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Global Markets for Oleochemical Fatty Acids

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Bharat Book introduces a report "Global Markets for Oleochemical Fatty Acids" Coverage of consumer trends that drive many of the end markets, such as cleaning, beauty, and food.

Derivatives will experience the most growth, while personal and homecare applications will reap the benefits of the drive towards greener and more biodegradable chemicals.

This BCC Research study is focused on the natural––based fatty acid industry, which is part of the wider oleochemical industry. The natural based fatty acid industry has been a workhorse in the chemical industry for a number of years, but it is a brightly burning star today fueled by the green chemistry agenda. The reason is that the raw material consumed to produce the oleochemicals is mainly based on material that is renewable, sustainable and readily biodegradable.

This study reviews how the industry has recovered from the economic slowdown of 2008 and 2009, and how it will develop and change over the next five years through 2017. Global value demand for natural fatty acids, as well as the byproduct glycerin, will grow 9.8% annually from the current manufacturing value of $7.7 billion in 2011 to $13.5 billion through 2017. This is based on the expectation that prices of key vegetable oils and animal fats will continue to rise sharply during the six–year period due to pressure on stocks from not only the fatty acid sector, but also the self–sufficient energy generation (bio–fuel) and food industries as well as export taxes imposed on key vegetable oils. In tandem, the demand for the base oleochemicals will largely reflect the gross domestic product of the developing nations across Asia, South America, Eastern Europe, the Middle East and Africa. However, the profitability for the operators will be squeezed as raw materials are a substantial portion of the manufacturing costs and there is difficulty in passing these fully across to the customers.

Derivatives will experience the most growth, while personal and homecare applications will reap the benefits of the drive towards greener and more biodegradable chemicals. The wax applications (including candles and crayons) segment is expected to benefit from the lack of sufficient paraffin volumes to meet demand as a result of petrochemical refineries shifting production streams to match demand from the motor oil industry. A shift towards alternative waxy substances will also be driven by the high price of crude oil passing along the whole fossil fuel supply chain.

This study looks at the basic oleochemical business of fatty acids based on fats and oils and touches upon the impact of the biodiesel industry on the market. It presents historical demand data for 2008 and 2011, estimates for 2012 and projections for 2017. It reviews the main markets for the major acid types from stearic acid, distilled fatty acids, polyunsaturated (including tall oil fatty acid: TOFA), fractionated fatty acids and monounsaturated oleic acid. It reports on market sectors, reviews latest technology developments including the patent space, provides a regional perspective, examines the changing landscape of raw material and reviews the byproduct glycerin market.

Market shares provided by leading and active merchant players such as Emery Oleochemical, Arizona Chemicals, Kuala Lumpur Kepong (KLK), IOI, Wilmar International Vantage Oleochemical, Oleon, Felda, MeadWestVaco, Forchem, Braido, Oxiteno and CremerOleo are profiled. The report looks at how government incentives and regulations have impacted the industry especially with respect to self–sufficient energy resources and animal fat classification. It also assesses the impact of rising raw material prices, tight supply and demand curves for certain acid chains, the uncertainty of the economy in many of the developed countries around the world and the impact of the Roundtable on Sustainable Palm Oil (RSPO) accreditation.


The fatty acid industry provides multiple products that are used in a wide range of industries due to the functionality it offers as a result of its molecule structure. A typical fatty acid has two reactive sites; the minor is the double bonds situated along the straight alkyl chain, while the major is a carboxylic acid group at the start of the chain. Thus, the molecule is a starting material for a number of reactions changing the functionality and performance dependent on the fatty acid derivative formed. Fatty acids are excellent hydrophobes and thus are a key material for a number of very important surfactant groups.

The world economy is still in a fragile state with a number of financial stress points impacting the more developed regions, oleochemicals will be a vital resource to meet the ingredient needs of a number of specialty chemical formulators and consumer facing companies.

Oleochemicals service different types of markets, more industrial orientated segments require ingredients that can achieve or even surpass the performance specification of the application at a price that is affordable while the more wellbeing and health orientated markets require ingredients that are not only suitable for human contact, be that externally on the skin or internally such as orally digested, but are sourced from renewable and natural grown origins. In both cases ingredients consumed must meet all safety, health and environmental regulations and legalization. Based on these types of demand the more wellbeing sectors will grow faster in value terms with a CAGR between 12% and 16% from 2012 through 2017 compared to the industrial segment at between 7% and 10% over the same period.

There are a number of governmental tax break incentives for using biomass to generate energy and produce fuel products. There are also export tax incentives for major tropical oil plantation countries to use local companies to develop downstream manufacturing capabilities utilizing locally sourced materials. Combined these incentives will have a profound effect on the industry at various points along the value chain. The self–sufficient energy incentives will not only drive up the cost of raw material for producers, it will tighten the supply especially for tallow based economies. The export taxes will not only make it prohibitive for foreign companies, especially those located outside Asia, to source the high in–demand, medium–chain, fatty acid raw material; it will also mean that local producers gain an unfair monetary advantage over the competition since derivatives of these fatty acids or refined acids such as fractionated and distilled cuts are exempt from this export tax.

The exponential growth in certain segments of the oleochemical family led to the devastation of important ecological systems that cannot be recovered. In addition it resulted in the diversion of not only vital food ingredients, but the arable land used to grow the crops such was the eagerness of a number of companies to benefit from the high value demand. The industry is now going to great lengths to, not only meet the growing needs of the market, but to do this in a way that is sustainable while minimizing the impact of the food supply chain.


Twenty-five years ago the oleochemical industry was in the heartland of mainland Europe and North America with a small foothold in Asia. Today, the heartland has shifted towards Asia with over 65% of the capacity on the ground now residing in that region. Another revolution has taken place today with upstream plantation owners seeking routes and applications for their crops by taking over established and longtime oleochemical firms or moving products for the same price around the world regardless of destination.

While a global business, fatty acids have a high regional tendency due to the fact that moving fatty acids a long distance is expensive as acids are prone to air oxidation, color reversion, odor reversion, metal pick–up and partial crystallization. Several factors play a role in the selection of raw material for oleochemicals, which are availability, fatty acid composition, quality and price. A number of sources are interchangeable such as coconut oil or palm kernel oil or palm oil for tallow, but it can result in challenges around meeting certain specifications as it is not a direct like–for–like substitution.

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