# SURFACTANTS

A Market Opportunity Study Update

Prepared for the 

## United Soybean Board

December 2008

By: Dwight Rust and Stephen Wildes

### TABLE OF CONTENTS

Executive Su mmary.....................................................................................................1

Study Obj ectives ..........................................................................................................2

The Surfactants Market ...............................................................................................3

Market Segmen t Summari es.......................................................................................7

Household De tergents......................................................................................7

Personal Care....................................................................................................9

Industrial and Institut ional Clea ners .............................................................11

Food Processi ng .............................................................................................15

Oilfield Chem icals ...........................................................................................16

Agricultural Ch emicals ...................................................................................19

Textiles .............................................................................................................21

Emulsion Polyme rization................................................................................23

Paints & Co atings ...........................................................................................24

Constructi on....................................................................................................26

Lubricant and Fuel Additives .........................................................................27

Surfactant Industry Manufacturer s ..........................................................................28

Soy-Based Surfactants and Emerging Opport unities ............................................35

Issue Anal ysis............................................................................................................38

Environmental and Re gulatory I ssues .......................................................... 38

Unmet Surfactant Ma rket Need s ....................................................................39

Barriers to Mar ket Entry .................................................................................411 

### EXECUTIVE SUMMARY

Surfactants or surface acti ve agents are broadly defined as organic compounds that can enhance cleaning efficiency, emulsifying, wetti ng, dispersing, solven cy, foaming/defoaming and lubricity of water-based compositions.

The annual surfactant demand in the United States is estima ted to be 7.7 billion pounds. The largest end use market for surfactants is household cleaning dete rgents. These are comprised of large volume, lower priced laundry and dishwashi ng detergent commodity products that account for roughly one-half of the U.S. surfactant market. “Specialty surfactants” are higher-priced, low-volume products used in a broad range of industrial and personal care market applications with annu al demand estimated at 2 billion pounds or
26% of the total US surfactant market.

Surfactants are produced from petrochemical (synthetic) feedstocks or oleochemical (natural) feedstocks. U.S. su rfactant production is based on 40% petrochemical and 60% oleochemical feedstocks. The basic petroc hemical feedstocks ar e ethylene and benzene

which are derived from crude oil and converted to surfactant intermediates ethylene oxide (EO), linear alkylbenzene (LAB) and detergent alcohols. The basic oleochemical feedstocks are typically seed oils - palm and coc onut – as well as tallow. Raw material costs for these feedstocks are a prime det erminant of surfactant pricing.

The U.S. surfactant market is extremely diverse and in cludes many primary product manufacturing industries and segments which are described in this report. Surfactants are used in formulated products to provide optimum performance.

The structure of the surf actant supply industry is stratified and complex. It consists of large

surfactant manufacturers that produce surfactant raw mate rials, surfactant producers without a raw material position that typically modify basic surfactants by sulfonation or ethoxylation, smaller specialt y surfactant producers and/or formulators and end users that are often focused on specific industries.

It is difficult to estimate the amount of so y-based surfactants being produced because of the supply chain complexity. The largest vo lume of soy-based surfactants is represented by lecithin. Examples can be found of soy- based surfactants in most of the markets studied. Soybean oil and soy protein are used as the starting material s for surfactants; however, soybean oil is current ly the predominate feedstock us ed in the manufacture of surfactants where soybeans are used.

One thing that is common in t he surfactant industry is concer n for the environment. This concern ranges all the way from the impac t of crude oil supply and demand to the environmental impact of chemicals, energy us age and conservation of resources. The interest in the “cradle to grave” use of products by both governmental organizations and consumers has heightened environmental interest s and created a growing trend in more stringent environmental regulatio ns impacting surfactants.

Increasing environmental awareness and the use of renewable resources provide opportunities for the use of soybeans in surf actants through new technologies that are emerging, especially in the field of protein-based surfactants.2 

### STUDY OBJECTIVES

The main objective of this study is to update the May 1996 report “Emulsifiers and Wetting Agents – A Market Opportunity Study.” This study update provides much more surfactant industry background information and summaries of ten primary market segments. The original study analyzed three market segments. A more comprehensive overview is also provided on industry environmental issues, su rfactant manufacturers , pricing and emerging surfactant technologies t hat may provide opportuniti es for soy chemistry.

Much has changed in the surfactant industry sinc e 1996. Identification of these changes is another objective of this report and di scussion of the changes occurs throughout.

The final objective is to provide recommendations for the development and commercialization of soy-based surfactants. The emergence of oleochemical-based surfactants has come a long way since 1996. Unfortunately, most of these surfactants have not involved soy.

SURFACTANT INDUSTRY CHANGES 1996 – 2008

• Much more surfactant indus try information is available es pecially on the internet. However, very little market demand st udy has been done or published since 2003.

• There has been considerable industry cons olidation through mergers and acquisitions among surfactant manufa cturers and customers.

• There is growing awareness and interest in renewable-based products by consumers
and industrial end users for “Green Products”.

• Increasing environmental and regulat ory pressure on petrochemicals

• Major feedstock pricing changes favoring oleochemicals

• The emergence of oleochem ical-based biosurfactants

• A gradual emergence of new product and ma rket application opportunities for soy3 

### THE SURFACTANT S MARKET

OVERVIEW

Surfactants or surface acti ve agents are broadly defined as organic compounds that can enhance cleaning efficiency, emulsifying, wetting, dispersing, solvency, foaming/defoaming and lubricity of water-based compositions.

All surfactants have the same basic chemical structure - a hydro philic (water-loving) “head” and a hydrophobic (oil-loving) “tail” which is always a long (linear) chain of carbon

atoms. Surfactants are made from oleochemical (natural) and/ or petrochemical (synthetic)

raw materials.

WORLD SEED OIL PRODUCTION – 2007

SURFACTANT FEEDSTOCKS

Oleochemical / Natural surfactants are commonly derived from plant oils – coconut and palm oils, from plant carbohydrates – sorbitol , sucrose and glucose or from animal fats

such as tallow. Oleochemical feedstock sourcing for surfactants has been changing in recent years. Animal fats have lost ground in favor of vegetable oils , including the growing utilization of soybean oils. Beef tallow has been impacted by mad cow disease concerns while fish oil use has declined due to high oil prices caused by growing antioxidant

demand.

Petrochemical / Synthetic surfactants are derived from petroleum-based feedstocks, mainly crude oil. The pr imary synthetic feedstocks are ethylene, benzene, kerosene and n-paraffins. The surfactant industry currently uses roughly equal amounts of “natural” oleochemicals and “synthetic” petrochemicals.4 OLEOCHEMICAL FEEDSTOCKS

Oils and fats can lead to a vari ety of products as shown below:

Prepared by D. J. Burden, Center for Crop Utilizat ion Research, Iowa State University, Ames, Iowa

SURFACTANT PRODUCT TYPES

Surfactants are classified by their ionic (electrical charge) properties in water:

Surfactant Type Ionic Charge Anionic Negative Nonionic No charge

Cationic Positive Amphoteric Positive/Negative5 CONVENTIONAL SURFACTANT PRODUCTS BY TYPE

The primary function of a surfactant is to enhance the performance properties of waterbased formulations composed of a range of ingredients such as other surfactants, solvents, thickeners, alkalis/salts, chelatin g agents, foamers/defoame rs and fragrances. They are grouped by their ionic charge.

Anionic Surfactants

• Alkylbenzene sulf onates – detergents

• Fatty acids – soaps

• Sulfosuccinates – wetting agents

• Lauryl sulfates – foaming agents

• Lignosulfonates – dispersants

Anionic surfactants are the largest group accounting for approximately 40% of world production. These products exhibit superior we tting and emulsifying properties and tend to be higher-foaming materials.

Nonionic Surfactants

Alkylphenol ethoxylates Alcohol ethoxylates Alkanolamides Fatty amine ethoxylates Polyglucosides Sucrose esters

Sorbitan esters

Nonionic surfactants are the se cond largest group by volume at about 35%. Demand for these sugar-based products is escalating due to their low toxicity.

Cationic Surfactants

Imidazolines Morpholines Betaines Quaternary ammonium compounds Pyridenes

Cationics typically have ex cellent antibacterial properties, provide good corrosion protection and can be good demulsifiers.

Amphoteric Surfactants

Imidozoline derivatives Q uaternary ammonium compounds Betaines Phosphatides

Amine condensates

Amphoterics can behave as a cation or anion depending on pH. These surfactants are “mild” and are increasingly used in personal care products.6 SURFACTANT USES

The largest end use market for surfactants is as household cleaning detergents. These are typically formulated cleaners based on linear alkylbenzene sulfonate (LAS) made from petroleum feedstocks – benezene, kerosene and n- paraffins. The largest producers are Procter & Gamble, Unilever and Colgate Palmo live. These “household cleaning” products are comprised of large volume, lower pr iced laundry and dishwashing detergent commodity products that account for roughly one-half of the U.S. surfactant market. The

rest of the U.S. surfactant ma rket involves “Specialty Surfac tants”. The portion of these that are higher-priced, low-volume products used in a broad range of industrial and personal care market applications is estimated at 2 billion pounds, or 26% of the total US

surfactant market.

