Transcript Document

Chemicals & Plastics
Outlook
Howard Rappaport
Senior Director, Chemicals
IHS Global Insight – Pricing & Purchasing
September 27, 2012
Big Picture: Basic Chemicals & Plastics
Demand Distribution is Shifting
Economic Expansion:
Basic demand to fast
growth emerging
economies is evident
Investment Decisions:
Two Options: Produce in
demand centers or leverage
a clear cost advantage
Tomorrow’s Market:
Sustainability includes a
systematic addition of
performance products
Copyright © 2012 IHS Inc. All Rights Reserved.
Distribution of Global Demand
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Basic Chemicals and Plastics
All Others
Middle East
W. Europe
N. America
Other Asia
China
1990 1995 2000 2005 2010 2015 2020
Center of demand has shifted to Asia…
2
Crude Oil & Natural Gas:
Building Blocks for the Industry
o-XYLENE
Butane
Hydrogen
XYLENES
Refinery
Naphtha
Gas Oil
Natural
Gas
BTX
Extraction
Copyright © 2012 IHS Inc. All Rights Reserved.
ETHYLBENZENE/
STYRENE
Raffinate
POLYETHYLENE
Propylene
POLYPROPYLENE
Pygas
Ethylene
ETHYLENE
DICHLORIDE / PVC
EO/EG
Butadiene
SBR / PBR
Methanol
PET
BENZENE
Steam
Cracker
Gas
Separation
Unit
p-XYLENE
PTA/DMT
Reformer
Reformate
Ethane
Propane
Butane
PIA
TOLUENE
BTX
Crude
Oil
m-XYLENE
PAN/DOP/Plasticizers
ETHANOL
EP RUBBER
3
The Energy Outlook
130
13
110
11
90
9
70
7
50
5
30
3
10
1
2004
2006
2008
2010
2012
2014
Oil, US Refinery Acqusition Price, $/barrel (left)
Natural Gas, Henry Hub Spot, $/mmbtu (right)
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4
North America: Natural Gas Advantage
Dollars Per MMBtu
Gas as a% of Crude, BTU Basis
18
70%
16
60%
14
50%
12
10
40%
8
30%
6
20%
4
10%
2
0
0%
06
07
08
09
Crude (WTI)
Copyright © 2012 IHS Inc. All Rights Reserved.
10
11
Natural Gas
12
13
14
15
16
Gas as % of Crude
5
North American Feedslate Becoming Lighter
Wt% Produced
From Feedstock
Monthly Ethylene Production
By Feedstock
100%
• Given its high selectivity
90%
to ethylene & relative cost
position to other feeds,
ethane is consistently the
most favored feed
80%
70%
60%
50%
• Once oil & gas began to
40%
diverge, producers have
been shifting feedslates
lighter to capitalize on the
advantage
30%
20%
10%
0%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Ethane
Propane
Copyright © 2012 IHS Inc. All Rights Reserved.
Butane
Naphtha
Gas Oil
6
Ethylene &
Polyethylene
North America Second Lowest Cost Region
2011 Global Ethylene Cash Costs
Dollars per Ton
1650
WTI Crude $95/Barrel
Nat Gas $4.14/MMBtu
Ethane 76.7 cpg
1450
1250
West Europe Avg.
1050
NE Asia Avg.
850
U.S. Avg.
U.S. Ethane
650
450
Middle East
Avg.
250
SE Asia Avg.
Alberta Ethane
Middle East Ethane
50
0
20
40
60
80
100
120
140
160
CUMULATIVE ETHYLENE CAPACITY (million tons)
Copyright © 2012 IHS Inc. All Rights Reserved.
8
2012 U.S. Ethylene Production Losses
Higher Than Expected
Million Pounds, Cumulative
Million Pounds, Monthly
1,200
3,500
1,000
3,000
2,500
800
2,000
600
1,500
400
1,000
200
500
0
0
Jan
Feb
Mar
Apr
May
Planned*
'11 Cumulative Production Loss
Series4
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Unplanned**
Forecast '13 Cumulative Production Loss
* Includes both confirmed and unconfirmed outages
Copyright © 2012 IHS Inc. All Rights Reserved.
9
Global Monthly Ethylene Prices
Dollars Per Metric Ton
2,100
Forecast
1,900
1,700
1,500
1,300
1,100
900
700
500
300
10
A
J
O
11
A
U.S. Large Buyer Contract Price
Copyright © 2012 IHS Inc. All Rights Reserved.
