mpoc fortune - vol08 august 2009

16
WITH a population of 28.1 million people, Venezuela’s consumption of oils and fats can be considered relatively small compared with countries such as China and Malaysia. While China has a huge population to create the volume in demand for oils and fats, Malaysia has extensive downstream activities that consume up to 4 million tonnes annually. However, Venezuela saw a steady increase in the uptake of oils and fats in the past few years. According to Oil World, oils and fats consumption in the country reached 857,000 metric tonnes (MT) in 2008, an increase of 21.5 per cent from 705,600 MT recorded in 2007. A key fact to note is that the 10.3 per cent average growth in oils and fats consumption in Venezuela since 2003 was mainly due to the country’s strong economic growth, during which its GDP registered an average growth rate of 10.4 per cent a year – thanks to the hike in crude mineral oil prices. As the 10th largest producer of petroleum products, Venezuela’s economy is highly dependent on the export of crude mineral oil, which brings 90 per cent of its export earnings and 50 per cent of the federal budget revenue. However, the country’s production of oils and fats is not sufficient to fulfill the consumer demand because of the low involvement of the workforce in agriculture and low crushing capacity. Hence, more than 80 per cent of the oils and fats required are imported. The import of oils and fats grew at 10.2 per cent a year from 2003, with soybean oil, the major oil consumed in the country, accounting for almost 70 per cent of the total oils and fats imported in 2008. Venezuela’s industrial activities are mainly in the heavy industry sector, such as oil and gas and mining, with the development of other manufacturing activities being rather slow or even backward. Output by the manufacturing sector actually dropped by almost 5 per cent at end of 2005 compared with that of a decade earlier. Hence, most of the oils TM MALAYSIAN PALM OIL COUNCIL KKDN PP 14669/05/2010 (024659) VOL: 8 2009 MPOC FORTUNE Continued on page 11 MARKETING & MARKET DEVELOPMENT DIVISION For more information, please contact Tel : 603 - 7806 4097 Fax: 603 - 7806 2272 DIRECTOR Wira Adam [email protected] MANAGER Muhammad Kharibi Zainal Ariffin [email protected] MARKET ANALYSTS Asia Pacific Desmond Ng Kok Hooi [email protected] Lim Teck Chai [email protected] South Asia Fatimah Zaharah Md Nan [email protected] Middle-East Mohamad Suhaili Hambali [email protected] Africa Nor Iskahar Nordin [email protected] Europe Azriyah Azian [email protected] Americas Ahmad Fadzli Abdul Aziz [email protected] Source: Oil World 0.0 50.0 100.0 150.0 200.0 250.0 300.0 350.0 400.0 450.0 500.0 2003 2004 2005 2006 2007 2008 Import ('000 MT) Soybean oil Tallow & Grease Palm oil Other Figure 2: Venezuela – Oils & Fats Import 0.0 100.0 200.0 300.0 400.0 500.0 600.0 700.0 800.0 900.0 2003 2004 2005 2006 2007 2008 Consumption ('000 MT) Soybean oil Palm oil Tallow & Grease Corn oil Sunflow er oil Other Figure 1: Venezuela – Oils & Fats Consumption Venezuela Consumes More Oils and Fats

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The Malaysian Palm Oil FORTUNE is MPOC's (Malaysian Palm Oil Council) monthly market update covering the latest development in the oils and fats market. This newsletter can now be downloaded via MPOC's Website (http://www.mpoc.org.my). You can also make use of the Malaysian Palm Oil FORTUNE as your platform to advertise your products/services. We are ready to offer advertisement space in each monthly issue at very affordable rates.

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Page 1: MPOC Fortune - Vol08 August 2009

WITH a population of 28.1 million people, Venezuela’s consumption of oils and fats can be considered relatively small compared with countries such as China and Malaysia. While China has a huge population to create the volume in demand for oils and fats, Malaysia has extensive downstream activities that consume up to 4 million tonnes annually.

However, Venezuela saw a steady increase in the uptake of oils and fats in the

past few years. According to Oil World, oils and fats consumption in the country reached 857,000 metric tonnes (MT) in 2008, an increase of 21.5 per cent from 705,600 MT recorded in 2007. A key fact to note is that the 10.3 per cent average growth in oils and fats consumption in Venezuela since 2003 was mainly due to the country’s strong economic growth, during which its GDP registered an average growth rate of 10.4 per cent a year – thanks to the hike in crude mineral oil

prices. As the 10th largest producer of petroleum products, Venezuela’s economy is highly dependent on the export of crude mineral oil, which brings 90 per cent of its export earnings and 50 per cent of the federal budget revenue.

However, the country’s production of oils and fats is not sufficient to fulfill the consumer demand because of the low involvement of the workforce in agriculture and low crushing capacity. Hence, more than 80 per cent of the oils and fats required are imported. The import of oils and fats grew at 10.2 per cent a year from 2003, with soybean oil, the major oil consumed in the country, accounting for almost 70 per cent of the total oils and fats imported in 2008.

