Deep Grilled Surfactant Industry

Surfactant is a small but indispensable "industrial monosodium glutamate", and its downstream covers almost all fine chemical fields. In terms of varieties, non-ionic surfactants and anionic surfactants are the mainstream varieties. From the perspective of the surfactant industry, this is a market of 10 million tons and more than 100 billion yuan; the industry is currently in a state of high dispersion and numerous small enterprises. Under the background of stricter environmental protection, leading enterprises have become bigger and bigger. Strong is an inevitable trend.


Surfactant industry: fine chemical industry with broad market space

Surfactants are commonly known as "industrial monosodium glutamate", and a small amount of use can significantly reduce the surface tension of the liquid. Surfactants belong to the fine chemical industry and are located at the end of the chemical industry chain. The upstream uses petroleum derivatives and natural oil derivatives as raw materials, and the downstream can cover almost all fine chemical fields.

According to CNKI data, surfactants can be divided into anionic surfactants, cationic surfactants, nonionic surfactants, zwitterionic surfactants according to the dissociation properties of polar groups, of which anionic and nonionic surfactants Occupy the mainstream market. Non-ionic surfactants have superior performance, with good washing, solubilization, leveling, corrosion resistance and other characteristics. Compared with anionic surfactants, it has a higher emulsifying ability and hard water resistance, and good compatibility with the human body and the environment, which caters to the future trend of green development.


Demand: large market volume of surfactants

In 2020, the global surfactant market is expected to reach 54 billion U.S. dollars, with consumption exceeding 17 million tons. According to CNKI data, the global surfactant market in 2016 was approximately 42.5 billion U.S. dollars, and is expected to grow to 54 billion U.S. dollars in 2020, with a compound growth rate of approximately 5.5%. According to statistics from IHS Markit, the global consumption of surfactants in 2018 was 16.8 million tons; the average annual compound growth rate of the industry as a whole is expected to reach 2.6% in the next five years, and the total demand in 2023 is expected to reach 19 million tons. Based on this calculation, the global surfactant consumption in 2020 is about 17.68 million tons.

China is already the world's largest consumer market for surfactants (approximately 3.24 million tons in 2020), and it is optimistic that there is still room for more than double growth. According to CNKI data, the Chinese market accounted for 17.5% of global consumption in 2016, ranking first in the world. It is estimated that the domestic market consumption in 2020 will be approximately 3.24 million tons (excluding exports). However, compared with developed countries and regions such as the United States, Europe and Japan, China's per capita consumption is only 3.04kg/person·year. As China's economic development increases, the domestic market scale is expected to increase more than twice. Considering that China's economy is still in a period of medium-to-high-speed growth, it is judged that the growth rate of demand in the next three years is expected to remain above 6%.

The largest variety of surfactants is non-ionic surfactants. Compared with the global market, the consumption of non-ionic surfactants in China accounted for a higher proportion. According to the statistics of the Table Committee of the Chinese Washing Association, non-ionic consumption accounted for approximately 56% in 2019, followed by anionic surfactants, accounting for approximately Is 37%. It is estimated that in 2020, domestic consumption of non-ionic surfactants will be approximately 1.7 million tons, and consumption of anionic surfactants will be approximately 1.1 million tons.

The terminal covers a wide range and has a high correlation with the macro economy. The terminal applications of surfactants are extensive, and the downstream covers detergents (51%), cosmetics (11%), textiles (8%), foods (6%), etc. According to Zhiyan Information, the downstream demand for non-ionic watch activities covers real estate infrastructure (65%), detergent industry (21%), pesticide emulsifier (7%), textile printing and dyeing (3%), leather industry (2%), etc.


Supply: foreign countries are concentrated in chemical industry leaders, domestic concentration needs to be improved

The overseas surfactant manufacturers are mainly chemical giants. The mainstream foreign surfactant manufacturers include Dow, BASF, Procter & Gamble, Croda, Stepan and Lankai. BASF and Dow, as the global chemical giants, have the largest sales volume. Among them, BASF has deployed ethylene and ethylene oxide upstream and has the advantage of an integrated industrial chain. Stepan focuses on the field of non-ionic watch activity, and its market share in the global non-ionic watch activity business reached 11% in 2019.

There are many domestic production enterprises, and the concentration needs to be improved. There are 4,000 enterprises in my country engaged in the production of surfactants. There are many small enterprises, more than 40 enterprises above designated size, and less than 20 enterprises with production and sales exceeding 10,000 tons. A single enterprise has little influence on the industry. According to the statistics of more than 40 surfactant product manufacturers above designated size in the industry by the China National Washing Association, the industry achieved a total output of 3.408 million tons in 2019, of which 1.257 million tons of anionic surfactants and non-ionic surfactants (including The output of polyether and water reducing agent macromonomers was 1.899 million tons, the output of cationic surfactants was 102,000 tons, and the output of amphoteric and other types of surfactants was 149,000 tons.


