Natural Oils Polyols Market

Market Overview

The global natural oils polyols market size was valued at USD 7.72 billion in 2022. It is estimated to reach USD 13.49 billion by 2031, growing at a CAGR of 6.4% during the forecast period (2023–2031). The shift in the industry’s behavior from synthetic-based polyurethane to biobased polyurethane for manufacturing products such as plastics, fibers, elastomers, resins, surfactants, and lubricants is expected to increase the demand for natural oil polyols, driving the market.

Oil polyols, known as polyether polyols or polyether polyurethane polyols, are key components in producing polyurethane foams. Polyurethane foams are versatile materials with various applications in various industries, including construction, automotive, furniture, bedding, and insulation. Oil polyols are made by reacting a polyfunctional alcohol, typically a polyether polyol, with an isocyanate compound. This reaction forms a polymeric chain with repeating units, forming a liquid or solid polyol. The polyol is the "soft segment" in polyurethane foams, providing the final product's flexibility, resilience, and cushioning properties.

Oils polyols are characterized by high reactivity, low viscosity, and hydroxyl functionality. They are available in various molecular weights and compositions, allowing for the customization of polyurethane foams with specific properties such as density, hardness, and compression resistance. The selection of oil polyols depends on the desired foam application and the performance requirements. Polyurethane foams produced using oil polyols exhibit excellent thermal insulation properties, durability, and resistance to deformation. They can be found in a wide range of products, including flexible foams used in mattresses, furniture cushions, and automotive seating, as well as rigid foams used in insulation panels, construction materials, and packaging.

Market Dynamics

Market Drivers

Shifting Trend Toward Reducing Reliance on Petrochemicals

Globally, numerous chemical manufacturers have shifted their focus toward using renewable and environmentally friendly materials in their products. This shift has been driven by the fluctuating prices of raw materials derived from petrochemicals and regulations implemented by regulatory bodies such as EPA and REACH for a sustainable environment. Petrochemical polyols are highly dependent on crude oil prices. Any alteration in the price of crude oil is reflected in the prices of their derivative products. Depleting natural resources coupled with supply-demand imbalance has led to volatility in the prices of key petrochemicals.

To reduce the reliance on petrochemicals on account of the factor above, there is an increased demand for bio-based polymers, and this trend is expected to continue over the forecast period. Petrochemicals are widely classified into olefins and aromatics, which manufacture plastics, fibers, elastomers, resins, surfactants, and lubricants. Recently, petrochemical prices have increased due to growing concerns regarding petroleum reserves depletion and supply-demand imbalance. The shift in the industry’s behavior from synthetic-based polyurethane to biobased polyurethane for manufacturing products such as plastics, fibers, elastomers, resins, surfactants, and lubricants is expected to increase the demand for natural oil polyols.

Growing Bio-Based Polyurethane Demand

Growing demand for biopolymers in various end-use industries will positively impact market growth over the next six years. Increasing demand for environment-friendly polymers due to a strong shift toward reducing dependence on conventional polymers is expected to remain a key driver for the bio-based polyurethane market. Global adoption of bio-based polyurethane has been sparked by rising environmental concerns and unstable pricing connected with conventional polyurethane. Strong environmental restrictions on petrochemicals and synthetic polymers, as well as favorable rules to produce bio-based goods, are anticipated to have a beneficial effect on the growth of the bio-based polyurethane market.

However, the bio-based polyurethane market growth may be restrained by the complex technology and the high cost of manufacturing bio-PU. Thus, the end-products obtained require price alteration to sustain in the highly-priced competitive markets. Technological advancements and capacity expansions in emerging economies are expected to support the bio-based PU market to cope with the challenges shortly.

Market Restraints

Increasing Environmental Concerns for Soybean Production

According to the OECD-FAO Agricultural Outlook Report published in 2020, soybean production is dominated by two countries. Brazil and the U.S. Brazil is expected to be the largest producer, with an expected domestic output to reach 149 MT by 2030. These two countries account for almost 80% of the global soybean exports. Environmental concerns about the potential link between increased soybean production and deforestation are rising. These concerns motivate the private sector to incentivize using previously cleared land for expansion purposes, thereby avoiding further deforestation. Another major concern is the tropical climate conditions in Brazil. Crop production in Brazil is complicated compared to the U.S., which may negatively impact crop yield, reducing oilseed production in Brazil.

Market Opportunities

Increasing Consumer Awareness and Demand for Sustainable Products

The global natural oils polyols market presents significant opportunities driven by increasing consumer awareness and demand for sustainable products. Consumers are increasingly worried about the environmental effects of their purchasing decisions and actively seeking sustainable alternatives. This shift in consumer preferences provides a favorable market landscape for natural oils and polyols derived from renewable sources such as vegetable oils. The growing consumer awareness regarding sustainability has created a demand for products that minimize carbon footprint and reduce reliance on fossil fuels.

Natural oils polyols offer a compelling solution by utilizing renewable resources and providing a more sustainable alternative to traditional petroleum-based polyols. Companies operating in the global market can capitalize on this trend by emphasizing the environmental benefits of their products through effective green marketing initiatives.

Regional Analysis

Based on region, the global natural oils polyols market is bifurcated into North America, Europe, Asia-Pacific, Central and South America, the Middle East and Africa.