Venezuela’s industrial activities are mainly in the heavy industry sector, such as oil and gas and mining, with the development of other manufacturing activities being rather slow or even backward. Output by the manufacturing sector actually dropped by almost 5 per cent at end of 2005 compared with that of a decade earlier. Hence, most of the oils

TM

MALAYSIAN PALM OIL COUNCIL KKDN PP 14669/05/2010 (024659) VOL: 8 2009

MPOC FORTUNE

Continued on page 11

MARKETING & MARKET DEVELOPMENT DIVISION

For more information, please contact Tel : 603 - 7806 4097 Fax: 603 - 7806 2272

DIRECTOR

Wira Adam [email protected]

MANAGER

Muhammad Kharibi Zainal Ariffin [email protected]

MARKET ANALYSTS

Asia Pacific Desmond Ng Kok Hooi [email protected]

Lim Teck Chai [email protected]

South Asia Fatimah Zaharah Md Nan [email protected]

Middle-East Mohamad Suhaili Hambali [email protected]

Africa Nor Iskahar Nordin [email protected]

Europe Azriyah Azian [email protected]

Americas Ahmad Fadzli Abdul Aziz [email protected]

Source: Oil World

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Figure 1: Venezuela – Oils & Fats Consumption

Venezuela ConsumesMore Oils and Fats

Page 2: MPOC Fortune - Vol08 August 2009
Page 3: MPOC Fortune - Vol08 August 2009

A month ago in this technical analysis column, I have expected the price of FCPO in Bursa Malaysia to have a bullish bias and test the resistance level of RM2,300 per metric tonne because that was the long-term 90-day average. The price then was RM2,020. After facing some resistance at RM2,340, the price of FCPO continued to climb and went as high as RM2,515 one day before this article was written. The price of FCPO pulled back to close at RM2,441 on Aug 14 because of sharp overnight fall in the price of soybean and FCPO in the Dalian Commodity Exchange. The correction has formed a bearish reversal chart pattern based on Japanese Candlesticks analysis. So, the question is, is the price of FCPO going to correct further downwards?

Minister for Plantation Industries and Commodities Tan Sri Bernard Dompok said recently that August inventories for palm oil may remain unchanged from a month earlier at 1.3 million tonnes. Cargo surveyors Intertek Agri Services and SGS (M) Bhd are due to announce Malaysia palm oil export from Aug 1 to 15 in the next few days, but traders are expecting shipments to increase 1 per cent from the same period last month. Demand from China, which is Malaysia’s main palm oil importer, remains unchanged despite its worrying economy. Weather forecasters are seeing developing El-Nino weather patterns towards the end of this year.

The FCPO price uptrend may be able to be sustained because of the strong fundamentals. Technically, the price of FCPO is still in an uptrend. The price is above the short-to long-term 30-, 60- and 90-day moving averages. Price is just slightly above the average and volume has been slightly increasing in the past one month. The 90-day average is currently at RM2,380. While the 60-day average is at RM2,293. The rebound

from the recent low of RM2,000 confirms the intermediate up trend line (S1 on the chart).

Momentum indicators are showing strength in the current rally. The Relative Strength index (RSI) Moving Average Convergence/Divergence (MACD), Momentum and Average Directional Index (ADX) indicators are all making new highs. The strong momentum shows strong support and less resistance and therefore there is a high chance that the price can climb higher. Therefore the pullback on Friday may be short-lived with a mild correction and the uptrend is expected to resume. So, this answers the question in the first paragraph.

The short-term support level is at RM2,300 (the 60-day average) and this is where the price is likely going to be supported in the current pullback. If the

price of FCPO can stay above this level, then expect it to continue to go higher and test the RM2,800 resistance level within this year. So there you go. Based on technical analysis, I am currently bullish in the price of FCPO and RM2,800 can be tested again and this answers the title for this analysis.

There will be resistance along the way, especially at RM2,600. However, if the price falls below RM2,300, further sideways correction is expected as it should hover around the averages if there is not much development in the industry or when the market is uncertain.

MARKETWatch

FCPO daily chart as at Aug 14, 2009. Charted by Benny Lee using NextView Advisor Professional

Mr. Benny Lee is a private trader, trainer and sought-after speaker in the financial market. He is the Chief Market Strategist for NextView Group. NextView Group is a group of companies in the Asian region that provides a leading real-time investment tool for both professional and retail investors. NextView is also a leading Investor Education training provider. For more information, log on to www.nextview.com.

The above analysis and commentary is based on the writer’s personal opinion towards the price of crude palm oil using technical analysis and should not be construed as any form of investment advice. The writer will not be responsible for any decision made from using the above article.

W

MPOC FORTUNE •  3

by Benny LeeChief Market StrategistNextView Group

RM2,800again for FCPO?

Page 4: MPOC Fortune - Vol08 August 2009

For more information, please contact :

ICB Global Management Sdn Bhd No. 3, Jalan Sri Hartamas 7, Taman Sri Hartamas, 50480 Kuala Lumpur, Malaysia. Tel: +603 6201 6051 Fax: +603 6201 6053

Page 5: MPOC Fortune - Vol08 August 2009

MPOC FORTUNE •  5

GHANA has offered Malaysian palm oil players opportunities to take part in its oil palm plantation sector. This follows the inclusion of oil palm in the list of special development projects under the President’s Special Initiative (PSI). Though this list was launched in October 2002, Ghana has, until this year, yet to attract significant foreign investment into its oil palm sector.

There has been no official indication as to why the country has not been able to entice major foreign investment into oil palm planting. Local officials, however, pointed out the scheme has attracted good response from the smallholders and in the words of Ghana’s President, efforts taken to get the small farmers into oil palm growing are to create employment, reduce oils and fats import and diversify the country’s dependency on cocoa as a cash crop. The thrust of the plan is to replant aging trees, improve planting techniques and open new oil palm plantations.

This is an area for Malaysian industry players to note: Ghana lacks much of the expertise needed in all areas of oil palm growing and palm oil production, and is looking for professional assistance, particularly towards Malaysia, with which it has good diplomatic relations. Ghanaian officials say Malaysian palm oil industry players are most welcome to help in the country’s oil palm development programme. Assistance is needed in land preparation, water management, provision of machinery for oil palm plantations and advisory services.

