ASIA POLYMERS Are New Global Capacities Poised to Change The Trade Dynamics?

Transcription

1 ASIA POLYMERS Are New Global Capacities Poised to Change The Trade Dynamics? FELITA WIDJAJA SENIOR EDITOR ICIS, SINGAPORE

2 Corporate Structure RELX Group is a world-leading provider of information solutions for professional customers across industries. More than 30,000 Full-time employees based in 38 countries serving customers in 180+ countries ICIS is the world s largest provider of petrochemical information with growing fertilizer and energy coverage. More than 600 employees And more than 35 years in petrochemical benchmarks

3 Market intelligence to support your commercial planning & decision making Pricing intelligence News Training and Conferences Analysis Consultancy Supply and Demand

4 Agenda Current Asia market dynamics and price review Capacity expansion and evolving trade flows Asia polymers outlook hinges on China 4

5 Current Asia market dynamics China Southeast Asia India Largest importer in the world Price sensitive; trader-to-trader Volatile futures affect buying sentiment Indonesia & Vietnam, fastest growing markets Monthly purchases on contract and spot Largely tracking China market Bearish market amid ample local supply Exports PP and more recently, PE Disposable plastic ban curbs HDPE demand SE Asia PE & PP Consumption breakdown 2017 consumption: 11.9m tonnes 15% 7% 27% Thailand 2% 28% Indonesia 21% Vietnam Indonesia Vietnam Thailand Malaysia Philippines Singapore Source: ICIS Source: ICIS supply & demand database

6 Current SE Asia capacities and trade flow in Asia Thailand PE: 3.75m PP: 2.3m SE Asia PE & PP to China China PP to SE Asia (arbitrage dependent) Myanmar Laos Middle East and India PE & PP to SEA Thailand Thailand Cambodia Vietnam PE: 0 PP: 150,000 The Philippines PE: 320,000 PP: 350,000 Malaysia PE: 1.1m PP: 400,000 Malaysia Singapore PE: 2.84m PP: 1.6m Indonesia PE: 830,000 PP: 905,000 Legend: Net PE & PP importers Net PE & PP exporters Largely untapped markets Source: ICIS Supply & Demand Database, ICIS

7 Asia s HDPE film prices supported by tighter supply China prices shot up above SE Asia amid tight supply; producers focussed on HDPE pipe production Ethylene vs HDPE film prices ($/tonne) SE Asia prices caught up with China and rose above ethylene prices SE Asia prices fell amid sales pressure, weaker China market China prices soften; subdued demand amid yuan depreciation and higher local inventory Ethylene CFR NE Asia HDPE Film CFR SE Asia HDPE Film CFR China

8 Asia s LLDPE film prices largely under pressure LLDPE prices not supported; buying interest curbed by healthy import supply and currency depreciation Ethylene vs LLDPE film prices ($/tonne) NE Asia ethylene prices much higher as compared to LLDPE prices China prices depressed by ample local supply, widens price spread between SE Asia and China Recent LLDPE price drops in China and SE Asia due to availability of lower-priced India origin cargoes LLDPE Film CFR SE Asia LLDPE Film CFR China Ethylene CFR NE Asia

9 Some integrated PE producers more inclined to sell ethylene Feedstock spread Ethylene and HDPE SE Asia Feedstock spread Ethylene and LLDPE SE Asia

10 Asia s PP Flat Yarn prices suppressed by longer supply Propylene vs PP flat yarn prices ($/tonne) Persistent tight supply of import cargoes supported prices in Q1 Lengthened SE Asia supply amid recent start-ups weigh on prices Muted demand and falling futures led to decline in China prices Firmer upstream monomer costs fail to support PP prices, relatively healthy margins Source: ICIS PP Flat Yarn CFR China Propylene CFR NE Asia PP Flat Yarn CFR SE Asia

11 Capacity Expansion: Boom in US Shale Gas projects Mt/y North America Ethylene major capacity developments , by company Ethylene capacity expansion 1.67m tonnes in m tonnes in m tonnes in Braskem/Idesa CPChem Dow Chemical Equistar ExxonMobil Indorama OxyChem/Mexichem Westlake/Lotte Sasol Shell Shintech Formosa LyondellBasell INEOS +2.77m tonnes to 2021

12 North America to export the bulk of additional PE 1.3m tonnes in 2018 PE capacity expansion (tonnes/yr) 3.5m tonnes in 2017 Supply Pressure 2.7m tonnes 1.5m tonnes 750,000 tonnes LLDPE HDPE LDPE North America s production vs consumption LLDPE HDPE Production growth 17% 6% Local consumption growth 2% 1% Source: ICIS Increase in export 311% 39% Source: ICIS

13 India turns into net PE exporter after expansion China LLDPE imports 2017 US 4% Others 24% Iran 5% UAE 8% Source: ICIS May'18 March'18 Thailand 13% Saudi Arabia 24% Singapore 22% I N D I A P E E X P O R T S ( TO N N E S ) HDPE China LLDPE imports Q India 5% LLDPE Others 21% US 6% Iran 6% UAE 9% Thailand 12% Saudi Arabia 20% Singapore 21% OPaL LLDPE/HDPE: 720Kta HDPE: 340Kta Reliance LLDPE/HDPE: 550Kta LDPE: 400Kta Jan'18 Nov'17 Sep'17 July' Source: India Customs