J
O
12
A
J
WEP Contract Price
O
13
A
J
O
SEA CFR Spot Price
10
More Ethylene Capacity on the Horizon
North American Capacity Additions Leverage Ethane
Announced (-000- MT)
BASF/Fina (Port Arthur)
Chevron Phillips (Cedar Bayou)
Dow (Taft / Freeport)
Equistar (All locations)
Exxon (Baytown)
Formosa (Point Comfort)
Ineos (Chocolate Bayou)
Oxy (Ingleside)
Sasol (Lake Charles)
Shell (Northeast)
Westlake (Lake Charles)
Williams (Geismar)
Nova (Sarnia)
Braskem/Idesa (Mexico)
Unidentified
Total
Cumulative Total
Copyright © 2012 IHS Inc. All Rights Reserved.
Dow, Shell, NOVA, and Oxy capacity additions shown are IHS estimates
2012
2013
180
386
121
50
2014
Future
310
1500
1500*
90
1500
800
57
550*
1400
1000*
30
20
100
100
110
70
145
1069
1169
80
210
600
1769
250*
1000
110
9500
11,269
11
Ethylene Market View
Development of Two Low-Cost Production Regions
*
• Shale development has enabled the North American producer to become
one of the lowest cost producers in the world
• Combined with the Middle East, over 40% of the global ethylene capacity
is now cost advantaged
• Other cracking capacity likely to trend towards increased LPG
consumption in order to try and remain competitive
• Higher cost countries may respond with protectionist measures
Copyright © 2012 IHS Inc. All Rights Reserved.
*
12
Key Issues: Polyethylene
• Short Term:
Global demand growth for PE may be slowing as China
demand weakens and Europe contends with recession
• Longer Term: Two “low cost” regions (North America and the Middle East)
are set to compete for much of the global demand growth. The industry
has never before included two major “cost advantaged” regions
• Numerous capacity additions expected in North America as producers in the
region seek to leverage cost advantage driven by “shale gas”
• Continued demand strength anticipated for specialty polyethylene products
such as metalocenes and bio-based resins
• While annual integrated margins are generally expected to trend higher,
most of the margin is forecast to remain upstream with the ethylene
molecule
Copyright © 2012 IHS Inc. All Rights Reserved.
13
Domestic PE Demand by Region
NEA
6.5%
EUR
2.6%
NAM
2011
2016
2.8%
AFR/MDE
2011-2016 Average
Annual Growth
Rate, Total
Demand: 5.0%
6.7%
SEA
4.9%
SAM
5.8%
ISC
9.1%
0.0
5.0
%: 11-16 Average Annual Growth Rate
10.0
15.0
20.0
25.0
30.0
35.0
Demand by Region, Million Metric Tons
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14
Global Polyethylene Capacity Additions
Capacity, Million Metric Tons
10
8
6
4
2
0
-2
-4
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Asia/Pacific
Africa/ Middle East
North America
South America
Central Europe/ CIS
West Europe
Copyright © 2012 IHS Inc. All Rights Reserved.
2016
15
North America New PE Projects
Company
Equistar
Equistar
Nova
Location
LaPorte, TX
Morris, IL
Sarnia
Country
LDPE
2014-2015
United States
United States
Canada
LLDPE
HDPE
Startup
Type
300
50
100
Q1 2014
Q1 2014
Q1 2015
Hypo (1)
Hypo (1)
Hypo
300
650
750 Q1 2016
Q1 2016
Q4 2016
650 Q3 2016
(1)
Hypo (1)
(1)
(1)
550
500
650 Q3 2017
500 Q3 2017
Hypo
(1)
350
500
500
Q3 2018
500 Q3 2018
500 Q3 2019
Hypo (1)
Hypo
Hypo
2016
Braskem Idesa
Nova
Formosa
ExxonMobil
Coatzacoalcos
Joffre
Point Comfort, TX
Mont Belvieu, TX
Mexico
Canada
United States
United States
250
300
2017
Dow
CPChem
Gulf Coast
Sweeny, TX
United States
United States
2018-2019
Nova
Sasol
Shell
Sarnia
Gulf Coast
Marcellus,
Totals, 000's MT
Canada
United States
United States
1050
3300
3550
7900
Notes: (1): Announced projects included in our capacity database; (2): Announced expansions with IHS
estimate of product and size, also not included in database; Hypo (1): reported projects not fully verified
or approved and not included in the database; Hypo: IHS estimates of product and size for announced
ethylene crackers - PE not in database.
