Asia Wax Demand Growth to Outpace Supply

MUMBAI, India - Asia's demand for waxes will likely outpace supply, which is expected to slow slightly after strong increases in recent years, an industry official said.

The global wax market - which consists of petroleum, synthetic, vegetable and animal waxes - was estimated at 10.5 billion pounds in 2016, according to United States-based consultancy Kline & Co. Petroleum waxes accounted for around 70 percent of the global wax market.

Asia, the prominent source of nearly all types of waxes, accounted for 40 percent of global supply and 30 percent of global demand.

Asian wax supply - particularly in China - increased in the past five years, thanks to some refinery capacity expansions, debottlenecking and growth in Fischer-Tropsch capacity, Pooja Sharma, a project lead in Klines Energy Practice, told Lube Report Asia. Vegetable wax capacity in Malaysia and Indonesia increased as well. As a result, the region witnessed overall supply growth of close to 3 percent between 2011 and 2016, she noted.

The Fischer-Tropsch process is a collection of chemical reactions that converts natural gas into liquid hydrocarbons.

Asia - mostly China - provides nearly half of the worlds petroleum waxes, Sharma continued. The regions overall wax supply, however, is expected to grow just 1 to 2 percent to 2021, under-performing the likely demand growth of 2 percent to 3 percent during the period.

Most of this growth in demand for waxes will be driven by high-volume applications such as rheology, surface applications and candles, Sharma noted. In addition to those categories, waxes are used in applications such as corrugated containers; cups and cartons; flexible packaging; paper and textile sizing; personal care products such as soaps, cosmetics and pharmaceuticals; and in miscellaneous products such as crayons and fire logs.

Sharma said that worldwide supply of petroleum waxes is declining, as API Group I base stock supply has been shrinking in the past decade due to plant rationalizations. Due to quality improvements, Group I base stocks are becoming technically unviable for use in automotive applications and are being replaced with higher-quality base stocks, Sharma told the Asia, Middle East and Africa Base Oil, Lubricant and Wax Conference here in July. This has resulted in the closure of Group I plants that also supply petroleum waxes.

In the last five to six years, global supply of petroleum waxes trickled down from over 80 percent to less than 70 percent in 2016, Sharma said. Although petroleum waxes will continue to dominate wax supply in Asia, synthetic waxes - particularly those produced by the Fischer-Tropsch method - are increasing in the region.

The declining supply of petroleum waxes has created opportunities for alternative wax types, she pointed out. Synthetic waxes such as Fischer-Tropsch and polyethylene wax as well as vegetable waxes like hydrogenated soy and palm, along with natural palm waxes, are the fastest-growing products in the current market environment.

Synthetic waxes are growing at a strong pace of 3 percent to 4 percent to embrace the market space vacated by petroleum waxes and as a result, their share of the global market has increased from 11 percent in 2010 to 15 percent in 2016. The quickly growing share of rheology and surface applications is also driving demand for Fischer-Tropsch waxes and polyethylene/polypropylene waxes, she continued. The rapid demand growth is driven by the plastics, rubber and tire manufacturing and paint and coatings industries.

Fischer-Tropsch waxes are growing fast, with their share increasing from 34 percent to 39 percent between 2010 and 2016, Sharma said. The reason for such a strong growth is that the physical properties of Fischer-Tropsch waxes are similar to the physical properties of paraffin waxes, which make it easier for end users to absorb these waxes in to their process and formation.

Within the basket of waxes produced in Asia, synthetics will increase from 15 percent in 2016 to up to 19 percent by 2021, she predicted, noting that Fischer-Tropsch waxes will be a key contributor to this growth. Asia is the largest supplier of both Fischer-Tropsch and polyethylene waxes globally, with some key suppliers located in the region. The region supplies approximately 60 percent of global Fischer-Tropsch waxes.

Capacity for Fischer-Tropsch waxes has increased in recent years in Malaysia, South Africa and China, Sharma said, and further capacity additions are expected in South Africa and North America by 2020.

Vegetable waxes continue to expand in the market for applications demanding softer waxes such as slack waxes, which are in shortage. Palm waxes account for about 50 percent of the total supply of vegetable waxes, and these waxes continue to see robust growth in the candles market, she noted.

Approximately 95 percent of all vegetable waxes produced are being targeted to candle manufacturers, but demand for conventional, mainstream wax applications such as candles has slowed down, and relatively newer rheology and surface applications are gaining focus, Sharma said.

The most prominent challenge to wax suppliers in Asia today is the economic uncertainty in China, which accounts for about 80 percent of the regions demand. Reduced demand for waxes in China means a reduced demand for waxes in Asia, she concluded.

Photo: Vladimir Prusakov / Fotolia