The government is also hoping that the Malaysia’s Incorporated Society of Planters (ISP) will open a branch in

Ghana to train local people in oil palm plantation management. The government is currently working to develop 300,000 hectares of new oil palm plantations and is encouraging foreign investors to participate in it.

In terms of investment benefits under the PSI, potential investors can opt to fully own the plantations or enter into joint ventures with the locals. The minimum equity required for foreign investment in a joint venture is US$10,000, while wholly-owned foreign investments require an investment of at least US$50,000. Potential investors will enjoy exemption from import duties on plants, machinery, equipment and accessories.

Further, investors will benefit from a capital allowance of 50 per cent on the first year of investment and 25 per cent in subsequent years for plant and machinery. Other benefits are 20 per cent depreciation allowance in the first year and 10 per cent in the subsequent years for buildings; corporate tax rebates of between 40 and 70 per cent; investment allowance of 7.5 per cent per annum and full repatriation of earnings. Planters can also buy oil palm seedlings at ¢15,000 or RM2.40 per seedling under the programme. The seedlings are from the

Oil Palm Research Institute (OPRI) and a Grower Support Unit (OSU) has also been established to give planters technical assistance in lining, pegging and planting.

Besides these incentives smallholders also benefit under the PSI. Among others, they need only start paying for their seedlings after five years, when they begin harvesting the fruits. The smallholders have been told to form groups of between 15 and 40 members, with each member providing not less than two acres of land for the project, and to accept investors who can finance the project. The President has set a target of smallholders planting 10,000 hectares of oil palm every year.

Estimating the country’s oils and fats self-sufficiency using the compound annual growth rate (percentage) for the country’s consumption and production at 2.9 per cent per annum and 1.9 per cent per annum respectively between 2004 and 2008, it is expected that Ghana’s oils and fats shortfall will increase from 62,500 MT in 2008 to 85,600 MT in 2012. However, should the targets set in developing oil palm plantations materialise, the country would be able to become self-sufficient in oils and fats in

Ghana’sOffer onOil Palm President’s Special Initiativeset to make Country NetExporter of Oil Palmfrom 2012

MARKETInsightsIns g

Ghana Oils and Fats Requirement: Projected Self-sufficiency 2008-2012 (’000 Mt)

Year 2008 2009f 2010f 2011f 2012f

Consumption 424.8 437.1 449.8 462.8 476.3

Production 362.3 369.2 376.2 383.3 390.6

Shortfall 62.5 67.9 73.6 79.5 85.6

f: forecast

Continued on page 13

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Page 6: MPOC Fortune - Vol08 August 2009
Page 7: MPOC Fortune - Vol08 August 2009

FINAL PART

ALKANOLAMIDE AND AMID ETHERALKANOLAMIDE (mainly 6501 and CMEA), is active matter for certain liquid detergents, shampoos, liquid soaps and industry add-ons. Though not occupying a substantial part in the formula, it performs well in improving thickening and builders. Glycerine in alkanolamide obtained from one-step synthesis of oil and fat will not impair the performance of detergents and household chemicals that it is used in.

Alkanolamide prepared from methyl ester requires lower reaction temperature, while there is less secondary reaction, higher amide yield, higher purity, as well as lighter colour. This is an advanced method of alkanolamide synthesis and the product is called super alkanolamide. Currently, the major alkanolamide manufacturers include Zhejiang Zanyu, Guangdong Jingmei, Guangzhou Yeshu and Shanghai Yazhou, with domestic output totalling some 80,000 metric tonnes (MT).

Their products are mainly based on coconut oil and palm kernel oil, which can produce products in 1:2, 1:1.5, 1:1 mole ratio specifications according to the consumer’s requirement. Research and manufacturing have been reported on the production of alkanolamide based on oil and fats with longer carbon chain (mainly C16-18) as well as the production of fatty acid monoethanol amide. However they occupy a relatively small market share and their fields of application need to be further developed.

Reaction of alkanolamide with ethylene or propylene oxides can produce a series of surfactants based on amide ether with different polymerisation degrees, and they can further produce surfactants such as amid (ether) phosphates, amide (ether) borates, amid (ether) sulphates, and amide (ether) sulfosuccinates. These surfactants are suitable for washing special textiles and make the fabric soft after washing. They can also

be used as lime soap dispersing agent, levelling agent, wetting agent or leather liquoring materials to make the leather soft and highly flexible. Currently, the major amide ether manufacturers include Hubei Guan Sifu Chemicals Co Ltd, Shandong Normal University Chemical Plant and Zhejiang Zanyu.

Fatty acid esterFatty acid ester surfactants can be divided into monobasic alcohol ester, dibasic alcohol ester, glycerine and sugar ester. Monobasic alcohol ester can be applied in various lubricants, plasticizers for synthetic resin, substrates for cosmetics and pesticide solvents, depending on their molecular weight, unsaturation and branching degree. Methyl ester, as raw material for bioenergy and surfactants or as an intermediate applied in organic synthesis, plays a pivotal role. Dibasic alcohol ester includes monoester and diester of glycol (EG), polyglycol (PEG) and propanediol (PG). These esters, subject to their degree of esterification and polymerisation, as well as HLB values, can be applied as a thickener for the ink and dye industries, as well as an emulsifier and pearlescent agent.

Fatty acid monoglyceride and polyglycerol ester are major categories of fatty acid glyceride. Oil and fat go through transesterification with glycerine in certain proportions, and can produce a mixture of mono-, di- and tri-glycerides. Monoglyceride with a content of over 90 per cent obtained through molecular distillation has been widely applied as an emulsifier for food and cosmetics. Polyglyceryl ester is also an excellent food emulsifier. Currently, a facility with capacity of 500 MT per year has been completed in Shanghai Lulu Food Additives Co Ltd and the product is applied in the manufacture of almond syrup and ice cream.