Copyright © 2012 IHS Inc. All Rights Reserved.
16
Regional LLDPE Butene Prices
Cents Per Pound
100
90
80
70
60
50
40
30
20
10
0
Jan-07
Sep-07 May-08
Jan-09
NAM Cash Cost, Integrated
Copyright © 2012 IHS Inc. All Rights Reserved.
Sep-09 May-10
NAM LLDPE
Jan-11
Sep-11 May-12
WEP LLDPE
Jan-13
Sep-13
CHINA LLDPE (Spot)
17
Polyethylene Chain Margins
Dollars Per Metric Ton
Cents Per Pound Polyethylene
40
880
30
660
20
440
10
220
0
0
-10
-220
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
PE Margin - Contract HDPE Blow Molding Non-Int. Including Discounts
Ethylene Margin - Average Acquisition Ethylene Price Minus Ethane Cracking Costs
Copyright © 2012 IHS Inc. All Rights Reserved.
18
PE North America: Near Term Pricing
• Contract PE prices increased 6.0 cents Jan – April due to
tight ethylene and high spot / contract ethylene prices, but
later declined by 14.0 cents over May/June as supplies
improved and ethylene prices collapsed. Prices rebounding
with +5 in August achieved and +5 in October announced.
• Integrated margins were recently at record levels = 28 cents
per pound in August versus year to date average of 28.75
cpp. Rest of year average margin is 25.5 cpp and 2013
average of 25.3 cpp. Margins forecast to move higher and
peak in 2015/2016 prior to start up of new capacity.
Copyright © 2012 IHS Inc. All Rights Reserved.
19
Implications for Buyers: Polyethylene
• Nearly 6.7 MMT of “cost advantaged” new production capacity is
anticipated to be added within the region during the next five years*
• Nearly 5.4 MMT of the referenced capacity is expected in the US
• An additional 6.5 MMT tons of new production capacity is expected to
come on line in the 2017 – 2022 timeframe
• While most of the new production capacity will be targeted into the export
market, the domestic price premium that has existed within the region is
expected to erode as competition for the domestic demand increases
• The first new major complex to start up in the region (Braskem / Idesa) will
impact trade flows from the US to Mexico when production begins
• US producers are likely to look further south in an effort to move any
displaced sales volume
Copyright © 2012 IHS Inc. All Rights Reserved.
20
Propylene &
Polypropylene
Propylene Supply Profile
Motor
Gasoline
Motor
Gasoline
Alkylation
Isobutane
Crude
Crude
Oil
Unit
Gas
Oil
FCC
Unit
High Octane Alkylate
Gasoline
Unit
Other Fuel Uses
Refining Industry
Chemical Industry
RG
Propylene
Market
HSFCC
Polypropylene
Unit
Ethane
Propane
Steam Cracker or
Olefin Plant
Metathesis
MTO and MTP
Purification
Splitter Unit
Propane to LPG
Naphtha
PDH
Cumene, Oligomers
Isopropanol
Other
Technologies
Ethylene
& Olefins
Injection
Molding,
Fibers,
Films
Other propylene consumers:
acrylonitrile, propylene oxide, acrylic
acid, oxo-alcohols
PG & CG
Propylene
Markets
Olefin Cracking
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Others
22
Ethane Cracking Chemistry Reduces
Co-Product Volumes
Million Tons, Production Yield for World Scale 1 Million Ton Cracker
3.5
3.0
2.5
Other
Benzene
Butadiene
Propylene
Ethylene
2.0
1.5
1.0
0.5
0.0
Ethane
Copyright © 2012 IHS Inc. All Rights Reserved.
Naphtha
23
Cracker Feedstocks Also Influence
Pygas \ Benzene Yields
Benzene Produced Per Ton of Ethylene
0.30
0.25
0.20
Heavier Feeds
0.15
0.10
0.05
0.00
Ethane
Propane
Butane
Light
Naphtha
Heavy
Naphtha
Gasoil
Cracker Feedstocks
Copyright © 2012 IHS Inc. All Rights Reserved.
24
Global On-Purpose Propylene
Production Increases
Percent, %
25
Million Metric Tons
25
20
20
15
15
10
10
5
5
0
0
01
02
03
04
05
Propane Dehydro
Methanol-to-Olefins
% Total Production
Copyright © 2012 IHS Inc. All Rights Reserved.
