TRENDS IN THE POLYMERS MARKET

Transcription

1 IHS CHEMICAL TRENDS IN THE POLYMERS MARKET Jesse Tijerina, Managing Director, Consulting Americas

2 ENERGY

3 Million barrels per day A Period of Deflated Prices and Squeezed Chemical Margins Crude Production Is Expected to Exceed Market Demand Through Mid 2016 OPEC balancing OPEC crude production above the Call on OPEC implies a build in global inventories OPEC Quota Increasing Inventories 28 Q Q Q Q Q Call on OPEC crude Q Q Q Q Q Q Q Q OPEC crude production Notes: Call on OPEC crude = total global liquids demand - non-opec liquids supply - OPEC condensate and NGL supply - processing gains - biofuel supply - other liquids supply. Source: IHS Q Q Q4 2016

4 After Falling from the Cliff, Crude Prices Are Expected to Bottom at Turn of the Year Dated Brent and other benchmark crude oil price outlook to Brent - WTI Brent FOB Dubai FOB WTI Cushing

5 Presentation Name / Month 2015 Implications of low oil: Latin America Demand improves with lower costs Competitiveness increases profits as raw material prices decline for some countries. Market still focal point for growing North American supply IHS

6 ECONOMY

7 Latin America: Large market with 630 million consumers of finished goods. Mid America: MEX, VEN, COL North America East of Andes: BRA, ARG Pacific Coast: CHL, PER Large Population- 630 Million Greatest Asset Economic Disparity and Slow GDP Growth 2015 South America Politically Stable Compared to other Regions. ALL RIGHTS RESERVED.

8 Economic Growth in Latin America GDP Growth, % Latin America World USA Argentina Brazil Chile Colombia Mexico Peru

9 Polymer Industry Overview

10 Latin America s plastics deficit continues to increase 000 tons PET PVC PS PP PE (3,500) (3,000) (2,500) (2,000) (1,500) (1,000) (500)

11 Latin America Plastics Consumption Has Been Growing with No Additional Capacity PE Other PET PP, 3255 PVC AAGR % Other PE PET PP, 3995 PVC 2009 Latin America Plastics Demand = 15.3 MMT 2013 Latin America Plastics Demand = 17.8 MMT

12 Latin America Plastics Consumption: Continue to Grow with limited Additional Capacity PE PP PE PP Other PET PVC AAGR % Other PET PVC 2014 Latin America Plastics Demand = 18.6 MMT 2020 Latin America Plastics Demand = 22.7 MMT

13 South America Will Be More Dependent on Polyethylene Imports from North America PE 6665 PP North America South America (Thousand Metric Tons) *North America Includes Mexico

14 Net Trade, Million Metric Tons Trade as a % of Production America s Polyethylene Trade Balance Americas PE Net Trade By 2020 HDPE ~15% LLDPE ~20% LDPE ~15% 20% 16% 12% 8% 4% 0% -4% % SAM Net Trade NAM Net Trade Americas Net Trade Americas Net Trade as % of NAM Production Source: IHS

15 A Period of Deflated Prices and Squeezed Chemical Margins South America Polypropylene Demand and Imports Will Increase PP North America South America (Thousand Metric Tons) *North America Includes Mexico

16 Net Trade, Million Metric Tons Trade as a % of Production Polypropylene: Americas Trade Balance Americas PP Net Trade SAM Net Trade NAM Net Trade NAM Exports - SAM Imports Americas Net Trade as % of NAM Prod Source: IHS

17 Percentage of Demand Market Briefing / September 2015 A steady decrease in Latin America Polyolefins Self Sufficiency Polyolefins Self Sufficiency 80% 70% 60% 50% Source: IHS PE Production as % of Demand PP Production as % of Demand

18 Percentage of Demand Market Briefing / September 2015 The story is the same in the other Latin America Plastics Self-Sufficiency Plastics Self Sufficiency 90% 85% 80% 75% 70% Source: IHS PVC Production as % of Demand PET Production as % of Demand PS Production as % of Demand

19 Latin America did not make the Top 5 Countries Adding Base Chemical Capacity 231 Million Tons from 2010 to 2020 Million Metric Tons 120 Market Briefing / October Top five will add nearly 75% of base chemical capacity. China will dominate new capacity, adding 45% of total China United States Saudi Arabia S. Korea India Chlorine Paraxylene Benzene Methanol Propylene Ethylene

20 COUNTRY OVERVIEW

21 Mid America: Country Overview Mexico Energy reform is opening new possibilities. Foreign Direct Investment will enter slowly. Lower electricity costs expected to increase competitiveness as gas pipeline carry cheap gas to Mexico. Etileno XXI startup end 2015 First new capacity in North America. Demand recovering in 2016 amid lower petrochemical prices. Venezuela Low crude oil prices and currency crisis restricted availability of raw materials and created scarcity of finished goods. Most affected by lower crude oil prices.. Economic downturn and currency crisis may lead to political unrests. Colombia Ecopetrol focusing on completion of Cartagena Refinery expansion by YE Economic growth will slow down, but will still lead Latin America. Domestic demand for petrochemicals increasing.