One major category of fatty acid polyol ester is sorbitol fatty acid ester (Span). The domestic output of Span is les than 10,000 MT, with processing technique mainly relying on the traditional one-step method. Major manufacturers include

Tianjin Tianzhu Fine Chemicals Co Ltd, Lushun Chemicals Factory, Shanghai Auxiliaries Manufacturing Co Ltd, Zhejiang Qingming Chemicals and Zhejiang Chemicals.

Sugar ester is divided into esters of monose (glucose, fructose), diose (sucrose) and polysaccharide (cellulose), among which the usage of sucrose ester is more common.

Fatty alcohol etherA series of alcohol ethers, such as AEO2, AEO3, AEO7, AEO9 and JFC can be obtained from the ethoxylation of fatty alcohol. China’s production capacity of alcohol ester today is 600,000 MT, with the major producers being Jilin Petrochem Calcium Carbide Plant, Fushun Petrochem Synthetic Detergent Plant, Jiaxin Sanjiang Chemicals, Zhejiang Huangma Chemicals, Liaoning Huaxing Chemicals, Liaoning Oxiran Chemicals, Liaoning Kelong Chemicals, Beijing Rhodia Eastern Chemical, Shanghai Cognis and Fengyuan Biochemical. The newly established large-scale facilities are a propylene oxide alcohol ether plant with annual capacity of 120,000 MT set up by Dows in Zhangjiagang, a nonionic detergents plant with capacity of 60,000 tonnes established by German BASF and Sinopec; and a propylene oxide plant with capacity of 80,000 MT as well as a polyether polyatomic alcohol plant with capacity of 50,000 MT jointly established by Korea Komhu Petrochemical and Jiangsu GPRO Group.

Alkyl Polyglucoside (APG)APG is obtained from the reaction between fatty alcohol and glucose. Since the raw material is naturally obtained and has no by-products, it is biodegradable and safe for human use, besides having sound decontamination capability and compatibility as well, and therefore a popular green surfactant. Currently, industrial APG is obtained by two methods, the two-step method and the one-step direct synthesis method. APG has been successfully developed and launched in China in the 1990s.

MARKETInsightsIns g

Table 4: Major Domestic APG Manufacturers and Capacity No Enterprise Capacity Remarks (MT/year) 1 Yangzhou Lujie 8,000 One-step and two-step method 2 Shanghai Fakai 5,000 One-step method 3 Nanjing Lingxin 4,000 Two-step method 4 Yangzhou Chenghua 3,000 Two-step method 5 Shenzhen Changyuan 2,000 One-step method 6 Nanjing Petro-Chemical Institute 1,000 Two-step method 7 Henan Daochun 1,000 Cationic APG

Trends in Oilsand Fats-basedSurfactantsMarket Status of China’sNonionic Surfactants

MPOC FORTUNE •  7

Continued on page 9

Page 8: MPOC Fortune - Vol08 August 2009
Page 9: MPOC Fortune - Vol08 August 2009

MPOC FORTUNE •  9

However, its high price has limited sales and therefore, its application as well. Due to its instable quality and slow acceptance by the market, its actual usage is limited in China. There are seven major enterprises manufacturing APG in China (see Table 4), with total output of some 10,000 MT. APG is mainly used in personal cleaning products and pesticide emulsifiers. With the price of fatty alcohol falling, APG usage is expected increase, and by a broader market as well.

Ethoxylated Fatty Acid Methyl Ester (MEE)MEE is a new nonionic surfactant. It has poor foaming power due to the ester linkage in its molecular structure, but is non-toxic and biodegradable. It has good performance in detergency, wetting ability and penetrability, doing as well as as alcohol ether but cheaper. For example, ethoxylated methyl stearate can be used as an emulsifier, dispersant or oil phase modifier. In cosmetics, ethoxylated methyl laurate can be used as a wetting agent. The synthesis of MEE is addition of EO to fatty alcohol methyl ester under a special catalyst. Nowadays, MEE has been put into large-scale production both at home and abroad. China Research Institute of Daily Chemicals Industry and Jiangnan University have developed and patented a new catalyst, and completed research in the one-step preparation of methyl ester ethoxylate.

MARKET STATUS OF OILS AND FATS-BASED CATIONIC SURFACTANTSCationic surfactants are mainly produced by natural oils and fats. Quaternary ammonium salts are a major category of cationic surfactants, such as 1227, 1831 and D1821, which are widely applied as disinfectants, softening agents and antistatic agents. Usually, the industrial production of quaternary ammonium salts adopts batch technology. In 2007, domestic output of quaternary ammonium salt cationic surfactants totalled 32,000 MT, with a total sales volume of 30,000 MT.

In recent years, China has developed imidazoline cation, esterquarter ammonium salt, polyquaternary ammonium salt and organosilicone polyquaternary ammonium salt.