U.S. SURFACTANT MARKET

2007 DEMAND

MARKET SEGMENT MILLION POUNDS

Key Markets Household Detergents 3,500
Personal Care 800

Industrial & In stitutional Cleaners 490 Food Processing 405
Oilfield Chemicals 385 Agricultural Chemicals 270

Textiles 200 Emulsion Polymerization (Plastics) 200 Paints & Coatings 200

Construction 100

6,550

Other Markets

Lubricant and Fuel Additives 615 Metal Working 150 Mining Chemicals 100 Pulp & Paper 75 Leather Processing 30
Other 195

1165

Total 7,7157 

### MARKET SEGMENT SUMMARIES

HOUSEHOLD DETERGENTS

OVERVIEW

The household detergent market includes laundry detergents, dishwasher detergents, prespotters, carpet cleaners and fabric softeners.

This market consumes almost half of the to tal surfactant demand. For laundry detergents, the primary function of a surfacta nt is to remove soil from fabr ics and to suspend the soil in

the wash water. Fabric so fteners are either added to the fi nal rinse or as dryer sheets which are used to dry the wet clothes in drye rs. Surfactants in di shwasher detergents are used for wetting surfaces to help soil remova l. The surfactant level in automatic dishwasher detergents is lower than in hand dish wash detergents to minimize foaming in

the dishwasher. The amount of automatic to hand dishwash det ergent sales in pounds is almost equal.

The amount of surfactants used in this mark et area is around 3.5 b illion pounds. The percentage breakdown of surfac tant usage by market is:

• Laundry detergents - 80%

• Dishwashing detergents - 10%

• Fabric Softeners - 7%

• Other - 3%

MARKET TRENDS

Household laundry cleaners have an active history of change, and the function of surfactants has changed in the process.

The use of soaps in home laundry products was 99% of the total in 1940 as compared to synthetic detergents. Synthetic detergents were initially developed to replace soap when the supply of edible oils and fats were in shor t supply. These synt hetic detergents were found to have better cleaning properties, especia lly in hard water, than soaps. By 1960, the trend to synthetic detergent s reached about 75% of U.S. consumption. The initial detergents had poor biodegradab ility and modifications were made so that these products degraded before they entered the water supply in streams, etc. Synthetic detergents

account for over 85% of the category today.

The second trend has been the growth of liquid laundry detergent sales at the expense of powders. This trend is more one of convenienc e as the cost per wash of liquids has been higher than that of powders. The split between liquid and powder detergents was about

50:50 in 1994. The amount of liquid laundry detergent used today is at least 85% of the combined liquid and powder laundry sales in pounds, and it is projected to increase to

90%.8 The third trend has been the concentration of liquid laundry detergents which was targeted for 2008. The use of more concentrated (2 :1) liquid laundry products has been promoted by Wal-Mart to decrease shelf space require ments, decrease plasti cs used in containers, decrease usage of water and to obtain savings in shipping costs. Water content reduction in these products ranges from 44% to 60%.

The fourth trend is the curr ent movement to side loadin g home laundry machines along with lower wash temperatures to save water and energy. In January 2007, the U.S. Department of Energy phased in tougher effi ciency requirements for washing machines. New washers are required to use 21% less energy . Much of the increase in Energy Star shipments has been because of the growth of front-loading washing machines. These are usually more efficient than conventional top loaders. The Association of Home Appliance Manufacturers reports that sh ipments of front loaders grew from 9% in 2001 to 29% in 2006. The market has traditionally preferr ed top-loading agitator m odels; front-loading washers made up only 14.5% of a ll installed units in 2006 whil e current front-loader sales are reported at about 35% of shipments.

These trends can be summarized as:

• Emergence of synthetic detergents (surfa ctants) to replace soaps (1950 -1960).

• Liquid home laundry products re place powders (1990 - current).

• Concentration of liquids to save on shi pping, container costs and shelf space (2007 - 2008).

• Front loading washing machines that use less water and operate at lower temperatures to save energy (current).

SURFACTANT INNOVATIONS

To satisfy requirements for the front l oading home laundry machines along with lower wash temperatures, surfactants for l aundry detergents will have to demonstrate low foaming in horizontal-axis machines, be more easily rinsed due to cooler wash temperatures, and provide reduced redeposition of soils with lowe r volumes of water. The biodegradability of any new surfac tant also has to be considered.

In reformulating detergents for cold water, a product requires a surfactant system that solubilizes oily soils in cold water as well as proteases and carbohydrases (enzymes) that

work on insoluble dirt residues in cold water. Examples of specia l surfactants with greaseremoval properties are branched-chain narrow -range ethoxylates, ethoxylated amines and alky amidopropylamines. Hydrotropic surfactant s such as short-chain alkyl polyglucosides that help solubilize ingredients a nd provide cleaning are also needed. Finally there is also an opportunity for surfactants that clean well in hard water, cold water and over a wide temperature range.

HOUSEHOLD DETERGENT SURFACTANT MARKET

The total amount of detergents used in the home detergent market is about 13 billion pounds and the corresponding amount of surfact ants used is estimated at 3.5 billion9 pounds. The market growth of surfactants in the household detergent ar ea is projected at 1-2% per year.

The leader in the US detergent market is P&G with a 55-60% share. The second largest is owned by Vestar Capital Partners which ac quired Huish Detergen ts and the North
American business of Unilever to form Sun Pr oducts Corporation in 2008. Other players are Henkel and Church & Dwight.

The major categories of surfactant s used in household detergents are:

• Anionic

o Linear alkylbenzene sulfonates (modified)

o Alcohol ether sulfates

o Alcohol sulfates

• Nonionic

o Alcohol ethoxylates

• Cationic

o Fatty nitrogen quaternar ies (fabric softeners)

Major producers, in addition to ot hers listed in this study are:

• Proctor & Gamble (P&G)

• Sun Products Corporation

• Stepan.

Introduction of methyl ester sulfonates into heavy duty laundry detergents is of interest as they perform better at lower water temperat ures. Huish, which now belongs to Sun Products Corporation, and Stepan manufacture this surfactant. Production capacity of this

anionic surfactant is es timated at 285 million pounds.



### PERSONAL CARE

OVERVIEW

The personal care market includes bubble bath s, body washers, hand soaps and cleaners, shaving products, hair shampoos and oral care products.

The personal care retail market in the United Stat es is valued at over $70 billion. The sub segment of this market that is defined as nat ural products in hair, skin and cosmetics is valued at $7 billion.

The amount of surfactants used in this mark et segment is close to 800 million pounds. Surfactants reportedly constitu te around 15% of the raw materi al costs for personal care products.10 MARKET TRENDS

Natural products and ingredients remain a big trend in the global cosmetics and toiletries market. Key growth sectors for natura l products include baby products, bath and shower products and hair care. Organic products see gr owth in oral hygiene, deodorants, liquid soaps and skin care.

Consumers are also looking for improved per formance in this market segment along with sustainable or “green” products. Companies that are active in these types of surfactants are Sea-Land, Croda, Cogn is, Chattem Chemicals, Inc. and Air Products.

Toilet soap bars with high levels of surfact ants are projected to decline in volume and be replaced by liquid body washes. The use of lower levels of surfactants in liquid soaps has caused the surfactant growth in this market to level out as bar soap is being replaced with liquid soap for personal care.

Another market that is seeing growth is wipes with surfactants growth at 5-10% per year in that market niche. Surfactant producers s ee this market as one to provide higher value products with improved profit margins to offs et the surfactants t hat are used in the household detergent ar ea that are more commodity priced.

SURFACTANT INNOVATIONS

The development and commercialization of new surfactants are more prevalent in the personal care area than other market segments in this study. The interest of consumers using personal care products has driven this mark et. The interest in more environmentally friendly and more natural products has been a big driver in the development of new surfactant products.

Innovations in personal care are aimed primarily at skin and hair care. The types of new products introduced here include naturally der ived surfactants based on oat triglycerides that have a composition close to that of the skin, vegetable der ived nonionic surfactant to solubilize essential oils and fragrances, and the use of sulfonated methyl esters to formulate a surfactant in a soap bar that reduces drying of the skin,

PERSONAL CARE SURFACTANT MARKET

The total amount of surfactants used in th is market is estimated at around 800 million pounds. The market growth of surfactants in the personal care area is projected at 4-6%

per year.

The usage of surfactants in this major market is:

• Bar Soaps -20%

• Liquid Soaps/Body Washes -15%

• Hair Care -35%

• Skin Care -20%

• Other -10%11 The types of surfactants in personal care are:

• Amphoterics -10%

• Anionics - 55%

• Nonionics - 5%

• Cationics - 30%

Major producers of surfactants in this market, in addition to other s listed in this study, are:

• Procter & Gamble

• Stepan

• Cognis

• Rhodia

• Degussa

• Croda

• Lonza



### INDUSTRIAL AND INSTITUTIO NAL (I & I) CLEANERS

The Industrial and Institutional cleaning industr y (I&I) utilizes formulated cleaners in a broad variety of market uses: restaurants, office buildings, hospitals, schools, nursing homes, food processing plants, transportation vehicles – cars, planes, trains, marine, janitorial and general housekeepin g and metal treatm ent and cleaning.