22 Mercosur: Country Overview Brazil Brazil expected to contract by 3.0 Low crude oil prices and scandals related to corruption is keeping investment low. Weaker Real slows down purchases but makes local products more attractive. Drought affecting power & gasoline supply. Argentina Energy development continues with focus on Vaca Muerta (Shale - NGL). GDP Contracted to nearly zero. Presidential elections this year. Some changes may come after elections. Dow and YPF working to increase ethane supply to increase capacity in Bahia Blanca. Petrochemical Projects cancelled. No Expansions through 2020.

23 Pacific Coast: Country Overview Chile Closure of small ENAP Ethylene & Petro Dow PE units in Talcahuano in Slowdown in GDP growth from ~5.6% to ~2.2% in Increased availability of product from North America and Asia will continue to supply product to support local growth in Chile. Peru 2014 was a challenging year for its economy, but we expect a slight recovery in 2015 GDP growth. Odebrecht awarded contract to build gas pipeline from Camisea to Southern Peru. This new gas pipeline could stimulate a Petrochemical project in the South of Peru. Convertors will benefit from additional supply and growth will follow.

24 TRENDS

25 Changes in the North American Market US/Canada Resin Production (YTD tons) September Resin % Change LDPE 2,393 2, % LLDPE 4,991 4, % HDPE 6,402 5, % TOTAL PE 13,786 13, % PP 5,796 5, % PS 1,527 1, % PVC 4,968 4, % Total 26,078 25, % 25

26 Changes in the North American Market US/Canada Resin Sales and Captive Use (YTD tons) September Resin % Change LDPE 2,435 2, % LLDPE 4,971 4, % HDPE 6,364 6, % TOTAL PE 13,770 13, % PP 5,869 5, % PS 1,509 1, % PVC 3,190 3, % Total 24,338 23, % 26

27 North America Resin Price Forecast US Dollars per Ton 2,000 1,900 1,800 1,700 1,600 1,500 1,400 1,300 1,200 1,100 1,000 Q Q Q Q Q Q Q Q PET, Contract-Net Transaction PP, Discounted Contract PVC, Contract-Market HDPE, Discounted Contract PS, Net Transaction Estimate 27

28 North America Resins Market Outlook Short Term. PE NORTH AMERICA RESIN HIGHLIGHTS Demand Price Contract PE prices appear to be heading for a flat settlement in October. PE producers have moved the previously announced five cent contract price increase out to November 1. The proposed November increase is likely to face stiff opposition. Product availability remains sufficient and buyers do not appear to be pre buying ahead of the proposed November increase. PP Demand continues to outpace supply despite very strong year to date operating rates. Several industry outages are expected to keep market dynamics very tight and likely allow for further margin expansion in the fourth quarter. PS Price for all grades of PS are likely to roll over in October. With benzene spot prices for November currently close to the October contract price level, the current IHS forecast for PS prices in November is for another rollover. Demand in September increased slightly mainly due to lower prices. Demand in October should be healthy before seeing a seasonal slowdown in November/ December. PVC Domestic contract PVC prices are likely to see a further downward movement in October. Soft regional ethylene prices in combination with soft resin export prices are increasing pressure on domestic PVC producers to narrow the gap between export and domestic contract pricing. Planned vinyls turnarounds this month have helped to balance the current softness in the domestic market. PET October raw material costs remain unsettled but we expect them to decrease around 1 cpp. November raws costs look to be relatively flat. Demand is slow though recent preliminary antidumping duties could slow imports and help domestic demand 28

29 Increase in Domestic Demand Without Capacity Growth With no new capacity additions and increase in demand, S. American net imports of Polymers will continue to increase No new ethylene or propylene capacity additions in S. America prior to 2020 Mexico and US will add significant new ethane cracking capacity, targeting PE exports to S. America NGL production additions from Vaca Muerta (Argentina), Gran Chaco (Bolivia) and Pre-Salt (Brazil) may stimulate future capacity additions The Southern Gas Pipeline Project (Peru) could also stimulate a Petrochemical project in the South of Peru The region has ample room for several world scale polyolefin complexes. Who is going to build it?. ALL RIGHTS RESERVED.

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