Polyester Value Chain Challenges Ahead

Transcription

1 Polyester Value Chain Challenges Ahead IndianOil Petrochemical Conclave Sanjay Sharma, Managing Director Middle East & India February 7, 2014 Dubai, UAE

2 Global Chemicals Investment Focused In Three Regions With Varying Strategies

3 3 Global real GDP growth expected to strengthen in Global economic growth expected to strengthen in The US expansion will gain momentum with faster growth in consumer and business spending. Western Europe will gradually recover, with northern countries leading and southern countries with heavy debt burdens lagging. Asia (excluding Japan) and sub- Saharan Africa will achieve the fastest growth. (Percent change) World Advanced countries Emerging markets (Percent change)

4 The new realities for emerging markets Both structural and cyclical forces contributed to the emerging markets slowdown. There was no decoupling of growth in emerging and advanced economies. While macroeconomic management has been sound, there have been too few structural reforms; the state still plays too large a role. As growth in the developed economies picks up, emerging markets will have to compete harder for funds, although their exports will strengthen. The pace of globalization has slowed. A return to the boom years of the 2000s is unlikely. 4

5 Presentation Outline Polyester Chain: Emergence of New Industry Order Polyester Chain - Fibers and PET Chain Margins: Integration pays off Conclusions

6 Polyester Value Chain. Paraxylene (PX) Acetic Acid Terephthalic Acid (PTA) Ethylene Ethylene Oxide Ethylene Glycol Naphtha Crude Oil Polyethylene Terephthalate 6

7 80 Percent of World Population needs more Fiber Per Capita Fiber Demand West Europe 25 Japan North America Middle East Africa China South America CIS & Baltic States Southeast Asia Indian Subcontinent East Europe South Korea Central Europe World Average GDP per Capita - PPP, Thousand Dollars/person

8 Relentless Capacity Expansion 20 Million Metric Tons PET PSF MEG PTA PX Demand Growth ( ) Capacity Growth ( )

9 Paraxylene Entering a New Era, Prices will decline, but avoid a collapse? Million Metric Tons Operating Rate, % Forecast Asia Europe, Middle East, Africa Americas Global Demand Growth Excess Capacity Operating Rate 60

10 Global MEG Capacity Growth Million Metric Tons Percent Operating Asia Americas Excess Capacity Europe, Middle East, Africa Global Demand Growth Operating Rate 10

11 PTA: Emergence of a New Industry Order Million Metric Tons Operating Rate, % Forecast Nameplate Capacity Effective Capacity Demand Operating Rate Effective Operating Rate

12 Global PTA Capacity Growth Million Metric Tons Operating Rate, Percent Americas Asia Excess Capacity Europe, Middle East, Africa Global Demand Growth Operating Rate 12

13 Presentation Outline Polyester Chain: Emergence of New Industry Order Polyester Chain - Fibers and PET Chain Margins: Integration pays off Conclusions

14 Total Fiber Demand Shows a Strong Co- Relation with GDP Fiber, Million Metric Tons Total Natural and Man-Made Fibers 2014 R² = Fibers Growth = 1.6 X GDP Growth Polyester Fibers Growth = 2.4 X GDP Multiple 40 38,000 42,000 46,000 50,000 54,000 58,000 62,000 66,000 70,000 GDP (Billion 2005 $)

15 Polyester & Cotton Dominate The Mix Global Fibers Nylon 5% Olefin 6% Cellulosic 5% Acrylic 2% Other Synthetic Fibers 1% Wool, Silk & Linen 2% Polyester 49% Cotton 30% 2012 = 78.2 Million Metric Tons

16 Cotton Demand: Depends on Supply 30 Million Metric Tons Supply CAGR: -0.1% Supply CAGR: 1.7% Demand CAGR:-2.8% Demand CAGR: 2.3% Supply Demand

17 Polyester Accounts for Bulk of Growth in Fiber Demand 8,000 6,000 4,000 Fibers, Million Metric Tons GDP Growth, % Forecast , , , Growth of Cotton Growth of Polyester Growth of Other Fibers GDP Growth -3

18 Staggering Surplus in Capacity! Excess Capacity, Million Metric Tons Operating Rate (%) PSF PET POY 60

19 PET Virtually Every Region has Surplus Capacity! FSU 0.9 NAM WEP -0.5 CEP 3.4 NEA (Excl. CHI) 0.8 CHI MDE ISC -0.6 SAM AFR 0.6 SEA *Numbers are in million metric tons

20 Presentation Outline Polyester Chain: Emergence of New Industry Order Polyester Chain - Fibers and PET Chain Margins: Integration pays off Conclusions

21 PET Resin Spreads in Terms of Polyester Integration Holds The Key 1,200 1,000 Global Value Chain Spreads - in PET Equivalent Dollars Per Metric Ton Forecast PX-Naphtha PTA-0.66*PX MEG-0.6*C2 PET - PTA/MEG

22 Presentation Outline Polyester Chain: Emergence of New Industry Order Polyester Chain - Fibers and PET Chain Margins: Integration pays off Conclusions

23 India s growth recovery dilemma Currency has stabilized, but risks not over External pressures Investment slump High borrowing costs and weak business sentiment Structural reforms High inflation Delayed by pre-election policy inertia Limits policy space for monetary stimulus 23

24 Conclusion Polyesters demand growth remains on trend line Severe oversupply in the polyester industry threatens to restrict margins for producers Managing excess capacity is necessary but challenging Difficult to commit further investments due to lack of margins Integration holds the key

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