The cleaning products used include general pur pose cleaners, floor care and carpet cleaners, disinfectants and sanitizers, laundr y detergents, hard-surface cleaners and hand

cleaners.

Surfactants are used in I&I formulations for de tergency, foam control, bacterial action, coupling ability, rinsabi lity and emulsification.

I&I cleaning products are estimated to represent about 10% of total U.S. surfactant use. In 2007, I&I market surfactant demand was appro ximately 490 million pounds and growing at

a 2.3% annual rate.

The I&I market segments that use the most surfactants in cleaning products are: hard surface cleaning, machine dishwashing, co mmercial laundries and metal cleaning. The most widely used surfactants in I&I products are:

• LAS – Linear alkybenzene sulfonate

• APE – Alkylphenol ethoxylates

• AE – Alcohol ethoxylates

• Biocidal quats

These product types account for 60% of all surfactants used in I&I cleaners.12 MARKET SEGMENTS

The largest I&I market segment is housekeeping.

1. Janitorial Products represent about 40% of the market volume. This involves hard surface cleaners, floor care, disinfectants and hand soaps. This market utilizes the largest volumes of hard surface cleaners t hat contain low foam ing surfactants and solvents to remove fatty soils. These cleaners have become a major market for

renewable biobased solvents such as meth yl soyate and d’Limonene that offer significant environmental advantages: renew able based, biodegradable, low toxicity
and reduced VOCs.

2. Transportation Vehicles – Vehicle cleaning generally involves high pressure foaming sprays that contain quaternary amm onium surfactant an d spray-on waxes. Hard surface cleaning of commercial fleet cars, trucks, aircraft, trains and ships will require an increased use of safer solvent and specialty surfac tant ingredients.

3. Metal Cleaning – Parts cleaners degrease and remove scale and the oxides of corrosion. Various immersion and spray cleaning processes utilize solvents, aqueous-based emulsion cleaners and detergent s. The use of low VOC, low toxicity surfactants is growing.

4. Hand Cleaners – This is a rapidly growing market that requires ingredients that are

not harmful to skin. Mild biosolvent s such as methyl soyate and amphoteric surfactants are growing in use. Most hand cleaners are waterless.

5. Food Processing Equipment – Dairies, bakeries, c anneries, beverage and meat packing plants all require the removal of fats and proteins from processing equipment. Typical cleaners are highly al kaline, heated and involve mechanical action. Surfactants provide rinsability, foam control and sani tizing with biocidal detergents or disinfectant.

6. Commercial Machine Dishwashing – Surfactants used in commercial dishwashing products are similar to hous ehold detergents. Product formulations are concentrate powders, liquids and so lid blocks that are chlorine-stable and designed for use in restaurants, hospitals , schools, nursing homes, hotels and office buildings. Leading suppliers are BASF, Ecolab and Johnson Diversey.13 MARKET TRENDS

Consumer Demand

The I&I market is usually the leading edge for tomorrow’s household cleaning products. However, in today’s market environment, the consumer is increasingly demanding product changes focused on wellness, safety and su stainability. Cons umer awareness has created significant demand-pull for ecofriendl y, biodegradable, renew able natural-based and safer products that are cost-e ffective, convenient and efficient.

Environmental Issues - Product Safety

Most I&I cleaning products are regulated under OSHA (Occupational Safety and Health Administration) but there is increasing environ mental pressure from the Consumer Product Safety Commission (CPSC) and the U.S. E PA (Environmental Protection Agency).

Primary I&I product ingredient concerns involve surfactants and solvents:

SURFACTANTS CONCERN NPE (Nonylphenol ethoxylates) Endocrine disruptors LAS (Linear alkylbenzene sulfonates) Sulfates DEA (Diethanolamides) Skin cancer in mice Mineral Spirits VOCs, Flammability, Toxicity d’Limonene VOCs, Flammability, Skin irritation

MARKETING TRENDS

The I&I cleaning industry is a service business wit h suppliers that solve cleaning problems rather than just sell products. Roughly two thir ds of I&I products move through distributors, janitorial supply companies and food servic e suppliers. Beyond the major detergent manufacturers – P&G, Unilever and Colgate Palm olive – most industr y manufacturers are small or regional with the exception of Ecolab, Johns on Diversey, Clorox and Reckitt Benckiser. Many of these companies have been involved in rec ent consolidations and brand acquisitions. Some of t he leading suppliers of renewa ble-based cleaners currently are smaller companies such as Spartan Chem ical, Maumee, OH with their Soy Strong product line and Acuity Specialt y Products, Atlanta, GA with their Zep brand, of 20 soybased products. These companies, being sm aller, can move quickly to develop and launch new green products.

Cleaning product ingredient concerns are in creasingly being addressed to provide better
resource assistance to formulator/manufacturers of I&I cleaning products. An example is the Clean Gredients Program dev eloped under the direction of the EPA’s Design for the Environment (DFE) effort. It is an online da tabase that contains “Modules” for primary formulation ingredients – Surfactants, Solv ents, Chelating Agents and Fragrances. Industry manufactures/suppliers of these ingredi ents list their products with analytical data documenting physical and chemical properties, to xicity test data and EH&S (Environmental Health & Safety) data for each product. Form ulators can subscribe to the service and14 select ingredients to provide the combinatio n of safety, performanc e and cost required for any formulated product.

FEEDSTOCK COSTS

I&I cleaning product raw material costs hav e escalated dramatically since 2003. Surfactant feedstocks are equally based on petrochemicals, mainly crude oil and oleochemical/natural materials, mainly pl ant oils – coconut, palm and tall oil; plant carbohydrates/sugars – sucrose and glucose or animal fats – tallow and lard.

Oleochemical feedstocks did not escalate in price like petrochemical s until 2006 when they began to skyrocket and then retreat. Currently, the highly volatile cost of feedstocks is an industry condition all with which produc ers of I&I cleaners must contend.

PRODUCT INNOVATIONS

In response to the market trends listed above, the manufacturers of I&I cleaners have implemented significant changes in raw mate rial content, product packaging/delivery and product end use/application methods. Raw material selection options have increased with

the assistance of new resources such as the Clean Gredients database. “Green Products” is a universal theme today in the I&I cl eaning market. Surfactants based on tropical (coconut, palm) oil-based detergent alcohols are a major industry trend that now accounts for about 60% of world surfactant pr oduction (vs. petrochemical alcohols).

Another example of petrochemical surfact ant/detergent substitution potential is Stepan Company’s MES (methyl ester sulfonate) bas ed on soybean oil and designed to replace LAS detergents. The use of renewable specialty surfact ants to replace conventional petrochemical surfactants is increasing and is often dictated by the purchasing policy of some major chain retailers like Wal-Mart in their commitment to improve the environment.

Another way the producers are minimizing costs and offering customers better product value is through the optimizati on of multifunctional ingredients

. By utilizing the synergism between complimentary surfactant s and other ingredients, they are using co-products and blends to custom design product properties , performance and cost for each formulated product.

Innovative product use delivery methods are also being introduced to bring about a paradigm shift from price per pound to cost in use. This is gradually being done with

cleaner concentrates that offe r reduced product volume us age and lower shipping, storage and disposal costs. This allows for on-site dilution with water, blending, mixing and product application with measured use rates.15 

### FOOD PROCESSING

OVERVIEW

The U.S. food processing industry is the larges t market for specialty surfactants. The industry is mature and encompasses meats, processed foods, beverages, dairy products, baked goods, candy, snack foods, frozen foods , fats and oils. Food and beverage demand is forecast to grow 1.5% per year suppor ted by population gains, growth in prepared convenience foods, nutrition-conscious cons umers and export demand. There are 20 major U.S. food processors that are among the world’s largest.

FOOD SURFACTANT USES

Surfactants provide multifunc tional properties for food additives as emulsifiers, dispersants, wetting agents and solubilizers in foods which contain fats and oils such as baked goods, dairy foods, salad dre ssings, shortenings and margarine.