MARKET STATUS OF OILS AND FATS-BASED AMPHOTERIC SURFACTANTS China has been studying amphoteric surfactants since the 1960s. No. 3 Shanghai Detergents Plant developed dodecyl betaine (BS-12) and later, China Institute of Daily Chemical Industry developed imidazoline. Thereafter, several enterprises developed other kinds of amphoteric surfactants such as amido propyl betaine (CAB), sulfonyl betaine and amino acid. Today, China’s amphoteric surfactants are mainly betaine surfactants, with research focusing on optimising the technical conditions and application of new amphoteric surfactants such as imidazoline and amino acid. Betaine amphoteric surfactant has good compatibility with anionic, cationic and nonionic surfactants and is therefore widely applied in the chemical industry. It has good foaming power, antistatic property, works as a disinfectant, is non-corrosive and is biodegradable as well. In 2007, China’s output of betaine amphoteric surfactants totalled 7,000 tonnes. Table 5 shows China’s current production and research conditions for amphoteric surfactants:

TRENDS IN DEVELOPMENT OF CHINA’S OIL AND FAT-BASED SURFACTANTSAs a renewable resource, natural oils and fats are becoming more and more important, with plantation area and output expanding. Natural oils and fats, whether in terms of output, supply or cost and performance, have already satisfied varied demands for surfactants. Compared with petroleum-based

surfactants, those from natural oils and fats are more advantageous in terms of price, safety and sustainability. In this regard, replacing petrol-based surfactants with natural oil and fat-based surfactants has been attracting greater attention as a necessary development trend.

In China:

1) The use of fatty acids in the manufacture of detergents has been replaced by other surfactants. However, they still occupy a certain market share, and the manufacturing process has advanced from a backward method to oil and fat hydrolysis and continuous saponification, with new formulae also being introduced.

2) In recent years, there have been substantial technological developments in processing fatty acids through high pressure hydrolysis of oils and fats to produce fatty acid methyl ester; fatty alcohol through high pressure hydrogenation; and fatty amine through amination. The oleochemical industry has seen unprecedented rapid development in yield and quality and today, China produces sufficient high quality raw materials for the development and production of natural oil and fat-based surfactants at a low cost.

3) The development of sulfonation of sulphur trioxide and ethoxylation technologies are propelling the development of surfactants based on fatty alcohol ether and fatty alcohol sulphate. Alcohol-based surfactants have become the most widely used surfactants, and have already surpassed that of LAS.

Category

Betaine

Imidazoline

Amino Acid

Research and Manufacturing CompaniesNo. 3 Shanghai Detergents Plant, Zhejiang Zanyu, Shanghai Gaowei, China Institute of Daily Chemicals, Jiangnan University, Beijing Institute of Chemicals and Jinling Petro-chemical Institute

China Institute of Daily Chemicals, Dalian University of Technology, Jilin Research Institute of Chemicals and Tianjin University

Dalian Polytechnic University and Sichuan Institute of Daily Chemicals

Main Products

Alkyl betaine, amide propyl betaine, carboxyl sulfonyl betaine and alkyl trimethyl betaine

Carboxymethyl, propyloic, saltless carboxyl propyl sulphonate, carboxyl propyl phosphate

N-alkyl lactamine

Table 5: Production and research conditions of amphoteric surfactants in China

Continued on page 15

MARKETInsightsIns gContinued from page 7

Trends in Oilsand Fats-based

Surfactants

Page 10: MPOC Fortune - Vol08 August 2009
Page 11: MPOC Fortune - Vol08 August 2009

MPOC FORTUNE •  11

and fats in the country are mainly utilised in the food sector, primarily in the consumer cooking oil and fat sector.

CONSUMER COOKING OIL AND FAT SECTORThis sector took up the biggest chunk of the oils and fats consumed in the country in the past 5 years. According to Euromonitor, the consumption of oils and fats by the consumer sector amounted to 367,400 MT in 2008, or about 43 per cent of the total oils and fats consumed in the country. This is a slight reduction of 2.7 per cent from the volume recorded in 2007. However, a review of the sector’s development in the past few years shows that the demand for consumer oils and fats increased by an average of 6.6 per cent from 2003, when the volume then was 266,400 MT.

Being a necessity for the people in a country where 37.9 per cent of the population lives below the poverty line, prices of most consumer oils and fats products have been strictly controlled by the government since 2003. While this can assure the consumer of being able to continue consuming edible oils and fats products at an affordable price, manufacturers suffer losses when prices of raw materials hike. This is one reason why the output of cooking oil and fats saw a decline in 2008, as the small manufacturers in particular could not afford the higher cost of importing raw materials. This led to a fall in production despite the growing demand. Then, at the end of 2007, another drop was seen in consumption of oils and fats, this time because of a 25 per cent increase in the price of cooking oil packed for domestic consumers. This inevitably affected the poorer households that cut back on their cooking oil use by eating more non-fried dishes such as rice, roasted arepas and pasta. Some of the households also re-use oil used for frying for other purposes because of severe budget constraints.

Soybean Oil the Main Cooking Oil Consumed Soybean-based oil is the most common cooking oil used. Venezuela’s proximity to Brazil gives it access to competitively-priced soybean oil. Besides soybean oil, palm oil is the next preferred cooking oil for the low-income, while corn

oil is preferred by middle-income households. Sunflower and canola oils are positioned as healthier options and are primarily consumed by affluent households.

Among the players in the consumer cooking oils and fats market, local producer Empresas Polar CA was the leader in terms of sales value in 2007. With a 23 per cent share of the domestic market, the company produces a wide range of margarine and regular oil and fat spreads, with Mavesa and Nelly being the most popular brands in these categories. Cargill de Venezuela CA with 20 per cent of the consumer cooking oils and fats market takes second spot. Cargill leads in the packed cooking oil sub-sector and its most popular brands are Vatel (9.9 per cent of the market) and El Rey (4.9 per cent).

Empresas and Cargill have strong distribution networks and their brands are highly recognised. Third ranked Consorcio Oleaginoso Portuguesa SA (Coposa) enjoyed 14 per cent of the retail

market in 2007. This local company focuses on the lower-income consumers through its brands like Mirasol, Bonna and Korina. Its reach among the lower-income group came from its successful tie-up with Merca, a State-owned discount store chain.

