How oleochemicals production is contributing to the palm oil industry

Malaysia contributes about 20% to the world production of oleochemicals, according to the 2018 Malaysia Investment Performance Report by the Malaysian Investment Development Authority (MIDA).

Oleochemical products are generally derived directly from naturally-occurring fats and oils from organic (i.e. vegetable and animal) sources. Oleochemicals are widely used in the home and personal care industries, in addition to being the raw materials or intermediaries for the pharmaceutical, rubber, plastic, paint and lubricant industries as Sime Darby Plantation succinctly describes it.

Quoting a report published by the Federation of Asian Chemical Societies (FACS), oleochemicals derived from palm oil and palm kernel oil can be divided into two groups of products - basic oleochemicals and oleochemical derivatives. Since palm oil and palm kermel oil contain between them almost the entire range of fatty acids, practically all the oleochemicals can be produced from them. And such is the case for Malaysia.

The MIDA report points out that Malaysia’s primary focus is on producing basic oleochemicals (e.g. fatty acid, fatty alcohol, methyl esters, and glycerine), oleochemical derivatives (e.g. fatty esters, fatty amines, soap noodles, and metallic soaps), and palm-based constituents (e.g. tocotrienols and carotene).

There are currently 19 oleochemical plants operating in Malaysia, which produced approximately 2.7 million tonnes of oleochemicals in 2018. Some of these companies are vertically integrated (i.e. active in both upstream and downstream activities, from oil palm plantation management to the actual manufacturing of oleochemicals) such as IOI, KLK, Sime Darby, and FGV.

Other major oleochemical producers include Oleon, Musim Mas, Croda, Emery and Wilmar.

To explain why the downstream driven oleochemical industry is the catalyst for value-added products expanded from the palm oil industry, let’s take a look at IOI Oleochemical. Being one of the world’s largest oleochemical producers of fatty acids, glycerine, soap noodles, fatty esters and specialty downstream oleochemical derivatives, the Malaysian company is involved in both the manufacturing and sales of the said products to more than 60 countries, including Japan, China and Europe.

The versatile oleochemical products are used in a wide variety of applications, including the manufacturing of detergents, surfactants, shampoos, soaps, cosmetics, pharmaceutical products, food additives and plastics.

The oleochemical industry in Malaysia is benefitting from an uninterrupted supply of palm oil and palm kernel oil for downstream expansion and sustainability, being the second largest palm oil producer behind Indonesia. This is in tandem with the rising global demand for value-added oleochemical products – hence going beyond the basic value of palm oil.