FOOD SURFACTANT TYPES

Commodity and specialty surfactants used in food are primarily nonionic esters:

• Nonionics:

o Mono & diglycerides

o Fatty acid esters

o Sorbitan esters

o Propylene glycol esters

o Lactylate esters

• Anionics:

o Sulfosuccinates

o Lecithin

• Cationics:

o Quaternary ammonium salts

FOOD PROCESSING SURFACTANT MARKET

2007 Market Demand (North America) Nonionics – 355 million pounds

Lecithin – 50

Total 405 Market growth – 3%

SURFACTANT FOOD APPLICATIONS

The largest food processing use for surfactants is in bakery products as emulsifiers, dough strengtheners, crumb soft eners and texturizers. Dairy products such as ice cream, whipped cream and margari ne utilize surfactants to form stable emulsions containing fats and oils. Other major uses include short enings, salad dressings, peanut butter, cake mixes, toppings and breads.16 Surfactant use in food and bever age applications is projected to grow about 3% per year supported by increased demand for processed and pre-prepared foods t hat often contain specialty surfactants. About 60% of surfactant use is in bakery goods. Emulsifiers are the largest surfactant type often sold as preformulated systems based on glycerides and/or sorbitan esters. Dispersants are another major su rfactant type that hel ps uniform mixing of

food additives such as flavors and texturizers

A growing concern in the food processing industry is consumer health and the control of

contamination from micr oorganisms. There is gr owing use of surfactants as biocides to kill fungi, bacteria, viruses and protozoa that may be present in fresh food such as fruits, vegetables, fish and poultry. Quaternary ammonium salts and ethylene oxide/propylene oxide copolymer sprays are us ed as antimicrobial washes.

LECITHIN

Lecithins are phospholipid co mpounds found in all plant and animal organisms but the primary commercial source is the by-produc ts from the soybean degumming process. They are natural anionic surfactants that ar e widely used in many food applications as emulsifiers in salad dressings and sauces, vi scosity reducers and stabilizers in chocolate, anti-spattering agents in margarine, pan release agents in bakery and confectionery products and as wetting agents in instant food pow ders. Use levels are small, about 0.1%

to 2% in foods which is consistent with use leve ls of synthetic (petrochemical) surfactants. Lecithin use is often combined with synthetic su rfactants which, synergistically, allows for lesser amounts of the synthetic products. Of the estimat ed 405 million pounds per year food use of surfactants in the U.S., about 80% are synthetic and 20% natural. Lecithin is a major contributor to this portion of nat ural surfactants used in food products.

MAJOR FOOD SURFACTANT SUPPLIERS

• AMD

• Cargill

• Croda

• International Specialty Holdings

• Lambent Technologies

• Kao

• Cytec • Dow

• McIntyre Group

• Noveon

• Rhodia

• Solae

• Unilever

• Lonza



### OIL FIELD CHEMICALS

OVERVIEW

The U.S. oil and natural gas i ndustry consumes a variety of large volume chemicals including a broad range of commodity and specia lty surfactants to drill and produce oil, natural gas and coal bed methane. The dram atic increase in crude oil and gas prices has generated renewed interest in enhanced o il recovery (EOR) technologies that

involve extensive use of surfactant s that must meet demanding down-hole17 environmental regulations and performance r equirements. Surfac tant applications involve well stimulation, drilling/completion, production/refining and pipeline transport. These operations will require an increased us e of specialty surfactants that are effective, safer and cause less environmental damage.

OILFIELD SURFACTANT USES

• Emulsifiers/demulsifiers

• Lubricants

• Dispersants

• Corrosion inhibitors

• Foam control agents

• Wetting and suspending agents

• Biocides

U.S. OILFIELD SURFACTANT MARKET

SURFACTANT DEMAND 2007

SURFACTANT TYPE MILLION POUNDS MARKET GROWTH

Anionics 135 2.0%

Nonionics 100 1.0% Cationics & Amphoterics 150 4.0%

TOTAL 385 3.4% The dramatic rise in oil and gas prices has caused a significant increase in the need for more effective EOR processes and material s. This has stimulated greater market demand for specialty, higher cost surfactant s such as cationics and amphoterics that are more costly than nonionics and anionics but perform more effectively. The use of

surfactant combinations with ot her ingredients in formulated oilfield chemical additive products is also a growing tr end. Tighter environm ental regulation is forcing the use of less invasive products that have lower VO Cs, are less flammable, are biodegradable and reduce the large volumes of water required to recover and refine crude oil and natural gas.

OIL AND GAS SURFACTANT APPLICATIONS

Crude oil and natural gas production and refining operations utilize the largest volume of

oilfield industrial surfactant s. Typical applications in volve the use of nonionics as demulsifiers, anionics as defoamers and ca tionics and amphoterics as biocides and

corrosion inhibitors.

Surfactants containing formulated products are also important additives in drilling operations. They are used in drilling muds and drilling fluids to provide lubricity for better flow and pumpability, fo r foam control, emulsification and to reduce water loss during drilling. Commonly used surfactant s include aromatic sulfates, aromatic18 sulfonates, lignosulfonates, fa tty amine ethoxylates and bet aines. They also provide

corrosion and biocidal control.

Natural gas and coal bed methane down hole dr illing utilizes surfactants for gas well stimulation in foaming syst ems that provide formation blocking and fracturing with cationic quaternary ammonium compounds. These foamer s can reduce water loading, reduce corrosion and increase gas production.

CONVENTIONAL OILFIELD SURFACTANTS

Conventional oilfield surfactants can be pr oduced from petrochemical (synthetic) or oleochemical (natural) feedstocks and can often be interchangeable depending on feedstock costs. Major oilfie ld surfactants products are:

• Aromatic sulfates

• Aromatic sulfonates

• Alkylphenol ethoxylates

• Fatty amine oxides

• Quaternary ammonium compounds

• Betaines

• Tallow fatty acids

• Tall oil fatty acids

• Lignosulfonates

The use of oleochemical feedstocks has historically been significant - usually based on tallow, tall oil and lignin, a paper process by -product. To a lesser degree, vegetable oil feedstocks have also been used in drilling fluids and corrosion inhibitors.

Some soy-based feedstocks used for oilf ield surfactant products include:

• Soybean oil

• Degummed soy oil fatty acids

• Acidulated soy soapstock

• Fatty acid distillates

The high cost of petroleum feedstocks, demanding environmental pressures and a growing demand pull for renewable-based fe edstocks to reduce oil imports have all

become drivers for the surfact ant producers to develop more natural products. Despite the rapid price escalation of vegetable oil prices in 2007 and early 2008, the long-term cost competitiveness of seed oil-based f eedstocks should continue to stimulate the development and use of oleochemical su rfactants in oilfield applications.19 MAJOR OILFIELD SURFACTANT SUPPLIERS

• Akzo Nobel

• Baker Hughes

• Clariant

• Cognis

• Croda

• Dow Chemical

• Rhodia

• Lonza

• Stepan*

*Stepan Company and Nalco launched a new EOR joint venture “Tiorco” to provide oilfield product sales and process technology service



### AGRICULTURAL CHEMICALS

OVERVIEW

In the U.S., about 60 manufacturers produce surf actants for agrochemical (Ag) markets. These products are sold to more than 100 pe sticide manufacturers that formulate their own end-use products and to about 2,000 pesticide formulators that purchase pesticides, solvents and other ingredients from chemical producers. The formulated products then move through a market netwo rk of about 250-300 di stributors and 8000 dealers. There are then over 1,000,000 cust om applicators and growers that actually apply the end product pesticides.

AG SURFACTANT USE AND APPLICATIONS

Ag surfactants are used as additives primar ily in pesticides (herbicides, insecticides, fungicides) and to a lesser degree in fertilizer s, animal feeds and soil treatments. When used as a pesticide adjuvant, surfact ants provide the following functions:

• Emulsifier for the active ingredient in li quid formulations to create stable

emulsions and extend shelf life

• Spreader or dispersing agent to aid applicat ion of the active ingredient

• Sticking agent to improve contact of the acti ve ingredient on the crop or weed plant leave surface

• Foaming aid to control spray drift during pesticide application20 Surfactant use as a pesticide adjuvant is esti mated to be 60% for use in herbicides and 40% for use in insecticides and fungicides.

AG SURFACTANT MARKET

Conventional Ag surfactants typically us ed have been commodity products due to low cost – nonylphenol ethoxylates (NPE) and ethoxylated fatty amines. Market demand growth has been relatively flat in total with NPEs declining and some specialty surfactant use growing.

Two major new influences have im pacted the Ag surfactant market in recent years. The growth in use of glyphosate herbici des (Monsanto’s Roundup®) and new generics following its patent expiration has seen an in crease in the use of more specialty surfactants – ethoxylated ami nes and phosphate esters in these glyphosate products to improve their performance. The other ma jor influence is the growth of public environmental concern and regul atory pressure on pesticides. In addition, market demand will slow due to improving agricultu ral productivity (less planted acreage), increasing global Ag compet ition (reduced exports) and the rise of organic farming (no pesticides).

Market demand for Ag surfactants will remain re latively flat with modest growth of some specialty cationics and anionics and declini ng use of commodity nonionics such as APEs due to environmental pressure.

AG SURFACTANTS PRODUCTS & DEMAND 2007

MILLION POUNDS

Primary Surfactants Demand

Nonionics: 100 Alkylphenol ethoxylates Alcohol ethoxylates EO/PO block polymers

Cationics: 95 Ethoxylated amines Fatty amine oxides

Anionics: 75 Alcohol ether phosphates

Aromatic sulfonates

270 Market Growth: 1% per year21 MAJOR AG SURFACTANT MANUFACTURERS

• Akzo Nobel

• Cognis Corp.