Non-ionic surfactant

The largest variety of surfactants is non-ionic surfactants. At present, my country has mature technology and stable supply in the field of large varieties of surfactant products such as the water reducing agent application sector, but in the organic silicon application sector, high-end lubricants sector, energy-saving and environmental protection coatings application sector and other small varieties of products and special surfactants Insufficient new varieties and lack of innovation ability.

There are 30 above-scale production enterprises in the nonionic surfactant industry, and the industry concentration is low. According to Zhuo Chuang Information, Zhejiang Real Madrid topped the list with 287,000 tons of production capacity, accounting for 13.0% of the industry, followed by Sanjiang Chemical, Shengdehuaxing, Jiahua Chemical, etc., with CR4 production accounting for 39.8% in 2019.


Anionic Surfactant

The second largest variety of surfactants is anionic surfactants, which are most widely used in the field of daily chemicals. In 2019, there were 19 enterprises above designated size in the anionic surfactant industry, with a high degree of concentration. Among them, the output of AES and LAS CR5 accounted for 92.8% and 89.3%.

In terms of supply, the domestic anionic surfactant production capacity has been stable in recent years, with a production capacity of 1.715 million tons in 2019 and a 2015-2019 CAGR of +1.8%. The output reached a record high in 2019 at 1.006 million tons, YoY +17.4%, and 2015-2019 CAGR +10.6%. However, the operating rate of the anionic watch industry is low. After reaching a historical low of 42% in 2015, it began to rebound gradually, and the operating rate in 2019 was 58.7%. On the demand side, anionic surfactants have excellent performance and a wide range of uses, mainly used as foaming agents, emulsifiers, washing machines and wetting agents. The downstream demand areas cover personal cleaning products (62%), household/daily products (33%) and industrial-grade public facilities products (5%).


Import and export: exports are mainly low-end products, and high-end products rely on imports

The growth rate of my country's surfactant exports is higher than the growth rate of imports. The export volume of surfactants in my country is higher than the import volume, and the gap is gradually widening. The export volume in 2019 was 2.242 million tons, YoY+11.2%, and the 2015-2019 CAGR was +12.4%; the growth rate of imports was relatively low, with 1.299 million tons in 2019, YoY+0.2%, and 2015-2019 CAGR+5.3%.

In terms of non-ionic surface activity, the import volume is higher than the export volume, but the export growth rate is obvious. The export volume in 2019 was 158,000 tons, YoY+30.3%, 2015-2019 CAGR+14.2%; the import volume in 2019 was 193,000 tons, YoY-0.4%, 2015-2019 CAGR+3.4%. In terms of anionic surface activity, my country's exports have increased significantly. In 2019, exports of 286,000 tons, YoY+28.9%, 2015-2019 CAGR +11.8%; imports also maintained a growth trend, but the growth rate was relatively slow. Imports in 2019 were 89,000 tons, YoY+16.4%, 2015- The CAGR of 2019 was +10.1%.

my country's surfactant exports are mainly composed of low-end products, while high-end products rely more on imports. From the price point of view, the average import prices of anionic and non-ionic surfactants are higher than the average export prices. The import unit price of anionic watch activity is about US$1,000/ton higher than the export unit price, and the unit price difference between the import and export prices of non-ion watch activity fluctuates around US$500/ton. Taking non-ionic surface activity as an example, polyether-type surface activity is the main variety of non-ionic mainstream surface activity, among which high-end products (special products) mainly rely on imports. In 2019, the total imports of polyether surface actives were 222,000 tons, of which special products and ordinary products accounted for 13%/87%; the total import volume was RMB 3.32 billion, and special products and ordinary products accounted for 31%/69% respectively. The price is much higher than ordinary products. The main reason is that my country's traditional non-ionic watch active NP series, private disc series, Twain series and other conventional products have overcapacity, but high-end special watch active capacity is insufficient, and there is a gap between the core technology and industry scale and the international level.


The upstream raw material prices are low, and the industry's gross profit margin is expected to continue to expand

The main raw materials of petroleum-based surfactants are petroleum and its derivatives, while the main raw materials of natural oil-based surfactants are natural oils and their derivatives (quoted from CNKI). Since raw materials account for a relatively high proportion of the cost of specialty surfactants, the price fluctuations of specialty surfactants are closely related to the fluctuations in the prices of raw materials. Taking Real Madrid’s non-ionic surfactant products as an example, raw materials accounted for 89.8% of the total cost, of which ethylene oxide (EO) and propylene oxide (PO) accounted for 55.4%/10.6% respectively. Since ethylene oxide and propylene oxide have the characteristics of low boiling point and wide explosion limit, high requirements are put forward for the storage and production operations of ethylene oxide and propylene oxide, which often require relevant operating experience and High-standard safety automatic control system investment and relevant operating experience. At the same time, the country’s requirements for the safety of the chemical industry are getting higher and higher, which further increases the entry barriers for companies to use ethylene oxide and propylene oxide to produce non-ionic surfactants. It is more difficult for small companies to enter the industry. Come bigger.

