Prospects for Global Wax Industry
Wax Industry has come a long way since its inception by diversifying the sources for extracting wax. Generally, waxes are broadly classified on the basis of the source from which they are derived. This includes crude oil, animals, vegetables, and synthetic-based wax. The waxes sourced from crude oil are called petroleum waxes, whereas, vegetable wax can be derived from various sources such as palm, soy, sunflower. Beeswax and wool wax are common examples of animal-based waxes. Synthetic wax is produced either using the Fisher Tropsch process or by ethylene polymerization process.
Lubricating oil base stock, which forms part of bottom distillate during crude oil fractionating process, is primarily used as a source of petroleum wax. Petroleum waxes are a complex mixture of hydrocarbons which include n-paraffin (macrocrystalline wax), branched-chain paraffin, and cyclo-paraffins (microcrystalline wax).
After dewaxing of LOBS (lubricating oil base stock) a crystallized layer of wax is obtained which is washed with cold solvents for impurity removal. This results in the product known as ‘slack wax’, which contains 10-40% of oil. This slack wax is further de-oiled and refined to obtain paraffin wax and microcrystalline wax. The wax that is obtained from the distillate lubricating oil fraction is known as paraffinic, while the wax obtained from the residual distillate lubrication oil fraction is known as microcrystalline wax. A small volume of slack wax is consumed directly in industries pertaining to wooden construction boards, candles, and polishing.
Paraffin Wax: Paraffin wax accounts for ~60% of the total wax demand in the global market with a volumetric consumption of ~3,000 MMT in 2019. Candles followed by packaging, rheology (PVC, Tires, Rubbers, Hot melt adhesives and paints), board sizing and cosmetics industries are utilizing a huge volume of paraffin wax. The Asia Pacific is the largest producer and consumer of paraffin wax followed by North America and Europe. China alone accounts for more than 70% of global paraffin wax production. More than 50% of paraffin wax produced in APAC is for the export market. PetroChina, Sinopec and Nippon Seiro are key producers of paraffin wax, serving the companies across the globe. In North America, ExxonMobil, HollyFrontier and Calumet are the key integrated companies manufacturing petroleum waxes.
Paraffin wax is segmented in two forms, semi-refined paraffin wax (SRP) and fully-refined paraffin wax (FRP), based on oil content. SRP is de-oiled to get FRP.
Fully refined paraffin wax is usually available in two major grades, low-melt FRP and high-melt FRP. Several certifications and approvals such as FDA, USDA, USP are required for the sales of these grades
Recent Trends: Paraffin wax has found its application in the production of wax emulsion where different other waxes such as MCW (microcrystalline wax), slack wax, synthetic, and vegetable wax are mixed together to get a consistent emulsion which is expected to garner interest from wood composites and boards manufacturers. The industry leaders are also expanding their capabilities in terms of wax blending. In 2019, Calumet acquired a wax blending entity, Paralogix.
Microcrystalline Wax: The volumetric production of microcrystalline wax is relatively low when compared with paraffin wax and is estimated ~150 KT, in 2019. These waxes are primarily available in three grades: laminating, coating and hardening. The major difference among the grades is their melting point and cone penetration. A significant volume of MCW is used in combination with paraffin wax to produce petrolatum.
In packaging, MCW is used in multiple applications such as laminating, coating, and impregnating. In the tire and rubber industry, it is mostly used in form of anti-ozone wax, which is a combination of 70% paraffin wax and 30% MCW, to prevent fouling at varying temperatures. The blend makes the wax amenable to perform at different temperature ranges. MCW works perfectly at higher temperatures while paraffin works better at low temperatures.
There have been few supply constraints of microcrystalline waxes due to the closure of Group-I base oil plants. Recently, Shell has closed its plant in the Netherlands. However, Sinopec Maoming Petrochemical (China) and NRL (India) have started to produce MCW in small volumes which would further strengthen the position of APAC.
Is shrinking supply of Group-I base oils leading to alternative waxes?
The global industry has witnessed the closure of Group I base oils plants across the Americas and Europe. The first wave of closure was observed in North America and the second wave in Europe. Currently, Asia Pacific is the largest producer of Group I base oils and subsequently paraffin waxes. In 2010, Group I base oils accounted for 57% of the total base oil which declined to 37% in 2019.
The new IMO 2020 regulation which mandates a maximum of 0.5% sulfur content from the previous 3.5% for marine fuels to lower sulfur emissions is expected to further decrease both supply and demand for Group I base oil stocks.
Fischer Tropsch and PE wax are widely used synthetic waxes. These synthetic waxes and animal wax are gaining traction in different applications because of their superior properties over petroleum waxes.