• Dow Chemical

• Harcros Chemical

• Huntsman

• Lambent Technologies

• McIntyre Group

• Rhodia

• Stepan



### TEXTILES

OVERVIEW

The overall global fiber demand is 165 billion pounds . The percentages of fibers in this category are:

• Synthetic - 57%

• Cotton - 36%

• Cellulose - 5%

• Wool - 2%

• Silk -<0.5%

The amount of synthetic and cellulose fiber manufactured in the United States is estimated at 15 billion pounds. The amount of cotton processed is estimated at 3 billion pounds.

The textile industry uses surfactants in m any of the steps betw een producing the raw fiber and selling the finished article. Natural fibers are treated or scoured with

surfactants in solution to remove oils and di rt in preparation for spinning, Synthetic fibers have oils applied for lubrication needed fo r spinning. These oils are removed by scouring before dyeing or printing. Sizes are applied for weaving that must be scoured

out later.

Surfactants are also used as lubricants and ant istats in all manufacturing for processing and in fabric softening. The dyeing pr ocesses also require surfactants.

MARKET TRENDS

The United States had 23% of the worldwide share of manuf actured fiber in 1987, and this had decreased to 9% in 2007. During that time the market sh are of Asia increased

from 34% to 75%.22 Whereas textile production is in decline in t he United States, the production of fibers in the United States for other applications, mainly nonwovens, has remained far more stable and is projected to grow at 2%.

Consumer awareness of greenhouse gas em issions, global warming and the carbon footprint may lead to opportuniti es for the US textile produc ers. If US producers are more energy or carbon efficient in producing products locally, and if energy costs in long distance shipping from Asia are consider ed, one may see the po ssibility of textile manufacturing returning to the United States.

SURFACTANT INNOVATIONS

The textile industry is energy and water intensiv e. There is a great deal of potential for savings. The dyeing and finishing sector is the largest energy and water consumer in

the whole textile chain.

As fiber producers seek to improve pr oductivity, increased line speeds demand increased thermal stability. New surfactant types are being examined to meet these

demands.

Producers try to lower their energy costs by using lower temperatures and lowering the amount of water used. To comply with envir onmental regulations, the surfactants have changed or are changing to m eet these requirements.

TEXTILE SURFACTANT MARKET

Natural fibers are treated or sc oured with surfactants in solution to remove oils and dirt in preparation for spinning, Synthetic fiber s have oils applied for lubrication needed for extrusion and spinning. These oils are remo ved by scouring before dyeing or printing. Sizes are applied for weaving that must be scoured out later.

Surfactants are also used to as proce ssing lubricants and antistats and in fabric softening. The dyeing processes also require surfactants.

The estimated textile market size for surfactants is 200 m illion pounds. The growth in this area is projected to be less than 2%. The types of surf actants used are:

• Anionic- 18%

• Cationic – 22%

• Nonionic-60%23 

### EMULSION POLYMERIZATION

OVERVIEW

The amount of emulsion polymers produced in the United States is around 5.5 billion pounds. The growth rate of this market is 3-4% per year.

The major polymers produced are styrene-but adiene latex, acrylics, polyvinyl acetate and vinyl-acrylics.

This type of polymerization starts with an em ulsion incorporating water, monomer and a surfactant. Emulsion polym erization is used to manuf acture several important polymers. Many of these pol ymers are used as solid materials and must be isolated from the aqueous dispersion after polymerization. In other ca ses the dispersion is the end product. This dispersion is often called latex. These pr oducts are typically found in adhesives, paints, paper coati ngs and textile coatings.

Surfactants play a significant role in the production and application of emulsion polymers. They control the par ticle size and distribution wh ich in turn dictates the rheology and viscosity of the final latex.

MARKET TRENDS

The polymers and latexes from emulsion polymerization are finding increasing acceptance and are preferred over solvent-bas ed products in suitable applications as a result of their eco-friendly characteristics due to the absence of VOCs (Volatile Organic Compounds) or petroleum solvents. Alt hough the coatings are water-based, they still typically contain 5-10% organic solvent to function properly. Solvents are required for durable film formation (“coalescents”), to provide package stability in cold weather (“freeze/thaw stabilizers”) and to dilute coat ings additives. Industry has been challenged

to reduce or eliminate these solvents while still providing economical and durable coatings. To meet the lower VOC regulatio ns, industry has taken several approaches:

• Use of additives that c ontain little or no VOCs

• Modify film forming polymers so t hat they need little or no coalescing
solvent and/or freeze/thaw stabilizer

• Use of vinyl acetate-ethylene copoly mers that form good coating films with little or no organic solvent

SURFACTANT INNOVATIONS

New emulsifiers have been developed in respons e to increasing global environmental protection regulations and recommendations to phase out the use of alkyl phenol ethoxylates (APEs). These new products have been designed to meet environmental requirements while providing effective performance in emulsion polymerization.24 EMULSION POLYMERIZATION SURFACTANT MARKET

The use of surfactants in the emulsion polyme rization market is estimated at 200 million pounds. The usage is split almost equally between nonionic and anionic surfactants

.



### PAINTS and COATINGS

OVERVIEW

The total amount of coatings shipped in the United States is around 1.32 billion gallons or about 11.6 billion pounds. The industry declined in volume 2% from 2006 to 2007.

The coatings market is segmented as Ar chitectural Coatings (57%), Product OEM Coatings (28%) and Special Purpose Coatings (15%).

The Architectural Coatings market consists of exterior (33%) and interior coatings (67%).

The Product OEM Coatings market consists of many segments. T he coatings in this segment are used in automot ive, heavy duty trucks, ma chinery and equipment, wood furniture, appliances, etc.

The five largest markets for Special Purpose Coatings are high performance maintenance, automotive refinish, highway and traffic marking, aerosols and marine.

The major producers of paints and coat ings in the United States are:

• PPG Industries, Inc.

• DuPont Coatings & Color Technologies Group

• Sherwin-Williams Co.

• Valspar Corp.

• RPM International, Inc.

• Behr Process Corp.

MARKET TRENDS

The trend in Architectural Coatings is towa rds the use of more waterborne coatings (82%) than solvent based coatings. As the quality of wate rborne coatings has improved, do it yourself (DIY) users and cont ractors prefer to use these coatings.

Restrictions on the amount of solvents thr ough federal legislation and state laws favor the use of waterborne coatings.25 Powder coatings, as an alternative to liqui ds, are used in many coating applications. Growth is slowing as the market for thes e products matures and companies try to avoid the cost of capital to invest in powder app lications. Powder c oating represent about 75 million gallons (375 million pounds) or about 6% of t he total coatings market.

SURFACTANT INNOVATIONS

Most of the efforts in coating formulati on development have been to reduce volatile organic compound (VOC) emissions by decreasi ng the amount of solvent. This has resulted in new polymer developments i.e. one company bringing out a soybean-oilbased latex alkyd emulsion which meets strict VOC standards for interior coatings. Surfactant developments are also being focu sed on the reduction of the VOCs from

surfactants or to enable the use of less solvent in a coating.

The trend in the paints and coatings mark et is to develop products with higher performance at the equivalent or even lower price than competitive products. The higher performance tends to decrease the chance of the paint or coating being considered a commodity product.

PAINT AND COATINGS SURFACTANT MARKET

Surfactants act as wetting agents, dispersant s and foam control agents. The estimated market size is 200 million pounds. The growth ra te for surfactants in this market ranges from 1-3% per year. The usage within these three areas is estimated to be:

• Wetting agents - 25%

• Dispersants - 40%

• Defoamers and anti-foaming - 35%

Nonionic surfactants are neutra l and have wider applications in this market for wetting and dispersing. Alky phenol ethoxylates ar e the largest class of nonionics used, but their use is decreasing as their usage is being regulated. Def oamers are typically polysiloxanes or mineral and paraffin oils. Po lysiloxanes offer bette r compatibility and lower surface tension, while mineral and par affin oils have a lower price. Anionic surfactants improve wetting and dispersion of pigments.

Major providers of surfact ants for this market are:

• Air Products

• Byk Chemie

• BASF Corp.

• Cognis

• Rhodia

• DuPont26 

### CONSTRUCTION

The primary applications for surfactants in the construction industry are in asphalt,

cement and wallboard.

SURFACTANTS USED IN CONSTRUCTION – 2007

Million Pounds

Product Surfactants Million Pounds Asphalt Tallow fatty amines 45 (Cationics) Ta ll oil fatty amines

Imidazolines Lignosulfonates

Cement Naphthalene sulfonates 40 (Anionics) Lignosulfonates Polycarboxylates

Wallboard Naphthalene sulfonates 15

AES

LAS

TOTAL 100

Market growth: 1.0% per year

Asphalt

Surfactants are used as emulsifiers in asphal t cement which is the binder that adheres the asphalt to the aggregate. They are typica lly cationic tall oil and tallow-based fatty

amines and imidazolines as well as lignosulfonates.

