Oleochemical Market Update

August rev. , 2014

OleochemicalOleochemical MarketMarket UpdateUpdate

In the world of green Admixtures can be classified as follows: building materials con- In this Issue Air-entraining Water-reducing crete has emerged as a Plasticizers Accelerators resourceful material due Products for Concrete to its strength, durability Retardants Hydration control Admixtures and indestructible na- Corrosion inhibitors Shrinkage reducers ture. In building and con- There are many natural, renewable oleochemi- Fatty Acids See struction applications, cals that may be used in admixtures to provide Transition to concrete provides ther- desired properties. Chemical Associates can aid Plastic Drums mal qualities, design flexi- in providing quantities needed from one of our bility and permanence. stocking distribution centers. Please contact us July Admixtures, the ingredients in concrete other to assist you. than Portland cement, water and aggregate, BFT—Tallow Type/Desired Effect Product are added to the mixture immediately before average or during mixing. These materials are added Air-detraining Octyl (Fatty) Alcohol (Jacobsen— FOB Chicago) for many reasons including to reduce cost of Tall Oil Fatty Acid Air-entraining .4000 construction, achieve certain properties, Oleic Acid Cents/LB maintain quality during stages of mixing, Damp proofing / Butyl Stearate transporting, placing and curing in adverse Waterproofing Stearic Acid weather conditions and to overcome certain Permeability Reducer Calcium Stearate Heavy harvest data emergencies during concreting operations. Calcium Stearate Efflorescence Control puts downward pres- Tall Oil Fatty Acid sure on BFT and SBO

Oleochemical producers are moving away from Drum Specifications Short Chain Fatty steel drums to plastic drums. The plastic drums are Product Double L-Ring Drum (UN Acids and Alcohols UN Approved from storage and transportation of Approved) remain tight on a global basis. this material. The drums are made of HDPE (high Material type High Density Polyethylene density polyethylene) and are available in a variety Manufacturing Process Extrusion Blow Moulding of colors. The net weight on the drums will continue to be 180 kg (397 lbs). Specifications on the Capacity 220L / 58 Gal plastic drums are provided to the right. Drum Weight 10.8~10.9 kg / 23.81 lbs.

As inventories of the steel drums are depleted, the Stacking Height to 30°c 2 levels high Correction plastic drums will become the standard for at least Minimum Wall thickness 3.3mm (typical) seen on the C8 fatty acid (caprylic). We may see this transi- Cap’s thread pitch 5mm (typical) Coconut Oil tion spread to other products in the future. Please Typical Closing torque 30 Nm / 22.13 ft. lbs. PKO following contact Chemical Associates if you have any ques- Recycled Marking as expected. tions.

Chemical Associates, Inc. 1270 S. Cleveland-Massillon Rd. Your Gateway to Worldwide Copley, OH 44321 800-347-2891 Resources in Oleochemicals. www.chemicalassociates.com Chemical Associates Market Update—August rev. , 2014

BFT .4000 SBO .3901 RBD SBO .4176 CNO .5738 July averages: Down from June Malaysia RBD on 8/1/14: PO .3492 PKO .5239

Fats & Oils Commodity Averages - Comparison Tallow - Coconut - Soybean After peaking at $0.45/lb. in mid to late $0.70 May, we saw a decisive correction of tallow in June due to the lower demand curves in $0.60 the areas of biodiesel and exports. It would 0.5738 appear that the news of lower slaughter $0.50 rates has slowed and/or hampered the cor- 0.4000 rection, but the current pricing levels of $0.40 0.3901 soya and corn will likely allow for further adjustments relatively soon. It would not be USD Price/Lb $0.30 surprising to see a $0.37 - $0.38/lb. plateau $0.20 in the near future and one could expect BFT (Tallow) additional corrections beyond that if the CNO (Coconut) $0.10 soybean and corn harvests in the Midwest SBO (Soybean Oil)

play out as projected. Note that corn is now $0.00

12 13

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in the $4/bushel area and could even fall 13

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D D O below that level. If that occurs, BFT and the O Month/Year - Last 24 mos. soya meal complex will be forced to react accordingly. ChemicalAssociates, Inc. www.chemicalassociates.com 800-347-2891

Heavy harvest data in South Palm prices have eased a little recently pri- America, lower biodiesel us- marily on the weakness in the soybean market. The heavy Ramadan age, and heavy plantings re- shipping period is behind us and the actual prices will now be driven by ports in the US have all the inventory figures coming out of Indonesia and Malaysia. Initial re- maintained downward pres- ports show inventories building recently and both countries have al- sure on the market. The cur- ready reduced the export tax in order to encourage activity. Neither rent market appears to have country is hitting their internal targets for biodiesel usage primarily be- reached a temporary floor at or around the cause of inadequate infrastructure and therefore demand curves are $0.40 / lb mark but the 1 and 2 month fu- down from expectations. Look for some bearish activity in the next few tures are trading in the $0.385 range. The months – particularly if the harvest data comes in as expected. US market will be primarily driven by US harvest projection data in the coming 45-60 days but the world market could be af- fected by whether the larger importing countries trade the South American market effectively as there are still logistical and political hurdles that remain. Coconut recently saw a 13% correction back to the $0.54 - $0.55 /lb. mark. PKO is following that same trend at the time of this publication.