Sales Slowdown Expected in Next Few Years While the strong GDP growth the past few years has improved overall household income among Venezuelans, inflation has been growing at almost double-digit at the same time. A sharp decline in crude mineral oil prices since end of last year has hurt Venezuela’s national income and with inflation still out of control, the possibility of improved household incomes has decreased. Hence, it is estimated that the consumption of household cooking oil and fats will grow only by 2.2 per cent a year for the next five years, from 367,400 MT last year to 410,300 MT in 2013. Desmond Ng

MARKETInsightsIns gContinued from page 1

Table 2: Breakdown in Percentage of Cooking Oils Retailed

2004 2005 2006 2007 2008Soybean 55.5 55.5 54.7 52.3 50.4Palm 7.8 7.9 7.7 7.3 6.9Corn 17.3 17.6 17.5 17.0 16.8Olive 13.3 11.9 13.2 17.0 20.0Sunflower 4.3 4.4 4.3 4.2 4.2Canola 0.0 0.9 0.9 1.0 1.0Other 1.8 1.8 1.7 1.2 0.7

TOTAL 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor

Table 1: Consumption of Oils and Fats in the Domestic Sector (’000 tonnes)

2003 2004 2005 2006 2007 2008 CAGR 2003-2008Cooking oils 200.5 222.6 242.9 260.2 286.5 276.5 5.9%Cooking fats 0.6 0.5 0.5 0.5 0.5 0.6 -1.5%Butter 2.1 2.3 2.3 2.4 2.5 2.6 4.4%Margarine 12.6 13.9 14.7 15.5 18.3 16.3 5.2%Spreadableoils and fats 50.6 55.4 63.0 67.8 69.7 71.4 7.2%

TOTAL 266.4 294.7 323.4 346.4 377.5 367.4 6.6%

VenezuelaConsumes MoreOils and Fats

Table 3: Market Share (% Retail Value) of Major Brandsof Household Cooking Oils and Fats

Brand Company % Market ValueVatel Cargill de Venezuela CA 9.9Mavesa Empresas Polar CA 9.1Mazeite Empresas Polar CA 6.3Gallo Representacion Gonviz CA 6.3Mirasol Consorcio Oleaginoso Portuguesa SA (Coposa) 6.0Nelly Empresas Polar CA 5.2El Rey Cargill de Venezuela CA 4.9Branca Cargill de Venezuela CA 3.4COPOSA Consorcio Oleaginoso Portuguesa SA (Coposa) 2.7Diana Industries Diana CA 2.6Bonna Consorcio Oleaginoso Portuguesa SA (Coposa) 2.3Korina Consorcio Oleaginoso Portuguesa SA (Coposa) 2.3

Page 12: MPOC Fortune - Vol08 August 2009

THE Republic of Turkey, with a population of 76.8 million (July 2009 estimate according to CIA’s The World Factbook), is the 18th most populated country in the world. Its strategic location linking Europe with Asia has given its oils and fats market a unique blend of traditions of the West and the East. Consumption preferences vary according to the country’s regions: olive oil is popular in the western and Aegean areas, while vegetable fats, margarine and butter are preferred in the eastern areas. As for the domestic liquid oils market, sunflower oil dominates.

Turkey is the third-largest producer, importer, consumer and exporter of oils and fats in the Middle East, after the United Arab Emirates (UAE) and Iran. It has a major potential as a re-export centre for solid fats like margarine, which it produces in abundance for the domestic and export markets. Though the production of margarine and other fats experienced some fluctuation in the last eight years, growth has been steady at 6 to 7 per cent a year and in 2008 (Graph 1), Turkey’s production for the domestic market accounted for 84.8 per cent of the total production. The domestic market for margarine and fats is largely for table margarine, vegetable ghee and industrial margarine and fats.

Palm oil as a cooking or liquid oil in the local market has yet to record a significant take-up. The soft oils in wide use for cooking are sunflower and soybean oils, with sunflower oil taking up 82 per cent of the market. Palm oil products are mainly channelled to the solid fats sector for the manufacture of margarine and vegetable ghee, with this sector taking up 450,000 to 550,000 metric tonnes (MT) annually to produce table, tub and brick margarines for the consumer market and fats and bakery margarine for the industrial market.

With more and more people becoming health conscious, consumers are seeking margarine products that are cholesterol and trans fat free. The biggest obstacle to the marketing of household margarine is its trans fatty acid content. Many consumers have stopped buying margarine containing trans fatty acid as it has been proven to lower the level of good cholesterol (HDL) and raise the level of bad cholesterol (LDL). This has got margarine producers aggressively introducing zero cholesterol and non-trans fat margarines to capture the growing demand for healthier margarines.

The Association of Culinary Products and Margarine Industrialists of Turkey (MUMSAD) was established in 2004 to unite industry members under one roof and to help the industry offer consumers safe and healthy products. MUMSAD also supports efforts to set required standards and codex for margarine and create greater awareness of these issues among producers and end users. MUMSAD has 31 members from 13 top, well-established margarine producers in Turkey, including Unilever, Ulker, Marsan, Turyag and Kucukbaym, which produce highly popular brands such as Sana, Rama, Kalbim and Teremyag. MUMSAD’s members control 92 per cent of the domestic market and all their products have to be trans fat free and carry the “NO TRANS FAT” tag on the packages. Currently, there is no growth in margarine consumption in Turkey, as seen in Graph 2, and this is because consumers have negative perceptions about the product. Among their concerns are that margarine contains a high level of cholesterol, contains trans fat, almost fully saturated

Turkey’s MargarineIndustry

MARKETInsightsIns g

050,000

100,000150,000200,000250,000300,000350,000400,000450,000500,000550,000600,000650,000700,000

2000 2001 2002 2003 2004 2005 2006 2007 2008

Domestic MarketExport Market

Graph 1: Total Margarine & Fat Production (Domestic & Export) in MT

Source: MUMSAD

2000 2001 2002 2003 2004 2005 2006 2007 2008

BrickTub

Graph 2: Margarine Consumption (Brick and Tub) in MT

Source: MUMSAD

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

12 •  MPOC FORTUNE

Continued on page 13

Opportunities for Palm Oil as Consumer Concernsover Trans Fats Grow

Page 13: MPOC Fortune - Vol08 August 2009

MPOC FORTUNE •  13

three years. Subsequent expansion of this industry will make Ghana a net exporter of palm oil from 2012.