The asphalt industry is changing rapidly due to severely escalating and highly volatile feedstock costs. Rising crude oil prices have forced refinery product mix upgrading and significantly decreased the availability of bi tumen (petroleum-based asphalt). Prices of asphalt cement have, consequently, tripled si nce 2004. Concurrently, tall oil and its derivatives have also become scarce and expensive. These conditions have created new opportunities for renewable-based produc ts such as BioSpan Technologies’ soybased asphalt cement containing new soy so lvent chemistry and recycled plastics such as styrene-butadiene polymers from St yrofoam® and tire rubber scrap.27 Cement

Surfactants used in the production of ce ment are primarily anionics such as naphthalene sulfates, lignosulf onates and polycarboxylates as plasticizers and air entraining agents to control the rate of reaction with water.

Wallboard

Wallboard or gypsum board production prim arily utilizes anionics such as naphthalene sulfonates and alcohol ether sulfates. LAS (l inear alcohol sulfates) are also used as foam stabilizers in light weight wallboard products.



### LUBRICANT and FUEL ADDITIVES

Motor Oil

The by-products of the combustion proce ss will form sludge and varnish deposits in the engine. Detergents are used in motor oil to aid in removing the deposits. Other surfactants known as dispers ants are used to keep the by-pr oducts in the oil until the filtration system can remove them.

Surfactants are used in lubricants as deter gents and as dispersants. The estimated usage of all lubricants in the automotive sector is estimated at 1.4 billion gallons. The US passenger car motor oil yearly consumpt ion is estimated at 615 million gallons (4.5 billion pounds). The surf actant usage in this category is estimated at 315 million pounds.

Detergents used are magnesiu m sulphonate, calcium sulphonate, and sodium sulphonate. Dispersants used are typically alkenyl succinimides.

Gasoline

Detergents in gasoline keep the engine clean and can affect emissions. For that

reason the United States Environmental Pr otection Agency has required all gasoline
marketed in the United State to contain detergents since 1995.

The US yearly consumption of gasoline is es timated at 142 billion gallons (880 billion pounds). The corresponding surfactant usage is estimated at 300 million pounds.

Detergents include polyether amines, polybutene amines, Mannichs and alkenyl

succinimides.28 

### SURFACTANT INDUSTRY MANUFACTURERS

The structure of the su rfactant industry is stratified and complex. It consists of large

surfactant manufacturers that produce surfactant raw materi als, surfactant producers without a raw material position that typically modify basic surfactants by sulfonation or ethoxylation, smaller specia lty surfactant producers and /or formulators and end users that are often focused on specific industries.

FIGURE 1

U.S. SURFACTANT INDUSTRY STRUCTURE

The large surfactant producers using petro -chemical feedstocks typically produce ethoxylated commodity surfactants for lar ge volume household de tergent customers. Intermediate-Size Producers (mainly

sulfonators and

ethoxylators) (approximately 10)

Smaller Producers

and/or Formulators (10-15) Large Producers

that also

manufacture

surfactant raw

materials ( a pp roximatel y 11 )

End Users29 Companies producing surfac tants based on oleochemical feedstocks usually have much broader product lines and make mo re processed downstream specialty
surfactants based on sulfonation/ sulfation, esterification and amination with nitriles.

Due to difficult industry economic challenges caused by escalating feedstock costs and large manufacturer pricing pr essure, the surfactant industr y has undergone significant consolidation by acquisitions, divestitures, mergers and join t ventures especially among the smaller specialty producer s. This segment is led by large producers with broad product lines and extensive marketing, resear ch and manufacturing capabilities. These companies have grown by acquisition of sma ller specialty, niche product producers. The 12 largest producers of specialty surfact ants currently supply two-thirds of U.S.

demand. This consolidation trend continues wit h more recent acquisitions, mergers and joint ventures happening on a global scale involving many major companies: Dow bought Union Carbide, Akzo Nobel acquire d surfactant businesses from Witco and Crompton. Sasol acquired CONDEA and Cognis Corporati on, the world’s largest oleochemical manufacturer and part of Henkel, has recently been acquired by PTT Chemicals, Thailand. Elsewhere, Nalc o and Stepan recently formed a joint venture

“Tiorco” to sell oilfield chemicals and services.

SURFACTANT PRODUCT ABBREVIATIONS

• AE Alcohol ethoxylates

• AES Alcohol ether sulfates

• APE Alkylphenol ethoxylates

• APG Alkyl polyglycosides

• AS Alcohol sulfonates/sulfates

• DFX Diphenylether sulfonates

• EO/PO Ethylene oxide/propyl ene oxide block copolymers

• LAB Linear alkylbenzene

• LAS Linear alkylbenzene sulfonates

• MES Methyl ester sulfonates

• NPE Nonylphenol ethoxylate30TABLE 1MAJOR BASIC SURFACTANT PRODUCERSCOMPANYBASIC FEEDSTOCKSPetrochemical-Based:Detergent Alcohols Ethylene Oxide LinearAlkylbenzene Nonylphenol Major SurfactantsBASF Corp. X EO/PO PolymersDow Chemical X X NPE, EO/PO, DFXHuntsman Corp. X X X AE, NPESasol N. America X X AEShell Chemical X X AEOleochemical-Based:Detergent Alcohols Fatty Acids Nitrile-BasedAminesMajor SurfactantsAkzo Nobel X XAmines, quats, As,AES, LAS, EO/POCognis Corp. X XAS, AES, AE,esters, APGCrompton Corp. X X Amines, quatsDegussa Corp. X XEsters, amines,quatsUniqema X Esters, ethoxylatesProcter & Gamble X X Many, captive useLonza XAmines, quats,esters,ethoxylates, waxes31TABLE 2MAJOR U.S. SURFACTANT PRODUCERSCOMPANY SURFACTANT TYPES PRIMARY PRODUCTS/MARKETSAnionic Catonic Nonionic AmphotericAkzo Nobel X X X X Fatty amines, fatty acid derivativesBASF Corp. X X X EO/PO polymers, specialtiesClariant Corp. X X X AE, specialties, personal careCognis Corp. X X X X Cosmetics, Textiles, APGCroda Inc. X X Personal careDegussa Corp. X X X X Specialties, surfactant blendsDow Chemical X X APE, DFX, specialtiesHarcros Chemical X X X Specialties, AE, NPEHuntsman Corp. X APE, commoditiesKao Corp. X X X Specialties –textiles, paper, leather, etc.Lambent Tech. X X Specialties, AE, NPELonza Inc. X X XSpecialties, biocidal cationics, quats,textiles, personal care, plasticsMcIntyre Group X X AnionicsONDEO Nalco X X Oilfield surfactants, formulated productsPilot Chem. X X Toll producer of commodity productsProcter & Gamble X X Captive use, consumer productsRhodia Inc. X X X X Specialtyproducts, amphoterics leaderSasol N. America X AE supplier to detergent industryShell Chem. X Detergent feedstock supplierStepan Co. X X X X Largest specialty supplier, anionics leaderTomah Prods. X X Fatty aminesUnilever X X Captive use, consumer productsUniquema X X X X Specialties, broad line32 SURFACTANT PRICING

Surfactants are produced from basic petroc hemical - “synthetic” and oleochemical – “natural” feedstocks. The basic petroc hemical feedstocks are ethylene and benzene

which are derived from crude oil and convert ed to surfactant intermediates, ethylene oxide (EO), linear alkylbenzene (LAB) and deter gent alcohols. The basic oleochemical feedstocks are typically seed oils -palm and co conut and tallow. Raw material costs for these feedstocks are a prime determinant of surf actant pricing. In large, commodity surfactant markets such as detergent alco hols, feedstock costs for ethylene vs. plant oils will often determine product composition.

Synthetic vs. Natural Feedstocks

Through the 1990’s, surfactant production wa s dominated by the use of “synthetic” feedstocks due to low and stable crude oil prices. With the rapid escalation of crude oil pricing beginning in 2003, however, oleochem ical-based surfactant production has expanded to support major surf actant feedstock substitution. More recently, strong demand for plant oils in oleochemicals and biod iesel has caused similar price escalation which has reduced the cost advantage for natural feedstocks.

At the time of this writing, raw material costs for both synthetic and natural feedstocks have declined significantly.

This raw material cost competition and resu ltant feedstock substitution is common to commodity surfactants especially in the det ergent industry. S pecialty surfactant products are less vulnerable to the impact of rising raw material and energy costs because they are more performance/value driven, command higher prices and create higher producer pr ofit margins.

Recent Pricing Trends

The following pricing summaries demonstrate a major surfactant industry trend toward the increasing utilization of nat ural, renewable feedstocks which are primarily plant oils - palm, coconut and, most recently, soybean. The rapid price escalation of crude oil, natural gas and derivatives ethylene and benz ene beginning in 2003 triggered a major reformulation of many basic commodity surfac tants. Alcohol etho xylates, for example, can be made from natural fatty alcohols rat her than synthetic alcohols. Rising raw material costs only reinforced a growing tr end toward consumer preference for natural, renewable-based green products.

