Petroleum Wax Supply Melts


Petroleum wax made up just 73 percent of global wax supply in 2012, down from 90 percent in 2002, as API Group I capacity continues to slide, and synthetic and natural waxes make market inroads.

Petroleum wax is produced primarily as by product from manufacturing of Group I base stocks. The supply of Group I base stocks is declining due to technical obsolescence and also due to increased competition from higher performance Group II and Group III base stocks, said Milind Phadke, a director in consultancy Kline & Co.s energy practice, during a web presentation July 17.

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Synthetic waxes have increased their global market share to about 13 percent of supply, according to Kline, including growing Fischer-Tropsch and polyethylene wax capacities. Vegetable waxes accounted for just under 10 percent of global supply, Phadke said.

The global wax supply of 10.4 billion pounds in 2012 is projected to grow at only 0.7 percent through 2022, compared to a 1.5 percent growth rate in demand over that time. With demand growing more than twice as fast as supply, the overall wax market deficit is expected to exceed 800 million pounds by 2022. Kline estimates wax industry supply will be about 11.2 billion pounds in 2022, compared to a global demand of 12.1 billion pounds.

Kline projects wax demand to grow nearly twice as fast as supply through 2022.

As a result, we see a rather large deficit developing somewhere close to 800 million pounds, Phadke said. This means there is more room for substitute products like stearic acid to be in this market. Theres also room for other substitutes like vegetable wax to grow.

While Kline projects wax supply from non-Chinese sources will decline by more than 650 million pounds through 2022, it expects that will be offset somewhat by Chinas increased wax production of nearly 400 million pounds. This is expected to come from several expansions at refineries throughout China during that time period.

Phadke noted that over the last 10 years, the wax decline has not been nearly as sharp as the decline in Group I base oil supply, for several reasons. We have seen theres been an increase in wax recovered from tank bottoms – thats wax harvested from tank farms which store crude, he said. There has also been an increase in wax produced by de-oilers, who dewax the reduced crude, especially in Asia.

On the other hand, Phadke noted, the use of wax to produce Group III base stocks by wax isomerization has been reduced, especially since the supply of Group III through other sources such as hydrocracker bottoms has increased. There is no economic rationality to make Group III this way – wax isomerization – so that wax is also released from the base stock market and is available in the wax market.

He added that in some plants, Group I supply has been upgraded to Group II, using technology that allows production of wax to continue. So because of all of these factors, the decline in petroleum wax has not been as sharp as the decline in Group I, Phadke said.

Kline estimated Asia accounted for more than 40 percent of the 10.4 billion pounds of global wax supply in 2012, followed by Europe at 28 percent and North America at 15 percent.

Europe led in demand in 2012, with 31 percent, followed by Asias 30 percent and North America at 20 percent.

This industry does face a future of changing wax supplies, so wax consumers need to work at tying up their wax supply, Phadke said. De-oilers and other upgraders in the market need to tie up as much slack wax as possible.

He noted that China is such a big producer of petroleum wax that it makes Asia the largest exporter of that type of wax.

Asia and Africa/Middle East are significant exporters of petroleum wax, as well as synthetic wax, Phadke said. All three of the Fischer-Tropsch wax plants are located either in Asia or Africa-Middle East. A significant amount of [polyethylene] wax is also in this region. As a result, these regions are net exporters of this wax.

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

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Base Stocks    Business    Other    Waxes