ACI 2014: Stability, slow growth, ahead for soaps

00:27 AM | January 30, 2014 | Vincent Valk, Rebecca Coons and Robert Westervelt in Orlando

“Cautious optimism” was the phrase buzzing through the halls of the Grande Lakes Orlando this week at ACI's annual meeting and conference. Soapers and home care chemical makers mostly expect a solid, but slow-growing, 2014 as the global economy continues to tick upward gradually. On the flip side, innovative new products such as unit-dose laundry detergents are adding to growth, while raw material costs are expected to remain manageable.

“The mood is cautious optimism,” says Neil Carr, business president/functional materials at Dow Chemical. “We are preparing for similar economic growth as in 2013.” ACI attendees say that confidence in the economic outlook is slightly higher than last year, and that the troubled European economy has likely hit bottom and should begin to rebound, albeit slowly. However, few soapers see anything on the horizon that will jumpstart economic growth. “On average, our customers have some caution,” says Oliver Hufer, v.p./home and personal care at Solvay. “The are some downsides in big markets, so global GDP growth shouldn't be much higher than it was last year.”

Tom Nelson, director/customer business development at P&G Chemicals, says the prevailing mood at ACI is optimism about 2014. Customers are actively seeking supplies of key ingredients for their businesses, and ACI provides “opportunities for us to partner with our customers to build our mutual business,” he adds. P&G Chemical is investing in its supply chains to match its capabilities to their needs in a more efficient way.

Of course, emerging market growth is expected to outpace mature market growth. However, some emerging markets are cooling down. Economic growth in China continues to decelerate, as well, although it remains in the mid-to-high single digits, attendees say. Home care chemical makers are also looking to form sales relationships with regional consumer goods companies in large developing markets, which are often growing faster than multinational brands and have greater sensitivity to local needs.

In the absence of much market uplift, innovation is a crucial way for soapers to gain share. Many attendees cited the rapid rise of unit-dose laundry as a positive trend in innovation. “Our tailwind is innovation,” says Gabriel Tambourgi, head of care chemicals at BASF. “The single-unit dose trend is very positive in the US and is moving into Europe.”

Consumers will often pay a higher price of unit-dose laundry, as they will for other products perceived as easy-to-use, notes Kevin Gallagher, president/North America at Croda. Unit dose is growing faster globally than projected, and P&G's unit dose business was a high point in 2013, Nelson says. “We’ve got some new innovations as a company that are driving demand for our oleochemical products,” he adds.

Unit dose laundry also plays into sustainability trends, as it cuts down on the overuse of laundry detergents, attendees say. Product manufacturers remain highly interested in improving resource efficiency, says Dana Nystrand, marketing manager at Evonik. Producers are seeking products that improve performance and enable compaction for growing product areas such as pods and more convenient cleaning products, she adds.

Sustainability in general is a big focal point of discussions between home care chemical makers and their customers. Many customers are interested in developing products that can wash clothes with cold water, or eventually even no water, says Christi Stiers, global business director/consumer and industrial solutions at Dow. Many innovation initiatives are tied into customers sustainability goals. “The industry is moving away from reacting defensively to regulation” on sustainability and the environment, says Dirk Buengel, senior v.p./care chemicals, North America at BASF.

The sustainability trend even relates to feedstocks for home care chemicals. Many of Croda's customers now insist some portion of the company's products use mass balance analysis for palm oil, meaning that certified sustainable palm oil be tracked through the entire supply chain, Gallagher says. This enables companies to credibly claim that some specific proportion of a product is sustainably sourced, he adds. “Our customers have deadlines on this,” Gallagher says.

Feedstock prices, for both oleochemicals and palm oil, are forecast to remain stable. Raw material prices were relatively calm throughout most of 2013—showing steady growth after correcting to historical averages—but were impacted by Typhoon Haiyan, which devastated the Philippines in November.

New capacity is coming onstream for both petrochemicals and oleochemicals, attendees note, with petrochemical capacity focused in North America, and oleochemical capacity focused in Asia. Oleochemical capacity will come onstream sooner, which should bring prices in that market down in the short-term, according to Gallagher. However, longer-term, the shale gas boom in the US could eventually find its way downstream to surfactants and other home care products. “It will be interesting to see how the new US petrochemical crackers impact the synthetic alcohol market,” says Emmanuel Butstraen, president/Novecare at Solvay. “New capacity in petrochemicals could lead to lower prices.”