The current market for the C18:1 The aftermath of the typhoon in the Philippines in material would be best described as “in balance”. A signifi- the fourth quarter continued to linger contributing cant volume of oleic acid continues to move internally to to the higher commodity (CNO and PKO) prices in value added products and this trend is expected to continue SE Asia until very recently. In the past week, CNO if not increase. Oleic acid pricing should track BFT for the has started to fall and PKO is expected to follow. third quarter. Once can expect that CNO and PKO pricing will come into parity in the not too distant future. Pro- ducers in SE Asia continue to take a demand driven The tightness that we saw on approach for production. With the drop in com- stearic acid (particularly flaked material) in Q2 continues, modity prices, buyers are expected to “sit on the Lead times remain somewhat extended. This situation might sidelines” allowing these markets to stabilize. De- change slightly due to the drop in BFT. We would expect buy- mand for the C12 and C14 cuts will be the driver(s) ers to delay purchases while the BFT seeks to stabilize at a for production levels with the other carbon chain lower level. This drop was expected when BFT is viewed availability limited to the mid-cut demand. As a against the other global commodities. For Q3, tallow derived result, lower mid-cut fatty acid pricing is predicted. stearic acids should track the downward movement of BFT. Although we may see some moderation on the mid- cut pricing, we would expect the other fractions to The changes in the remain at an elevated price level for the third quar- channels to market in the tall oil fatty acid industry over ter. The impact of this higher pricing will continue the past two years continue to develop. The level of suc- as newer inventories arrive in the states. cess remains to be seen and is further questioned by Ari- zona’s announcement of a price increase on tall oil fatty acids effective July 1. This is viewed as producers attempt to stabilize this market. The fractionators continue to “run for rosin” and we have seen certain grades of tall oil fatty acid move to- wards extended lead times. Chinese gum rosin remains the “wild card” and, when viewed against the same timeframe for 2014 versus 2013, re- ported imports of Chinese gum rosin are up significantly. This will need to be monitored as we progress further into the year. Another variable is a European biodiesel facility that will use CTO as a feed and is scheduled for start-up in Q3.

Chemical Associates, Inc. Your Gateway to Worldwide 1270 S. Cleveland-Massillon Rd. Copley, OH 44321 Resources in Oleochemicals. 800-347-2891 www.chemicalassociates.com Chemical Associates Market Update—August rev. , 2014

Caprylic Acid Capric Acid On the whole, short chain fatty ac- SE Asian inventories of the capric acid ids remain in short supply with lim- are now exhausted and at current pro- ited quantities available for ship- duction rates, producers are struggling Short chain fatty acids are still ment from SE Asia in the third quar- to keep up with demand. Lead times relatively tight – particularly ter. C8’s availability has actually have extended and, although pricing 10’s. gotten slightly better over the latter has remained stable, there have been stages of Q2. This is not to say that very limited volumes available for Mid-cut fatty acids and alcohols C8’s are anywhere near “readily shipment. Like the 8-10 fatty acids, are reducing and under addi- available” but we have seen the capric acid could be poised for pricing lead times shorten a little. This is escalation during the third quarter. tional pressure as we enter the most likely attributed to product third and fourth quarters. substitution for the C8’s in certain applications. It remains to be seen Lauric Acid Short chain alcohols are still if this lost demand will return in The demand for lauric acid has waned very tight and allocated future. Pricing for caprylic acid re- somewhat and as such, pricing from amongst consumers. mains very high and the expecta- Southeast Asia has ebbed slightly but tions are that pricing will remain is still up when compared to early first elevated through at least the end of quarter prices. Lead times on ship- this year. We would expect stable ments from SE Asia have shortened for pricing on the C8’s for the third this product as producers have started quarter. to build some inventory. Prices are expected to continue to soften over the course of the third quarter.

Caprylic-Capric Acid Myristic Acid Pricing on the vegetable-based The 8-10 fatty acids are, at pre- Demand for the C14 molecule contin- triple-pressed stearic acid is sent, in the worst shape, from an projected to be up slightly for availability position, of the short ues to slightly outpace available supply. Lead times remain extended and the third quarter. The reduced chains. Pricing increased, as avail- pricing is stable impacted by the production rates in Southeast ability decreased, during the sec- higher commodities price. Although Asia could impact this product ond quarter. Pricing, at present, is stable from SE Asia but, if the cur- lead times have extended slightly, this down the road. Additionally, product would still be considered rent conditions continue, we could increased duties in Europe see an upward tick on pricing dur- readily available for shipments from SE could divert more of the veg. ing the third quarter. Asia. Pricing for Q3 is projected to be material to the states. It re- stable or down slightly. mains to be seen what impact this could have in the future.

Chemical Associates, Inc. 1270 S. Cleveland-Massillon Rd. Copley, OH 44321 Your Gateway to Worldwide 800-347-2891 Resources in Oleochemicals. www.chemicalassociates.com