatty alcohol dropped from RMB30,000/ton at the 1st quarter to RMB16,000/ton at the end of 2011, with a fall of 46%.
7. The world economy is faced with lots of instability and uncertainty in 2012, and the European debt crisis will be the biggest risk, which will seriously affect China's oleochemical industry.
8. Factors like the price decline of raw materials (palm oil, etc.) as well as rising labor cost has brought huge pressure to China’s domestic oleochemical enterprises.
9. The market downturns of 2011 and the 1st half of 2012, along with excess capacity, have resulted in the increasing inventory pressure and also hinder the innovative effort among the companies.
10. Merger and acquisition within the industry will continue.
11. The output of fatty acid, fatty alcohol and fatty amine is expected to drop marginally.
12. As the acylglycerol epichlorohydrin and other production equipments are put into operation one after another, the demand for glycerin will increase greatly so as to enhance crude glycerin import.
ISSUE AND CHALLENGES FOR OLEOCHEMICALS INDUSTRY
1. Highly dependent on import for the supply of raw materials.
2. Capacity was overly expanded and mostly installed with low grade technology.
3. Sufficient supply of basic products while shortages faced in further downstream oleochemicals.
4. Lack of resource in carrying out R & D among the players and shortages in relevant technical expertise.
5. Increasing cost of production due to increase in labor cost and also environmental management cost.
CONCLUSIONS AND SUGGESTIONS
1. China's industrial oils and fats mainly rely on import, among which, the palm oil & palm kernel oil are imported from Malaysia & Indonesia and the coconut oil from Philippines.
2. After 2003, China oleochemicals industry began to enter a rapid development period. Up to now, the whole capacity of oil hydrolysis is 2.1 million tons, fatty alcohol 480,000 tons, fatty amine 176,000 tons, mainly distributed in North and East China. The foreign enterprises take a leading role.
3. The import tariff of oils and fats is higher than that of oleochemicals like fatty acid and fatty alcohol, which reduce the competitiveness of China’s oleochemicals enterprises.
4. The global economy downturn and oil price fluctuation in recent years bring the huge pressure to China’s oleochemical enterprises.
5. In future, with the increasing demand for oleochemical applications, China oleochemical industry will face more and more opportunities as well as challenges.
6. Suggestions include source for new raw materials sources, increase utilization of current capacity and focus on further downstream development, intensify Research and Development efforts and increase differentiation in products offered.
(Source: China Cleaning Industry Association)