This feedstock substitution trend was temporarily interrupted during the first half of 2008 when plant oil prices suddenly escalated with gasoline prices and rising biodiesel demand. Later in 2008, however, plant oil pr ices subsided with crude oil prices due to growing recessionary pressure s and declining market demand.33 Feedstock Pricing

Feedstock 2003 2005 4Q07 4Q08

Petrochemical Crude oil $/barrel 22 50 72 43 Natural gas $/ MM BTU 5.00 6.50 7.90 5.80 Ethylene ¢/lb. .23 .57 .59 .51 Benzene ¢/lb. .25 .41 .50 .30

Oleochemical Coconut oil ¢/lb. .30 .27 .52 .345 Palm oil ¢/lb. .32 .185 .50 .255 Soybean oil ¢/lb. .25 .23 .38 .295

Surfactant Pricing

Recent pricing for major surfactants and t heir primary intermediates shown in the summary below documents the strong im pact of feedstock costs on commodity

surfactants and lesser influence on specialty surfactants.

Intermediate Pricing

Intermediate 2003 2005 4Q07 4Q08
EO, Ethylene oxide ¢/lb. .50 .75 .75 .70 LAB, Linear alkylbenzene ¢/lb. .70 .90 1.05 Detergent alcohols ¢/lb. .55 .60 .80

Surfactant Pricing

¢/lb.
2005 4Q07 4Q08 Commodity Surfactants LAS, Linear alkylbenz ene sulfonates .51 .71 .93 AE, Alcohol etho xylates .60 .70 .90 AES, Alcohol etho xysulfates 1.00 1.20 1.47 AS, Alcohol sulfates 1.35 1.50 1.70 NPE, Nonylphenol ethoxylates .80 1.02 1.40

Specialty Surfactants

Betaines 2.56 2.72 Fatty alkamolamides 2.50 2.62 Alpha olefin sulfonates 1.49 1.56

Sarcosinates 1.46 1.51 Quaternary ammo nium salts 1.24 1.30
Sulfosuccinates 1.24 1.27 Fatty amine oxides 1.17 1.2234 Oleochemical Surfactant Pricin g Outlook (Including Soy)

Despite wide fluctuations in both petrochem ical (synthetic) and oleochemical (natural) feedstock pricing in recent years, the escala tion of crude oil prices was most dramatic and had the biggest impact on surfactant prici ng. Supply/demand changes, along with other factors such as currency exchange rate s and commodity speculation, will continue to influence pricing of surfactants but not to the extent of the st ronger influence exerted by 1) the growing U.S. dependence on crude oil imports ( now 70% of supply) and 2) growing environmental and regul atory pressure on surfact ant manufacturers to use natural, renewable raw materials. As a result, demand for oleochemical-based feedstocks will grow at the expense of petrochemical-based surfactants.

Historically, the oleochemical feedstocks of choice have been palm, palm kernel and coconut oils as well as tallow. Soybean oil, with much greater supply volume and typically lower pricing, has not been used much in surfactant formulations. This has, most likely, been because of the higher leve l of polyunsaturates. Soy oil contains multiple unsaturates (double bonds) that preclude its use in most conventional surfactant products. The long er carbon chain fatty acids are not as water soluble and, consequently, do not “foam” as well; they can create dark colors when sulfonated and the greater reaction sites reduce the biodegradability of soy-based surfactants.

Methyl ester sulfonates (MES) are anionic surfactants derived from any of these oleochemical feedstocks that have been around for many years but were not produced commercially because they could not compet e with low cost petrochemical commodity
surfactants. MES is maki ng a comeback with some majo r manufacturing plants on stream using both palm and coconut oil main ly because of the higher prices of LAB

surfactant intermediate. MES is being used as a replac ement for LAS in laundry detergents because of 1) higher petrochemical costs, 2) the gr owing trend to cold washing temperatures and 3) a need fo r more neutral pH laundry detergent formulations. Growing production capacity in Asia and the U.S. is based mainly on palm oil but Stepan Company operates a coconut oil-based plant in Joliet, IN. Price competition between these seed oils will pr obably continue but they both produce cost performance competitive surfactants t hat can replace L AS detergents.

Product Performance

MES surfactants provide better overall detergency in hard and cold water, lower toxicity (mildness), more biodegradability and good compatibil ity with other deter gent additives. The product performance advantages of MES ar e best optimized by the utilization of C16 and C18 fatty acids from palm, coconut and soybean oil. Unfortunately, soybean oil contains mostly C18 fatty acids and only 11% C16s which are preferred for MES. C18 fatty acids have some aquatic toxicity issues that preclude its use in MES. However, if traditional seed oil pricing return s and soy oil is the low cost seed oil vs. coconut and palm, C16 fractions at 11% cont ent could be isolated and used as a costeffective MES feedstock.35 

### SOY-BASED SURFACTA NTS and EMERGING OPPORTUNITIES

The use of oleo chemicals, which consist main ly of plant based chemicals, is estimated at 60% of the total amount of petrol eum chemicals and oleo chemicals used in

surfactants.

The primary plant based materials are coconut, palm, castor, rapeseed and soybean oils, with the majority being coconut and palm oil.

The list below represents a sample of typi cal uses of soybean based surfactants in

selected markets.

1. Household Detergent . A biobased dishwas her detergent containing a

biobased surfactant from the fermentation of soybean oil and sugars which produces sophorolipids. Na me of the detergent is SophoronTM. Manufacturer is Saraya Co., Ltd. located in Osaka, Japan. Website is www.saraya.com.

2. Agricultural Chemicals . Use of lecithin in soybean herbicide adjuvants. Adjuvants are substances added to the sp ray tank, separate from the herbicide formulation that will improve the performanc e of the herbicide. Examples are trade names of CompareTM, LI700® and Libe rate®. Manufacturer is Loveland Products, Inc. in Greeley, Colorado. W ebsite is www.lovelandproducts.com.

3. Personal Care . Non nonionic surfactants derived from soy oil which are used in mild cleaning agents for skin and hair care and a solubilizer fo r fragrances and

oils. Products are ChemonicTMSI- 63 and ChemonicTMSI-7. Products are supplied by Noveon® Consumer Specialt ies owned by the Lubr izol Corporation of Wickliffe, Ohio. Website is www.personalcare.noveon.com.

4. Personal Care . Condensation product of undecyl enic acid and hydrolyzed soy protein. Product is used in hair care and skin care as a cleanser. The product is undecylenoyl soy polypeptide. It is so ld by Sinerga Cosmetic Company of Milano, Italy. Website is www.sinerga.it,

5. Household Detergent . A liquid laundry detergent that contains a soy-based

fabric softener. Product name is Ecos. Manufacturer is Earth Friendly Products of Winnetka, Illinois. Website is www.ecos.com.

6. Agricultural Chemicals/Construction . Use of ethoxylated soybean oil for surfactants in herbicides and pesticides. An example is AgniqueTM SBO-10. This same surfactant is used to treat fly ash for use in concrete. Manufacturer is Cognis GmbH headquartered in M onheim, Germany. Website is www.cognis.com.

7. Oilfield Chemicals . Use of soy alkyltrimethy l ammonium chloride as a

surfactant to recover crude oil in crude oil and water emulsions. Typical trade36 names are Arquad® SV-60 PG and Arquad® S-50. The manufacturer is Akzo Nobel headquartered in Amsterdam , Netherlands. Website is

www.akzonobel.com.

8. Textiles . Use of sulfated soybean oil as a text ile lubricant. Product is ActrasolTM OY-67. Manufacturer is Georgia Pacifi c Corp. headquartered in Atlanta, Georgia and owned by Koch Industries. Website is www.gp.com.

9. Paints & Coatings . Use of sulfated soybean oil in paints and coatings. Product
is ActrasolTM OY-75. Manufacturer is Georgia Pacific Corp. headquartered in Atlanta and owned by Koch Industrie s. Website is www.gp.com.

10. Food Processing . Use of lecithin to provide em ulsification properties in foods with high-viscosity, reduced –fat, high moisture and/or flavor-sensitive applications. Typical products from Ar cher Daniels Midland, headquartered in Decatur, Illinois, are Yelkin® lecithin, Ultralec® lecithin and BeakinTMlecithin.
Website is www.admworld.com. Other uses for lecithin can be found at

www.soynewuses.org.

The above uses of soybean-based products ar e examples of both the soybean oil and the soy protein as the starting materials fo r surfactants. Soy bean oil has been the principal feedstock used in the manufactu re of surfactants from soybeans.

