Overcoming Challenges in the North American Oleochemicals Market

The roller coaster ride that started in March 2020 continued into the second half of 2022.

From a macro perspective, we saw the U.S. economy remain strong through 2021, but have seen a slowdown amid 40-year-high inflation and federal interest rate hikes, resulting in GDP declines of 1.6% and 0.9% in Q1 2022 and Q2 2022, respectively.

In the oleochemicals market, lauric oils have settled after experiencing record high pricing in early 2022. Global markets have seen this settling reflected in a downward trend on mid-cut alcohol pricing due to the strong correlation with oil feedstock input costs. Coproduct alcohols, acids, esters and glycerin are really a story of supply vs. demand. For example, short chain acid and ester demand has been robust with the return of air travel, growing nutrition needs fueling demand for medium chain triglycerides (MCTs) and the strong agrochemical market. Glycerin, on the other hand, has seen downward pressure due to a slowdown in Asian demand and healthy biodiesel operating rates globally.

With respect to transportation, while ocean vessel freight rates have moderated, domestic logistics continue to be challenged at ports, in rail and in trucking. Hearing “product is available; I just can’t get it from my supplier’s storage location (or port) to my site,” seems to be a recurring theme as of late. Challenges with labor and maintenance of railroad infrastructure, as well as factors such as California Assembly Bill 5 (AB5), have all contributed to this situation.

In response to these challenges, P&G Chemicals has doubled down on our critical logistics relationships, a strategy that has helped achieve 92% on-time deliveries since the pandemic began. While we strive for on-time deliveries of all orders, given all the challenges, we are very proud of our above-market-performance service levels throughout the pandemic.

About six months into it, I heard someone say, “The U.S. industry needs to move from just-in-time inventory to just-in-case.” Inventory buffers, near shoring and partnering with reliable domestic suppliers have become key pillars of many companies’ supply chain strategies, as they experienced imports arriving weeks or even months later than expected. In this context, producers that can offer robust supply chain assurance and honor their agreements become key differentiators for success. At P&G Chemicals, we operate the only domestic natural fatty alcohol plant in North America, at our Sacramento, California site, and are well positioned to offer unique supply assurance and service to the U.S. and Canadian markets.

One of our key focuses is on honoring our agreements; it is exciting to hear customers praise our integrity as one reason they’ve been able to successfully navigate the challenges of the past couple of years. Our goal to honor agreements is backed by our successfully tested global supply assurance and service, and a team of professionals who follow through. As a long-term customer recently shared, “P&G Chemicals says what they mean and they mean what they say.”

Testimonials like this highlight P&G Chemicals’ commitment and longevity. After all, we’ve been doing this for more than 180 years.