Fisher Tropsch Wax (FT Wax): FT wax has been increasingly replacing petroleum and PE wax in inks, coatings, construction boards. There are two types of FT wax: high melt FT wax, and medium melt FT wax. These waxes exhibit superior performance even at elevated temperatures.
Most of the key suppliers of waxes such as Shell, Sasol, IGI are supplying FT wax along with traditional waxes such as paraffin wax, and microcrystalline wax.
Polyethylene Wax (PE Wax): PE wax is fully synthetic wax manufactured by polymerization of ethylene. The performance and properties of these wax make them suitable for a wide range of applications including paper-coating, crayons, packaging, paints, additives, and inks.
There are three commercial grades of PE wax available in the industry: HDPE Wax, LDPE wax, and Oxidized PE wax.
PE waxes are expected to witness a significant growth rate of ~5% for 2020-2025, due to increased demand in the packaging industry. Covid-19 has increased the demand for packaging drastically, where PE wax is used in combination with petroleum waxes because of their stable nature and scratch resistance properties.
Have vegetable waxes come a long way?
The vegetable waxes, a form of non-fossil naturally occurring renewable wax are a mixture of hydrocarbons and fatty esters. The vegetable waxes are extracted from different parts such as leaves, peels, and fruits of different plants. These are separated from plant oils by de-waxing. The major types of vegetable waxes are Carnauba Wax, Soy Wax, Jojoba Wax, Candelilla Wax, Rice-Barn Wax, Sunflower Wax, Rapeseed Oil Wax, etc.
Carnauba wax is also known as Palm Wax and Brazil Wax is obtained from the leaves of a palm tree, which grows in the equatorial climate. It is one of the hardest natural waxes with the highest melting point. It has a shiny finish, hence, often used in polishes for cars, shoes, floors, and furniture.
Candelilla is obtained from the surface of the Candelilla Plant and has a resin content of 20% and hydrocarbon content of 45%. It is frequently blended with other wax varieties to harden them without raising the melting point.
The different properties such as anti-blocking, water repellency, thermal stability, binding ability, etc. which are exhibited by the vegetable waxes have kept them in high demand in multiple industrial applications such as candle manufacturing, coatings, polishes, adhesives, cosmetics, etc. Like soy wax is used in inks, candles, soaps whereas jojoba wax is used in beauty products due to its protective and moisturizing properties.
The majority of the production of the vegetable waxes are accomplished in South-East Asia where the climatic conditions are favorable for the production of plants to source wax. Apart from the Asian market, the huge potential lies in the Latin America region. This is primarily due to the presence of abundant resources and vegetation required for production.
Currently, the vegetable wax market is valued at ~$130 Million and is expected to steadily grow at a growth rate of 5%. North America and Europe have witnessed a continuously increasing demand for waxes pertaining to the rapid expansion of their food & beverages, pharmaceuticals, and cosmetic industries. Their imports for candles have witnessed a surge, rather than purely functional items, which have become decorative accessories. The industry is majorly dominated by players like Cargill, Huzhou Shentgtao Biotech, Koster Keunen, Materia Aromatica, Fuji Oil, etc. They are primarily selling the finished products either through resellers, distributors, or the internet.
Recent Trends: With the rising awareness about environmental protection and acknowledging the fact of hazardous impact of plastic waste on biodiversity, the majority of the countries are shifting towards sustainable solutions for packaging and other applications. Keeping these factors in mind, countries are now backing the developments through legislation which creates a lucrative opportunity to conduct businesses. In fact, most of the wax manufacturers have also started developing novel vegetable wax materials for fulfilling the new requirements. Players like Cargill have also added a new range of vegetable wax for candles to their portfolio. Also, in 2016, Cargill acquired NatureWax a market-leading provider of natural, vegetable-based waxes.
Consumer Behavior: Consumer behavior is moving towards the adoption of healthy natural products. Also, the practice of veganism is on the rise which has further led to the growth of vegetable waxes in the industry. Both factors are the major drivers for vegetable waxes in the market. It was also observed that the purchase is usually made through online mode. The primary reason for this is online stores offer a variety of options to choose from than retail stores. Besides, prices offered on the internet are lower than retail stores because of the discount offered by vendors to promote their products. The share of online sales is expected to grow even more.
The major benefit of the vegetable waxes is that they are non-toxic, non-irritant, non-carcinogenic. Furthermore, the rise in environmental concerns around the world and increase in the cost of waxy raw materials in various industries such as olefins are the major factors driving the vegetable wax market. The continuous fluctuation in the prices of crude oil globally has been a major bottleneck for the traditional wax industry.
The growing vegetable wax market has addressed multiple challenges. The vegetable wax market would surely see a high demand in the coming future as a result of demand in all industries. However, the challenge pertaining to the management of the plantation as well as the long time required for the plantation are the major challenges that are required to be addressed for sustainable growth.