EMERGING TECHNOLOGIES FAVORI NG SOY-BASED SURFACTANTS

The emerging technologies that may a ffect the increased usage of soy-based

surfactants in the future are:

1. Increased knowledge in enzymatic proce sses which are related to fermentation to produce surfactants.

2. Increased knowledge in the area of protein-based surfactants to provide functionality is not currently available today. Soy oleosin surfactants were studied by the University of Southern Mi ssissippi. Three soy oleosin emulsifiers were identified, two lipoproteins and one vacuole protein, that were “100 times more efficient wetting agents than conv entional surfactants” and highly biodegradable. These soy proteins also emulsify best in highly alkaline systems such as detergents, household an d industrial cleaners. Th is feasibility study was completed but no further application development work was done. Further application work holds good potential.

3. Increased knowledge of t he oil content to produce fatty acid components with

less unsaturation.37 4. Process improvements in processing te chnology of producing surfactants by using micro fluidizer technology to prepare more stable nanoemulsions.

5. Separation technologies to produce products with fewe r impurities to increase potential product applications, especially in food and personal care. Cargill has developed a new fluid membrane separat ion process that can produce clear lecithin for these applications.

The United States Patent database was ana lyzed to evaluate the number of patents filed from 1975 to present. The word “surfactant” and the wo rds “surfactant and soybean” were searched in the patent claims . Notably the peak year for these patent applications with the word “s urfactant” in the claims peak ed in 2001 at 1,931 patents and has decreased drastically sinc e then. A similar pattern is seen with claims having the words “surfactant and soyb eans” with a peak of 38 patents for each year in 2000

and 2001.

These trends and emerging technologies suggest t hat there is room for innovation using soy-based surfactants.

Number of US Patents Filed in Specified Year (with word "surfactant" or words "surfactant and soybean" in the claims)

0 100 200 300 400 500 600 700 800 900 1000 1100 1200 1300 1400 1500 1600 1700 1800 1900 2000

19

7 5

1980 19

8 5

1990 19

9 1 1992 19

9 3

1994 1995

1 9 96

1997 19

9 8

1999 20

0 0

2001 2002
2 0 03

2004
2 0 05

2006
2 0 07

2008

Year of Patent FilingNumber of Patents Filed

Claims with Word "Surfactant"

Claims With Words "Surfactant and Soybean"38 

### ISSUE ANALYSIS

ENVIRONMENTAL AND REGULATORY ISSUES

ENVIRONMENTAL REGULATION

The surfactant industry is facing chall enging environmental, r egulatory and consumer pressure on the production, exposure, pa ckaging, handling, transporting, use and disposal of its products. Surfactant produc t protection and safety is regulated by the U.S. EPA and other federal, state and loca l agencies regarding product toxicity, flammability and volatility. In addition, surf actants used in food processing applications are regulated by the Food and Drug Administra tion (FDA) and surfactants with biocidal claims must be registered under the Federal In secticide, Fungicide and Rodenticide Act (FIFRA).

Other environmental regulations impacting su rfactant suppliers and end users include the Clean Water Act, the Clean Air Act, the Resource Conservation and Recovery Act (RCRA), the Toxic Substances Control Act (TSCA) and the Occupational Safety and Health Administration (OSHA) standards. More recently, a number of consumer product certification organizations have influe nced product environmental acceptability – Clean Gredients, Green Seal, EPA’s Desi gn for the Environment Program, EcoLogo, Eco-Label, GreenGuard, Nordic Swan and EcoCer t. Also, the impact of the European REACH (Registration, Evaluation, Authorizat ion and Restriction of Chemicals) program is growing.

THE “GREEN” PRODUCT MOVEMENT

Throughout the surfactant industry, there is significant new consumer market driven demand for natural, renewable-bas ed products that are more environmentally friendly. Consumers and major retailers of surfact ant-containing products want “wellness” and “sustainability” in addition to product perform ance. This new influence has come on strongly in the last two years, on top of conc ern for rising raw mate rial and energy costs and the growing requirement to have cl eaning products “certified” as safe.

This new market driven influence has resulted in some major purchasers of surfactantcontaining products banning specific surfact ants. In 2006, Wal-Mart North America began phasing out a list of suspect chemicals including APE (alkyl-phenol ethoxylates). Cintas Corporation, a major industr ial launderer, banned NPE (nonyl-phenol ethoxylates) detergents in 2008 and Levi Str auss began a ban on NPE use. Many producers of formulated cleaning products ha ve responded to these initiatives by eliminating APEs from their products, replacing the surfac tants with natural, renewable oleo-based products such as methyl ester su lfonates (MES) from so y or palm oil or seed oil-based alcohol ethoxylates. Major cleaning product manufacturers - JohnsonDiversey, Ecolab and Reckitt Bencki ser - have phased APEs out of their

formulations.39 SURFACTANT PRODUCTS OF CONCERN

• LAS – Linear alkybenzene sulfonates. There is a general health concern about surfactants containing sulf ates that has increased dem and for renewable-based substitutes especially in large commodity detergent products.

• NPE, APE – Nonylphenol et hoxylates, alkylphenol ethoxylates. These compounds have long been suspected “endocri ne disrupters” that cause reproductive disorders in aquatic life forms and potentially in humans . They are major commodity industrial

surfactants that have been thoroughly studied and banned in much of Europe although not in the U.S.

• Diethanolamides (DEA) – These commodity nonionic surfactants are typically based on oleochemical fatty acids and have been s hown to cause skin cancer in mice.

• Tallow fatty acid-based surfactants – T here is some concern over possible health

risks from “mad cow disease” that has caus ed some reformulating of surfactants to vegetable-based raw materials.

The environmental and health issues de scribed above, coupled with severe price volatility of feedstocks, especially crude oil and natural gas, have resulted in a significant response by the surfactant indus try. The emerging trends include corporate consolidation as smaller specialty producer s are acquired by lar ger firms, a growing demand for renewable-based products that are safer and less environmentally damaging, a renewed emphasis on R&D to produce value-added differentiated products, an increased use of surfactant ble nds to create better cost-performance and

the introduction of concentrate cleaners to reduce costs, boost cleaning performance and reduce the environmental imprint of pr oducts in terms of energy consumed and packaging disposal.



### UNMET SURFACTANT MARKET NEEDS

While the ten markets that ar e explored in detail along with five other market segments that are mentioned in this summary are very diverse; they do hold one thing in common,

and that is the concer n for the environment.

This concern ranges all the way from t he impact of crude o il supply and demand, environmental impact of chemicals, energy usage, conservation of res ources, etc. The

end result is some form of consumer awarene ss in these issues. The consumer in this case is all through the value chain from the manufacture of chemicals, formulators of products, retail outlets, and to the final consumer.

In addition to this value chain to the consumer, an interest in the “cradle to grave” use of products by both governmental organization s and non-governmental organizations has40 heightened environmental inte rests and created a growing trend in more stringent environmental regulations impacting surfactants.

Nowhere is this more evident than in the household detergent market. This market has progressed through many changes.

• Emergence of synthetic detergents (s urfactants) to replace soaps and reformulation for biodegradability (1950-1970).

• Liquid home laundry products re place powders (1990-current).

• Concentration of liquids to save on sh ipping, container costs, and shelf space (2007-2008).

• Front loading washing machines that use less water and operate at lower temperatures to save energy (current).

The current changes in washing technology will require surfactants t hat operate at lower temperatures and use less water for rinsing among other requirements.

These trends that concern the environment also impact industrial and institutional

cleaners.

Consumers of personal care products want pr oducts that are mild on their skin and hair along with being good for the environment. Knowledge of the chemistry of skin and hair will create more scientific approaches to formulating products in this area.

Renewable-based surfactant s offer good potential here.

As users of petrochemicals seek alternat ives to crude oil-based feedstocks through other alternatives such as coal, etc., opportuni ties exist for surfactant use in extracting

crude oil from oil reservoirs t hat have been difficult to remove.

This same concern for the environment can al so be seen in the trend to lower solvent usage and lower VOCs in paints and coatings , industrial and institutional cleaners, adhesives, paint strippers and many other form ulated products. Surfactants must also

meet these environmental standards and regulations.41 

### BARRIERS TO MARKET ENTRY

Oleochemical-based surfactants hav e historically utilized coconut oil, palm oil and tallow more than soybean oil. The basic chemistry of soybean oil has not been a deterrent for surfactant use, although the hi gher levels of unsaturated fatty acids in soy (C18) can affect water solubility and oxidative stabilit y versus the other oleo feedstocks. Pricing and availability of these raw materials are still t he primary drivers of raw material choice. Soybean oil has not been widel y available in Europe; this may have influenced surfactant products th at excluded soy.

Environmental and regulatory standards ar e becoming more stringent. Based on specific end use markets, surfactant products and formulations in which they are used must meet aquatic and human to xicity testing requirements as well as biodegradability

standards.

Product registration of surfactants and their formulated products is now required by the

EPA in the U.S. and REACH in Europe. This can be a time consuming and costly

process.

Another potential marketing issue involves the use of GMO soybeans and the consumer perception of product safety concerns. Although th is is not a problem at this time, future development efforts involving soy-based surfac tant products planned for use in the food or personal care markets should consider the use of GMO soybeans and their potential impact on demand for the end product.