The Development and Prospect of Oleochemicals Industry in the US

Global Oleochemicals Market

Chemicals derived from fats and oils are generally known as oleochemicals, including fatty acids, fatty esters, fatty alcohols, glycerin and all of their derivatives. Specialty oleochemicals are used for specific applications in various industries including cosmetics, industrial, paints and coatings, food processing, polymers, plastics, additives and others. For instance, glycerides and fatty acids are used mainly in paints and coatings.

The global oleochemicals market is expected to grow at a compound annual growth rate (CAGR) of 5.8% from 2020 to 2027 (Grandview Research). Demand growth can be attributed to a shift in the trend toward sustainable chemicals. Oleochemicals feedstocks are renewable and safe for the environment and thus, are gaining prominence over their petroleum-based counterparts. They have the same functions as petroleum-based chemicals, but advantageous in terms of biodegradability.

Oleochemicals Applications in the US

In the US, demand for oleochemicals and their derivatives is increasing at a steady pace as the intake of personal care, pharmaceuticals and food products increases. Growing awareness of the use of hazardous chemicals such as parabens has contributed to higher usages, along with committed efforts and initiatives by various international companies on adopting sustainability.

The US is perceived to be one of the world’s leading beauty and personal care markets, emerging as the fastest-growing product in the country. These segments are the major consumers of oleochemicals  commonly used in hair care formulation, skin care, creams, gels, ointments and other products in the US. Growing demand for sustainable and biodegradable products to reduce reliance on petrochemicals, is also apparent in the US cosmetics industry. According to industry estimate, in 2019, the revenue of the US cosmetic industry is estimated at around 49.2 billion USD. The expansion of the cosmetics market in the US may stimulate demand growth for palm-based oleochemicals.

Other big consumers of oleochemicals in the US are consumer goods, including direct chemical products, household cleaners, drinks, and food flavorings. Moreover, US textile industry primarily used oleochemicals in emulsifiers, antistatic agents, microbial agents, lubricants, dyeing agents and wetting agents.

Traditional application of oleochemicals for various application such as surfactants, personal care products, and food additives have now been extended to new applications. Recent developments have created new applications for oleochemical products in new segments such as in biosurfactants, lubricants, and polymers which offer substantial prospects for companies in the long run.

Malaysian Palm-based Oleo Exported to US

Malaysia continues to be one of the leading producers and exporters of palm-based oleo in the world. The total export of Malaysian oleochemicals products for year 2020 amounted at 3.058 million MT, decreasing by 6.7% from 3.28 million MT in 2019. Despite total export volumes being lower, however the export value recorded an increment of 1.4% to RM 12,467 million from RM 12,299 million valued in 2019.

Total Malaysian Oleochemicals Export
Year 2017 2018 2019 2020
Total Exports (‘000 tonnes) 2,774 3,091 3,280 3,058
Export Value (RM million) 15,015 14,264 12,299 12,467
Source : MPOB

The oleochemical capacities in Malaysia for the year 2017 until 2020 are as follows:

  2017 2018 2019 2020
Average Utilization Rate (%) 94.85 99.04 97.36 94.57
Total Operation (in Dec) 19 19 21 20
Capacity in Operation (MT/Year) 2,668,929 2,668,929 2,680,941 2,629,941
Source : MPOB

For the year 2020, total volume of palm-based oleochemical products exported to the US amounted to 321,287 MT with a total value of RM 1.43 billion. The main export product is palmitic acid, accounted for 21.1% of the export volume, followed by refined glycerine at 19.6%. Other top palm-based oleochemical products include lauryl-stearyl alcohol, calcium stearate, stearic acid, distilled pofa and stearyl alcohol.

The use of palmitic acid in the US dairy industry is on a growing trend, according to an industry survey. It is an essential component in the feed formulation for the dairy cows. Their advantages include increased milk fat yields and improved feed efficiency across production level of cows. The International Dairy Foods Association study indicated that the US dairy industry supports roughly 3 million jobs and generates around $625 billion for the American economy every year.

US customers increasingly prefer natural-based products, and this trend is likely to become more prominent in the country in the near future. Producers of personal care products, such as soap and laundry detergent, are exploring the opportunity to increase vegetable-based products in their applications.  This is followed by the rising market demand towards responsibly sourced, natural goods and organic products. The banning of trans fats may further boost the consumption of palm-based products in the US.

In addition, consumer preference for bio-based chemicals over conventional petrochemicals is anticipated to drive the product demand further. Compliance with the national and international regulatory norms for sustainable cultivation, manufacturing and distribution along with acquiring certifications, such as USDA, has turned out as a significant driving factor for manufacturers involved in domestic as well as offshore businesses.

Conclusion

Shifting consumer trend towards natural and less toxic ingredients in household products and beverages is anticipated to steer oleochemicals demand in the US in the future. Demand for personal care products is increasing contributed by increasing disposable incomes, product innovation, and high market penetration. Moreover, owing to growing demand for sustainable and biodegradable products in order to reduce reliance on petrochemicals , there is a growing demand for sustainable solutions and bio-degradable products. This will further support the application of palm-based oleo and is expected to create growth opportunities for palm-based oleo manufacturers.  

Some of the prominent players in the US oleochemicals market include Vantage Specialty Chemicals, Emery Oleochemicals, Evonik Industries, Wilmar International, Cargill, TerraVia Holdings, Inc., and Kao Chemicals. Oleochemicals market in the US is characterized by vertical integration across each component of the palm oil value chain. The value chain starts with the oil palm plantation, which generally involves independent farmers or plantation companies, all the way until end-product manufacturers, providing aplenty of opportunities for Malaysian companies to venture into.

Prepared by Zainuddin Hassan and Nur Adibah Mohd Razali

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