As it aims to make palm oil a major export commodity, Ghana is looking at West Africa as a favourable export market as the region is developing fast, with a huge market for palm oil and imports currently exceeding one million MT a year. Between 1998 and 2008, the import of edible oils and fats and palm oil by West Africa grew at an average of 13.3 per cent and 21.4 per cent a year respectively.

The rising import of edible oils and fats by West Africa can be attributed to a number of factors, the most obvious being greater political stability and improved business climate, putting the region in a better position for international trade. Today, a number of countries there boast the

conditions demanded for domestic as well as foreign investments, which are now coming in to finance economic recovery and growth. Generally, it can be concluded that demand for oils and fats in West Africa is poised to grow as the region accelerates in its economic development. The shortfall of oils and fats in West Africa is expected to rise from 846,000 MT in 2008 to 948,900 MT in 2012, based on the compound annual growth rate of consumption and production at 1.1 per cent and 0.5 per cent a year respectively between 2004 and 2008.

Being the most stable and peaceful country in Africa and lying within the oil palm growing belt, there are areas suitable for developing oil palm plantations in Ghana, especially by Malaysian companies looking for land

abroad to expand cultivation. Malaysian palm oil players interested in taking advantage of these opportunities are encouraged to take part in the Malaysia-Ghana Palm Oil Trade Fair and Seminar (POTS) 2010, which will explore investment opportunities under this PSI. Upon identifying investment potentials, they can consider applying for grants initiated by MPOC under the Programme for Rebuilding and Improving Exports (PRIME) to cover part of their investment costs. This scheme covers feasibility studies and expenses required for site visits and negotiations. The scope of the grant not only covers investment in plantations but also for building infrastructure to support palm oil trade overseas and brand promotion as well.

Lim/ED

MARKETInsightsIns g West Africa’s Oils and Fats Requirement: Projected Self Sufficiency 2008- 2012 (’000 Mt)

Year 2008 2009f 2010f 2011f 2012f

Consumption 3,493.3 3,531.7 3,570.6 3,609.9 3,649.6

Production 2,647.3 2,660.5 2,673.8 2,687.2 2,700.6

Shortfall 846.0 871.2 896.7 922.6 948.9

f: forecastContinued from page 5

MARKETInsightsIns g

Continued from page 12

Ghana’s Offer on Oil Palm

fat and is made of animal fats – all of which are negative points for margarine in a society that’s pushing for healthier lifestyles.

MUMSAD has taken various initiatives to counter and educate consumers by launching a nationwide “7 Facts of Margarine” campaign in Turkey. The campaign states:

• Margarines are made of vegetable oil

• Margarines do not contain cholesterol

• Margarines do not contain trans fat

• Margarines contribute to diet diversity

• Margarines contain Omega 3 and Omega 6 oils

• Margarines contain vitamins A and D

• Margarines are a valuable sources of energy

To ensure the campaign effectively reaches the right audience, MUMSAD has invested heavily in massive advertising and media campaigns, public relations efforts and also uses local celebrities and reputable dieticians as spokespersons to spread the true facts about margarine.

These campaigns are gaining public attention and more people are beginning to accept that margarine is a good fat, does not contain cholesterol, is a good source of energy and contributes to nutrition diversity.

While any increase in the import of palm oil for margarine production may not be

that significant in the years to come, other factors such as the continuous growth in the food industry and margarine use by the bakery sector and greater public awareness about trans fat products will surely require more palm oil usage by Turkey. Price competitiveness and growing concerns about trans fat too will mean that palm oil will meet a larger portion of the future demand for ingredients to produce margarine, since the oil has obviously no cholesterol and is trans fatty acid free. All of these have led to the industry estimate that Turkey’s palm oil demand will grow by 16 per cent annually. Norhaznita Husin/ED

Table 1: Projected Oils & Fats Sales by Sector, 2008- 2013 (‘000 MT)

2008 2009 2010 2011 2012 2013Olive oil 65.7 69.9 74.8 79.1 83.4 87.8 Vegetable & seed oil 802.2 849.4 902.8 959.7 1,020.5 1,083.2 Butter 72.3 74.1 75.9 77.6 79.1 80.5 Margarine 45.7 45. 46.1 46.2 46.4 46.5 Spreadable oils & fats 146.6 149.5 152.6 155.5 159.0 162.3 Regular spreadable 104.0 104.3 104.9 105.1 105.7 106.1 - Functional spreadable 42.5 45.2 47.8 50.4 53.3 56.2 Oils and fats 1,132.4 1,188.8 1,252.2 1,318.0 1,388.3 1,460.2

Source: Euromonitor International

Turkey’s Margarine Industry

Page 14: MPOC Fortune - Vol08 August 2009
Page 15: MPOC Fortune - Vol08 August 2009

MARKETInsightsIns g

4) Research and development of MES has been a focal point among the insiders in recent years. With its excellent performance and ecological safety, as well as the renewability of the resources and favourable cost, MES has become a major active matter and is expected to reach a sales volume of 100,000 MT per year. It is now one of the leading products in the oleochemical and surfactants industry and is expected to be even more widely applied in the coming years.