06
07
08
09
Metathesis
HS FCC
10
11
12
13
14
15
16
Olefin Cracking
Others
25
Global Monthly Propylene Prices
Dollars Per Metric Ton
2,200
Forecast
2,000
1,800
1,600
1,400
1,200
1,000
10
A
J
O
11
NAM Net Trans. Contract Price
Copyright © 2012 IHS Inc. All Rights Reserved.
A
J
O
12
A
J
WEP Disc. Contract Price
O
13
A
J
O
SEA CFR Spot Price
26
Key Issues: Polypropylene
• Expensive nature of polypropylene still affecting industry
• Relative prices versus other materials, but particularly to polyethylene, is high
• Demand will still grow
• Concerns with elevated prices do not translate into severe reductions in demand growth
• Improving economic conditions in developing regions that lift consumers from lower
income categories, creates positive environment for demand growth
• Certain applications will benefit more than others (durable vs non-durable)
• Price differentials across regions to remain in place
• Asian prices remain depressed due to global oversupply
• North American prices remain volatile and elevated due to tight propylene supply
• Europe continues to track North American price trends
• Lower Asian prices have affected demand growth in regions that have trade protection
for polymers but not for finished goods
• Global oversupply and increasing self sufficiency in China altering trade flows
• Investment in PP may resurface in North America, due to lower cost propane
de-hydro technology
Copyright © 2012 IHS Inc. All Rights Reserved.
27
Domestic PP Demand by Region
NEA
5.3%
EUR
2.8%
NAM
2011
2016
1.0%
AFR/MDE
2011-2016 Average
Annual Growth
Rate, Total
Demand: 5.1%
6.5%
SEA
6.0%
ISC
9.0%
SAM
5.4%
0.0
5.0
10.0
15.0
20.0
25.0
30.0
Demand by Region, Million Metric Tons
%: 11-16 Average Annual Growth Rate
Copyright © 2012 IHS Inc. All Rights Reserved.
28
In Recent Years,
PP Cost Position Has Changed
Price Ratio
1.4
1.3
1.2
1.1
1.0
0.9
0.8
0.7
2000
2001
2002
2003
PP/HDPE North America
Copyright © 2012 IHS Inc. All Rights Reserved.
2004
2005
2006
2007
PP/HDPE West Europe
2008
2009
2010
2011
PP/HDPE China
29
Global Polypropylene Capacity Additions
Capacity, Million Metric Tons
6.0
Global Demand AAGR
11-16 = 5.1 %
5.0
4.0
3.0
2.0
1.0
0.0
-1.0
2006
2007
2008
NAM
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2009
SAM
2010
EUR
2011
AFR/MDE
2012
ISC
2013
NEA
2014
2015
2016
SEA
30
Polypropylene Net Trade Flows
3622
121
2346
444
53
-1302
-1803
-893
-38
575
-154
-524
2011 Net Trade
2016 Net Trade
(Thousand Metric Tons)
Copyright © 2012 IHS Inc. All Rights Reserved.
-690
-663
-702
-392
31
Asia PP Prices: Lowest Price Region
Price, Cents Per Pound
Price, Dollars Per Metric Ton
110
2,425
100
2,205
90
1,984
80
1,764
70
1,543
60
1,323
50
1,102
40
882
30
Jan-08
661
Jan-09
Jan-10
North America Discounted
North America Spot Export
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Jan-11
Jan-12
Jan-13
West Europe Discounted
China Spot
32
North America Price Volatility:
Propylene Supply Affecting PP Price
Cents Per Pound
Million Pounds
400
110
105
300
100
200
95
90
100
85
0
80
75
-100
70
-200
-300
Jan-10
65
60
May-10
Sep-10
Monthly Growth
Copyright © 2012 IHS Inc. All Rights Reserved.
Jan-11
May-11
Sep-11
Jan-12
May-12
PP Homopolymer Discounted Price
33
Implications for Buyers: Polypropylene
• Absolute level of PP domestic demand appears to be key in pushing
propylene prices higher and thus impacting volatility
• Demand apparently grew in first half of 2012, but most of the growth was
related to inventory replenishment
• Margins not improving; propylene plus formula pricing and refinery
integrated cost advantage affecting margin evolution
• No relief in propylene supply on the short term; rash of additional
propylene supply in second half of the decade will help and may even
result in additional capacity investments
• Arbitrage to be sustained for next few years (resin and finished goods)
Copyright © 2012 IHS Inc. All Rights Reserved.
34
Thank you!
Howard Rappaport
Senior Director, IHS Chemicals
[email protected]