The global wax supply of 9.6 billion pounds in 2010 is projected to grow at only 1.4 percent through 2020, compared to a growth rate of 2.3 percent per year in demand over that time. So supply is growing much slower than demand, Phadke noted. This will lead to an overall shortage of about 1 billion pounds by 2020. Kline estimates wax industry supply will be about 11 billion pounds in 2020, compared to a global demand of 12 billion pounds.

Evolving Markets
Petroleum waxes still dominate the global wax supply, with synthetic waxes accounting for only 11 percent of the market in 2010, according to Kline, followed by animal waxes and vegetable waxes at 2 percent each. Others accounted for the remaining 1 percent. But the numbers are gradually changing.

Kline found the share of petroleum wax has declined from somewhere close to 87 percent in 2006 to around 84 percent in 2010. This shortfall has been largely made up by growth in synthetic waxes, but weve also seen growth in other categories of waxes, particularly vegetable waxes, Phadke pointed out.

Synthetic waxes are projected to grow at about 6 percent per year. We are expecting significant capacity addition in both Fischer Tropsch wax capacity by the two producers there, as well as capacity addition for polyethylene wax, he noted. Fischer Tropsch waxes have an advantage in being considered close to petroleum waxes in physical properties, according to Kline.

Vegetable waxes may grow as much as 9 percent a year because they are starting from such a small base, he observed. However, we think this incremental capacity from synthetic waxes and vegetable waxes will not be sufficient to make up for both the shortfall in petroleum wax and the growth in demand. As a result, we see a growing deficit in the market.

Regional Markets
Kline estimated Asia accounted for 42 percent of the 9.6 billion pounds of global wax supply in 2010, followed by North America (19 percent), Western Europe (14 percent), Africa and the Middle East (11 percent), Latin America (8 percent) and Eastern Europe (6 percent). China is the largest wax-producing country, accounting for almost 32 percent of the global total, Phadke said.

Turning to global wax demand, Asia accounted for 33 percent in 2010, according to Kline. It was followed by North America (22 percent), Western Europe (21 percent), Latin America (13 percent), Eastern Europe (7 percent) and Africa and the Middle East (4 percent).

Wax supply by region is vastly different than wax demand by region, Phadke said, leading to supply-demand imbalances.

Weve seen the Americas, as well as Europe, being consistently short in wax supply, and they are being supplied by exports from Asia and Middle East, he observed. Asia and the Africa-Middle East region are net exporters, and other countries are net importers. That is consistent with trade statistics available for wax products in each of these regions. Directionally, this wax supply-demand balance by region has remained unchanged for at least a decade.

The actual numbers have varied significantly over the last 10 years. For example, North America imported close to 300 to 400 million pounds in the 1990s, Phadke said. This number started to peak, and it reached around 900 million pounds by 2006. This was driven by growth in demand, and at the same time, flat production. But since then, the deficit has dropped to close to 300 million pounds.

Since the 2002 to 2004 period, he said, Asian exports have started to decline, and significantly since 2006. Phadke noted that is due to various supply constraints in China, and due to increase in wax supply from other sources – Iran, for example – and also due to decline in demand in many parts of the world.

Buyers Adjust
De-oilers face the challenge of reduced slack wax sourcing options. According to Klines findings, de-oilers will seek to tie up as much slack wax supply as possible through long-term supply contracts with slack wax producers.

Phadke said wax buyers face a different set of challenges in the changing supply outlook. Depending on the industry, some wax buyers are seeking long-term partnerships with multiple suppliers, which will reduce dependence and make their sourcing more stable. Expertise in sourcing different types of wax and providing tailored products will become even more important to wax customers.

Klines report is titled, Global Wax Industry 2010: Market Analysis and Opportunities.