5) The research, development and production of both primary amines from fatty acids and tertiary amines from fatty alcohols and their further processing as cationic and amphoteric surfactants, as well as production of imidazoline series surfactants from fatty acids, have made great progress. The further development and application of these products will have an important impact on the development of China’s oleochemical industry.

6) The market demand for fatty acid esters is expected to increase significantly because of the variety of their functions in the food, medicine, cosmetics, textiles and synthetic resin industries. In addition, the use of chemical reactions of fatty acid ester to develop “green surfactants” and various biodegradable and environment-friendly industrial surfactants will be a promising new field.

CONCLUSIONChina has successfully made great strides in research, development and production as well as application of basic oleochemicals and surfactants based on edible oils and fats. However, the gap between China and the advances achieved globally, whether in terms of technology or application, remain. For example, MES is successfully produced on a large-scale abroad whereas in China, its commercial production in both scale and technology are still in the

exploratory stage. APA has been industrially produced abroad but remains in the research and development stage in China and while amino acid surfactants are widely used globally, their domestic production is limited to a rare, high-quality product.

With socioeconomic development and enhanced awareness of environmental protection, China will further expand the market demand for oil and fat-based surfactants. It has become a necessity to develop and promote these surfactants. Therefore, China will concentrate on a reasonable development and utilisation of oil and fat resources, reduce costs and ensure sufficient supplies to expand the application of oleochemicals and increase their added value. China will continue to work on the research and development of oil and fat-based surfactants, produce more green and functional oil and fat-based surfactants to further improve quality and focus on technological innovation and application promotion in an effort to ensure a rapid and better development of China’s oil and fat-based surfactants and relevant industries.

The direction of future research and development of oil and fat-based

surfactants will be on new products, new processes, new technologies, new equipment, new formulations and new applications, as well as the use of the least processing steps, lowest energy and material consumption and waste emissions. Better product performance will go for raw materials and products that are milder, more secure, more energy-saving, least harmful to the environment, more biodegradable and less irritating. China will also work to improve the optimisation process, lower production costs and improve product quality and expand usage in industrial applications.

In a nutshell, vegetable oil and fat-based surfactants will see demand growing fast and steadily in future because of their sound performance and promising potential for varied applications, coupled with renewability and high safety, as well as biodegradability in this era where green, eco-friendly and renewable development is demanded.

(This article was presented by Fang Yinjun of Zhejiang Zanyu Technology Co Ltd at the 2009 Sino-Malaysia Oleochemicals Seminar, June 25-26, 2009, in Qingdao, China)

Continued from page 9

MPOC FORTUNE •  15

Trends in Oilsand Fats-based

Surfactants

Page 16: MPOC Fortune - Vol08 August 2009

MPOCOffices

WorldwideMalaysian Palm Oil Council (MPOC)2nd Floor Wisma Sawit Lot 6, SS 6, Jalan Perbandaran47301 Kelana Jaya, SelangorTel: 603-7806 4097Fax: 603-7806 2272www.mpoc.org.my

American Palm Oil Council Suite # 690, 21515 Hawthorne Blvd.Torrance CA 90503, USATel: +1 (310) 944 3910Fax: +1 (310) 944 3544www.americanpalmoil.comE-mail: [email protected]: Mohd Salleh Kassim

MPOC Africa Regional Office5 Nollsworth Crescent, Nollsworth ParkLa Lucia Ridge Office Estate,La Lucia 4051, KwaZulu-Natal, South AfricaTel: +27 (31) 5666 171Fax: +27 (31) 5666 170E-mail: [email protected] Address:P.O.Box 1591M.E.C.C. 4301, South AfricaContact: Uthaya Kumar

MPOC Bangladesh62-63 Motijheel Commercial Area,7th Floor, Amin Court Building,Dhaka, BangladeshTel: +88 (02) 9571 216Fax: +88 (02) 9551 836E-mail: [email protected]: Fakhrul Alam

MPOC Shanghai, ChinaShanghai Westgate Mall Co. Ltd.Room 1610B, 1038 Nanjing Rd. (w)Shanghai 200041, P. R. ChinaTel: +86 (21) 6218 2085 / 6218 2086Fax: +86 (21) 6218 1125E-mail: [email protected]: Teah Yau Kun

MPOC Pakistan11 – 3rd Floor, Leeds CentreMain Boulevard Gulberg, 111 Lahore, PakistanTel: +92 (42) 5716 600 / 5716 601Fax: +92 (42) 5716 602E-mail: [email protected]: Faisal Iqbal

MPOC India S-4, New Mahavir Building, Cumballa Hill Road Kemps Corner, Mumbai 400 036Tel: +91 (22) 6655 0755 / 6655 0756Fax: +91 (22) 6655 0757E-mail: [email protected]: Bhavna Shah

MPOC Europe Regional Office31 Avenue Emile Vendervelde1200 Brussels BelgiumTel: +32 (2) 7748 860Fax: +32 (2) 7794 371E-mail: [email protected]: Zainuddin Hassan

MPOC Cairo3 Gamal E1-Din Afify Street, Nasir CityZone No.6, 11371 Cairo, EgyptTel: +20 (2) 2273 8108Fax +20 (2) 2273 8106E-mail: [email protected]: Kamal Azmi

MPOC IstanbulGuzel Konutlar SitesiDilek Apartment Daire 3Balmumcu, Besiktas - Istanbul, TurkeyTel: +90 (212) 2668234Fax +90 (212) 2668236E-mail: [email protected]: Norhaznita Husin

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