14 China s PP expansion slower than expected 8% 16% 18% 58% Source: ICIS Supply & Demand Database Planned: 2.9m tonnes Realised: 1.9m tonnes

15 Southeast Asia s PP expansion faster than PE Company Location Country Capacity ( 000 tonnes/year) Start-up PTTGC Map Ta Phut Thailand 400 LLDPE End 2017 Lotte Chemical Titan Pasir Gudang Malaysia 200 PP July 2018 Petronas Johor Malaysia 400 HDPE, 350 LLDPE 900 PP Chandra Asri Cilegon Banten Indonesia 400 LLDPE/HDPE 80 PP (debottlenecking) JG Summit Batangas Philippines 250 HDPE 110 PP (expansion) Nghi Son Refinery and Petrochemical H End 2018/2019 Early Thanh Hoa Vietnam 400 PP July 2018 Long Son Petrochemical Ba Ria-Vung Tau Vietnam 500 LLDPE, 450 HDPE 400 PP H Source: ICIS 600kta of PP added So far 900kta more by end 2018

16 US LLDPE needs to find a home ME remains the biggest exporter China remains the biggest importer Source: ICIS Supply & Demand Database

17 Europe remains a major importer China less reliant on imports ME remains the biggest exporter Source: ICIS Supply & Demand Database

18 Escalating US-China trade war $34bn + $16bn 11 June 15 June $50bn Tit-for-tat $34bn 6 July 25% tariffs $34bn $200bn Pending $16bn 10 July 3 August 8 August 23 August 25% tariffs $60bn Pending $16bn Ongoing battle with no clear winner might hurt end-product market and slow down GDP growth

19 '000 tonnes China continues to build but will remain short of PE Additional 1.85m tonnes expected by 2019 Many projects delayed to after 2020 China s PE market (12m) (15m) 64% 62% 60% 58% - 56% Production Deficits Consumption Self-sufficiency percentage Source: ICIS

20 China expected to import more specialty grade LLDPE China import and production 2017 Substitution trend China LLDPE vs C6 mlldpe 50% specialty grade including mlldpe 3m tonnes LLDPE imports Less than 100,000 tonnes of mlldpe 7.1m tonnes LLDPE production mlldpe imports to reach 1.5m tonnes in 2018

21 '000 tonnes China less attractive for PP imports as it nears self sufficiency China s PP market 92% 90% 88% 86% 84% 82% 80% Production Consumption Deficits Self-sufficiency percentage PP imports almost stagnant at below 5m tonnes since 2015 Close to 90% self sufficiency

22 China crackdown on pollution a game changer April 2017 China begins air pollution inspections in Beijing, Tianjin and 26 other cities in the northeast ( 2+26 Plan ) More stringent environmental regulations have shut down chemical plants some permanently; also relocation ordered Some local waste plastic processors have already completed transformation or relocation of their facilities abroad Restrictions on imports of waste plastics announced in July 2017, total ban from 2019 Estimates of around 2m tonnes of additional demand for virgin PE and 1m of virgin PP Image credit: Rex Shutterstock China waste plastics imports quota ( ) Imports (Unit: tonne) Waste and scraps of polyethylene 2,339,770 19,413 Waste and scraps of other plastics, excluding discarded compact disks 1,542,440 17,036 Source: China's Ministry of Environmental Protection

23 Challenges in polymers market More supply options amid rapid capacity expansion Growing environmental concern on plastic trash Ban and restriction on usage of plastic bags and single-use plastics weaken end-product demand Big brands eliminate drink straws Pay for shopping bags

24 Asia s polymers market recap Supply Demand Growing US PE and Asia PP capacities to add on to supply pressure India anticipated to increase export PE volumes Integrated PE producers might continue to sell ethylene amid weak PE outlook Import demand hinges on currency developments Additional tariffs on US PE imports might boost demand for other origins in China Buyers refrain from buying long shipment cargoes amid uncertainty on US-China trade war

25 Possible scenarios in polymers market moving forward Impact of China s 25% tariffs on US cargoes Local Asian currencies continue to depreciate against strong USD US PE and PP not in demand amid additional tariffs in China $1 = CNY6.84 US PE directed to other markets, including SE Asia Surplus supply due to displacement Iran Kuwait Qatar Saudi Arabia UAE Oman Global pricing and margins under pressure

26 Felita Widjaja Senior Editor, ICIS

27 ICIS PE/PP team Asia Pacific Felita Widjaja (PE) Leanne Tan (PP) China Angie Li (PE) Dora Xue (PP) Europe Linda Naylor Middle East/South Asia Veena Pathare Muhamad Fadhil Head of Middle East Markets Turkey, Africa Ben Lake John Richardson Senior Consultant US Zachary Moore