North America Dominates the Global Market

North America is the most significant global natural oils polyols market shareholder and is estimated to grow at a CAGR of 4.9% over the forecast period. North America emerged as the largest natural oils polyol regional market, accounting for 44.15% of the total market volume in 2020. Government initiatives to encourage bio-based product consumption in the U.S. and Canada have been a major factor driving natural oils polyol consumption in the region. High soy oil production and increasing U.S. exports are expected to complement the market growth over the anticipated period. North America accounts for a large portion of the global natural oils polyol market and is expected to grow substantially over the forecast period. The growth in the major end-use industries, such as construction and automotive, coupled with polyurethane’s versatility as a product in new applications and uses owing to its high sustainability and lightweight properties, are anticipated to drive the natural oils polyol market growth over the forecast period.

Moreover, under the Green Infrastructure programs, the Canadian government has announced its plan to invest around USD 481 million for the deployment projects across four streams: renewables, electric vehicle infrastructure, smart grids, and reduction of diesel use in rural and remote communities. All these investments are likely to increase the demand for electric vehicles, construction development, and electric and electronic equipment that require polyurethane and thus drive the growth of the natural oil polyols market over the forecast period.

Europe is anticipated to exhibit a CAGR of 4.6% over the forecast period. Favorable regulations from the European Commission and REACH regarding producing bio-based products to reduce carbon emissions by 20% by 2050 are expected to remain a key driving element for the regional market. Increasing biofuel demand due to rising energy costs associated with volatile petrochemical prices is expected to complement the market growth over the next six years. In 2020, amid COVID-19 in most European countries, the foam plants operated as no government orders demanded closure.

However, the production drastically reduced due to the lack of demand for foam and the closure of end-use industries further down the supply chain. For instance, the plants serving the furniture and mattress industry witnessed a production fall of 30–90% in April, followed by closed retail in the region. The lack of demand for foam directly impacted the market demand for natural oil polyols amid the COVID-19 pandemic.

In Asia-Pacific, the Growth of the construction industry in emerging markets of China, India, Indonesia, and Malaysia is expected to drive polyurethane foam demand in insulation applications. This trend and increasing government regulations to promote sustainable growth and lower greenhouse gas emissions are expected to drive natural oils polyol market growth over the forecast period. Increasing automotive production in Japan, China, India, and Korea is expected to drive natural oils polyol market growth further.

In the Middle East and Africa, for emission reduction, the tendency to shift toward a green economy, rising demand for conventional energy sources and their high prices, and the negative effect of using fossil fuels for electricity production have led the governments of the United Arab Emirates, Saudi Arabia, and Kuwait to introduce and implement energy-efficiency policies. These policies have boosted the construction of energy-efficient buildings and retrofitting of existing buildings.

Segmental Analysis

The global natural oils polyols market is bifurcated into products and end users.

Based on products, the global market is bifurcated into soy oil polyols, castor oil polyols, palm oil polyols, canola oil polyols, sunflower oil polyols, and others.

The soy oil polyols segment dominates the global market and is projected to exhibit a CAGR of 6.4% over the forecast period. The demand for soy oil polyols is expected to grow from 2021 to 2028 as manufacturers look for alternatives to high-cost petrochemicals. These polyols are used as an alternative industrial ingredient for polyurethane products in binder systems, such as carpet backing. They are also used as flexible foams in upholstered furniture, automobile seats, mattresses, pillows, and carpet cushions. The ease of processing and the abundant availability of raw materials owing to increasing soy acreages, especially in the U.S. and Brazil, is estimated to drive the expansion of the soy oil polyol segment of the natural oil polyols market from 2021 to 2026.

Companies such as Cargill, Incorporated, and Dow Chemicals have successfully capitalized on soy oil polyols globally, especially for manufacturing polyurethane spray foams and PU insulation. Growing demand for biobased PU in automotive, building and construction, and furniture industries is estimated to drive the growth of the soy oil polyol segment over the forecast period. Surging demand for soy oil polyols for use in food and animal feed is also estimated to fuel the expansion of this market segment.

Based on end-users, the global market is bifurcated into furniture and interiors, construction, electronics and appliances, automotive, footwear, packaging, and others (Industrial, CASE).

The furniture and interior segment dominates the global market and is projected to exhibit a CAGR of 5% over the forecast period. Products made with polyurethane are typically made with natural oil polyols. Polyurethane, in a flexible form, is a popular material used for developing carpet underlays, bedding, furniture, etc. Flexible furniture made of polyols derived from natural oils is trustworthy, pleasant, and durable. They are also used in padded furniture as padding. As the leading furniture manufacturers are making efforts to lower the environmental footprints of their products, the utilization of natural oil polyols plays a key role in this regard. For instance, Cargill, Incorporated offers BiOH polyols. These are soy-based polyols that replace traditional petroleum-based polyols. As BiOH polyols are used to manufacture foam cushions, they are commercially available to foam manufacturers worldwide.

Recent Developments

• June 2023- Stepan Company announced the launch of its new line of bio-based polyols.The new line is made from renewable resources, such as soy and castor oil. It is designed for various applications, including polyurethane foams, coatings, and adhesives.
• May 2023- BASF SE announced the expansion of its production capacity for bio-based polyols.The expansion is expected to meet the growing demand for bio-based polyols in the automotive, construction, and electronics industries.