Cost-plus pricing model, low raw materials and rising gross profit margin. Affected by the decline in oil prices and the expansion of the raw material industry (ethylene oxide and propylene oxide, etc.), it is judged that the industry's main raw material price center will decline year-on-year in 2020. As the pricing model of the surfactant industry mainly uses cost plus, processing fees are relatively stable, and the industry's gross profit margin is expected to continue to rise.


Ethylene oxide

Ethylene oxide (EO) is the main raw material of non-ionic surfactants and the second-largest downstream product of ethylene. It is located in the middle of the industrial chain, and its price is highly correlated with oil prices and industry competition. The current mainstream process routes are direct oxidation of ethylene (oil head process) and coal-to-methanol method (coal head process). The production technology is mainly imported from Dow, Shell and other companies. Because it is flammable, explosive and corrosive, and the cost of transportation and storage is high, downstream factories generally build factories around EO factories, forming regional characteristics. At present, there are two transportation modes of ethylene oxide in my country: land transportation (nearly 70%) and pipeline (nearly 30%). The cost of land transportation is higher than that of pipeline transportation. The average freight rate is 1 CNY/ton per kilometer, and the supply radius is generally within 500km.

In terms of supply, the number of domestic manufacturers is small, mainly Sinopec, PetroChina and its subsidiaries, and a few large private companies, with strong bargaining power and high requirements for downstream customers' planning and procurement scale. The overall EO capacity is overcapacity. In 2019, the EO capacity will be 4.79 million tons, YoY+10.2%, and 2015-2019 CAGR 8.6%. In the past five years, the newly added production capacity has accumulated to 2.16 million tons, 80% of which is the expansion of the production capacity of enterprises, and 20% is the commissioning of new devices. According to Zhuo Chuang Information, the industry plans to add 1.33 million tons of new capacity in the next three years. The operating rate of the EO industry has remained at 65%-80% in the past five years. In terms of demand, the downstream consumption structure of EO is relatively concentrated. Polycarboxylic acid water-reducing agent monomer accounts for 60%, which is mainly used in the field of concrete facilities such as large-scale infrastructure; followed by non-ionic surface activity accounting for 22%, and its application fields are wide.


Propylene oxide

Propylene oxide (PO) is the second largest raw material of non-ionic surfactants, and the upstream raw materials are mainly propylene, chlorine and ethylbenzene. At present, the mainstream production routes include chlorohydrin method, ethylbenzene co-oxidation method, isobutane co-oxidation method and direct oxidation method. Among them, the chlorohydrin method is the most widely used, accounting for about 45% of the total global propylene oxide output, followed by the ethylbenzene co-oxidation method, accounting for about 34%. PO is as flammable and explosive as EO and difficult to transport over long distances, thus forming a regional characteristic.

In terms of supply, EO and PO manufacturers have a high degree of overlap. As my country has stricter requirements on chemical safety and environmental protection, industry barriers have increased. In 2019, the PO production capacity was 3.315 million tons, YoY +3.3%, and the 2015-2019 CAGR +2.3%. Production capacity has been in a stable stage in recent years after substantial expansion in the early stage, and the industry operating rate in the past five years has been between 75% and 90%. It is expected that PO production capacity will usher in a period of rapid expansion in the future. According to Zhuo Chuang Information, the industry plans to add 5.245 million tons of new production capacity in the next four years. In terms of demand, the downstream demand for PO is mainly polyols for polyurethane and propylene glycol for unsaturated polyesters. Polyether accounted for 72.9% in total, of which soft foam and rigid foam polyether accounted for 19%/17%, POP accounted for 15%, and high resilience and elastomers accounted for 12.2%/9.9%.


Investment advice: Optimizing growth, and recovery in the second selection cycle

The big track breeds big companies. From the perspective of the surfactant industry, this is a broad market of 10 million tons and over 100 billion yuan, and the market is large enough to nurture large-scale enterprises. From the perspective of the competitive landscape, the industry is currently in a state of high fragmentation and numerous small companies. Under the background of stricter environmental protection, it is an inevitable trend for leading companies to become bigger and stronger.


Risk Analysis

1. The macroeconomic downturn has negatively affected the demand for surfactants. The downstream surfactants are mainly detergents, cosmetics, etc., and the economic downturn may lead to lower demand.

2. Potential operating risks caused by environmental protection and safety factors. Enterprises may not be able to continuously produce due to environmental protection and safety factors.

3. Fluctuations in raw material prices. Fluctuations in the prices of crude oil and other raw materials may bring negative effects such as inventory losses to relevant companies.