Integration of raw materials and production in the supply chain will help reduce the production costs of oleochemicals
Kuala Lumpur, Malaysia – September 2, 2014 – Southeast Asia has become a hotbed of activity in the oleochemicals production space. This is due to a combination of factors: the abundant availability of raw materials, escalating consumer preference for vegetable-based products, and low manufacturing costs.
New analysis from Frost & Sullivan, Southeast Asia Oleochemicals Market, finds that the products manufactured in Southeast Asia are mainly basic oleochemicals that include fatty acids, fatty alcohols and glycerin. In 2013, the revenue of the fatty acid market was US$1.26 billion, fatty alcohol was US$471.6 million, and refined glycerin was US$61.1 million. In 2020, these revenues are expected to increase to US$2.74 billion, US$1.03 billion, and US$131.9 million, respectively.
“All over the world, the demand for fatty acids and fatty alcohols is swelling in end-user industries such as cosmetics, food, plastics, and rubber,” said Frost & Sullivan Chemicals, Materials & Food Consultant Sharmila Subramaniam. “Exports of these two derivatives are also on the rise as the products offered by many regional participants, especially those in Malaysia and Indonesia, are competitively priced and highly valued in the global market.”
However, the markets are pegged back by the cost of feedstock. The intensifying demand for vegetable-based raw materials has had a substantial bearing on the profit margins of manufacturers, as raw materials account for 80 to 90 percent of the costs of fatty acids or fatty alcohols. Consequently, the frequent fluctuations in the prices of vegetable oils, such as palm oil and coconut oil, ripple into the oleochemicals market.
Oleochemicals manufacturers can manage price volatility and even stoke value creation by integrating their business with upstream plantations. Integration of raw materials and production in the supply chain will not only reduce production cost but ensure that oleochemicals manufacturers have a constant supply of raw materials without compromising their bargaining power over the suppliers.
“As global consumer preference for natural and environment-friendly products continues to rise, demand from markets such as China, India and the United States will drive the Southeast Asian oleochemicals market,” concluded Sharmila. “The market will also benefit from emerging applications for all three derivatives – fatty acids, fatty alcohols and glycerin – in the areas of biolubricants, green chemicals, bioplastics, biopolymers, antioxidants and epichlorohydrin.”
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