Elastomers and derivatives workshop. Saudi Aramco: Public

Transcription

1 2017 Elastomers and derivatives workshop

2 Disclaimer The next slides contain forward-looking statements regarding future events based on current expectations, estimates, forecasts, and projections. The data is subject to updating, revision, further verification and amendment without notice. No reliance may be placed for any purpose on the information or opinions contained in this presentation or any other document or statement, or on the completeness, accuracy or fairness of such information or opinions therein. No representation or warranty, express or implied, is made or given by or on behalf of Saudi Aramco or its employees, or any other person as to the accuracy or completeness or fairness of the information or opinions contained in this presentation and no responsibility or liability is accepted by any of them for such information or opinions or for any errors, omissions, misstatements, negligent or otherwise, or for any 2 communication written or otherwise, contained or referred to in this presentation.

3 Table of Content Coatings Elastomers Adhesives Polyurethanes

4 In coating products, several opportunities emerge for SMEs across all steps of the value chain Manufacturing/investment Opportunities Raw Materials Potential to develop local manufacturing facilities each for Epoxy (10 ktpa each) and acrylic coatings (40 ktpa each) Further localization potential for polyurethanes coatings Finished Products Potential to develop local manufacturing plants, especially for industrial and FBE to serve KSA and ME markets Employment FTEs GDP contribution 1 Additional SME Opportunities Design Testing & Certification Logistics and transportation $ 300 mn 1-2 SMEs 1-2 SMEs 1-2 SMEs 1. Employment and GDP figures are estimations based on NAICS code ; calculations based on 2025 demand 2. SMEs will be common across multiple value propositions. The final number of SMEs will be confirmed only once firm commitments to set up manufacturing facilities are made Source: Saudi Aramco Analysis

5 Coatings have several applications globally 2016 Global Market Breakdown (based on spend) By Industry Sector 7% 0% 15% 29% 1% 0% 8% 1% 5% 14% 9% 10% Coatings have several applications with Automotive, wood and metal finishes being the main ones By Technology 15% 4% 5% 8% 13% 13% 29% 13% Technologies are also very fragmented with Acrylics, Alkyds, Epoxies and Polyvinyl as the most used Automotive equipment Finishes Appliances Finishes Wood Finishes Metal Finishes Container Finishes Machinery and Equipment Non-Wood Finishes Paper and Paperboard Finishes Electrical Insulation Coatings Powder Coatings Other Industrial Product Coatings Other OEM Product Coatings Acrylics Alkyds Epoxies Polyvinyl Acetate Polyester Silicones Aminos Other Source: Saudi Aramco analysis, Global Coatings GIA Report

6 In KSA, protective industrial coatings are the biggest application, in addition deco, maritime and auto are significant 2016 KSA Market Breakdown By Industry Sector 6% 24% 3% 68% Decorative coatings account for a majority of the KSA market industrial coatings are expected to drive future growth however By Technology 11% 10% 52% 15% 6% 3% 3% Vinvlics and styrenics are the main coating technologies employed in KSA, followed by Alkyds and Acrylics Acrylics Polyurethane Other Automotive Industrial Maritime Decorative and other Alkyds Epoxies Unsaturated polyester Vynil/Styrene Source: Saudi Aramco analysis.

7 Overall, potential exists to localize ~21% of the coatings market KSA Overall coatings market size and supply ( 000 Tons), ($ Mn) Unrealized demand Demand (KTPA) Domestic capacity , , , % of current market available for localization (230,400 Tons) The supply gap is expected to be ~50% by 2025 Value ($mm) $4,262 $4,515 $4,780 $5,058 $5,304 There are suppliers for coatings in the domestic market but still significant potential exists to localize the supply Source: Saudi Aramco analysis, UN Comtrade Database, GIA, Syngenta, RCJY report, SRI reports, EIU

8 Of the total market for coatings, industrial coatings is a key area of focus as most imports are in this domain Breakdown of coatings by industrial and other (2016, KTPA) Unealized demand (10%) 810 (90%) 2016 decorative and other coatings market Domestic capacity (66%) 75 (34%) 2016 industrial coatings market = 1, (21%) 885 (79%) 2016 coatings market 62% of all coatings imports come from the industrial segment- as such this is a focus area for KSA 66% of the industrial coatings market is available for localization Source: GIA, IHS, Saudi Aramco analysis

9 The industrial coatings market has been growing at ~4% CAGR, driven by increased construction and industrial activity KSA Industrial coatings market size and supply ( 000 Tons), ($ mm) Unrealized demand Domestic capacity Demand (KTPA) +4% Market for application and services is ~30-50% of the value of the coatings Value ($mm) $582 $621 $661 $703 $747 $388 $388 $388 $388 $388 Total unrealized market for industrial coatings totals ~$750 mn in 2016 Source: Saudi Aramco analysis, UN Comtrade Database, GIA, Syngenta, RCJY report, SRI reports, EIU, Saudi Aramco analysis

10 Specifically, fusion based epoxy (FBE) coatings show high localization potential as limited localization exists Middle East & Africa FBE market size ( 000 Tons), ($ mm) Unrealized demand Demand (KTPA) Value ($mm) 71 Domestic capacity +6% $366 $388 $412 $436 $462 FBE is expected to grow in line with the industrial coatings market at a 6% annual growth rate Very limited localization with major suppliers all importing from overseas plants KSA market expected to be KTPA Source: Saudi Aramco analysis, Ihs specialty chemicals

11 The GCC coatings market is forecasted to grow at 5% annually and it is expected to double by 2030 GCC coatings market expected size evolution ( 000 Tons) Rest of GCC KSA 4,651 5% 2,324 2,465 2,611 1,208 1,282 1,358 1,115 1,183 1,253 3,662 1,904 1,758 2,419 2,233 KSA coatings market composes 48% of GCC coatings market size Future demand will be mainly driven by the industrial coating segment Source: Saudi Aramco analysis, UN Comtrade Database, GIA, Syngenta, RCJY report, SRI reports, EIU

12 The current Coating Materials value chain has potential for localization at all stages Low High Tiering Step Tier-1/2 Input materials Resin Semi-finished materials Tier-1/2 Coating formulation Tier-2 Equipment manufacturing & maintenance Supply chain &Technical assistance Localization Level Gaps Medium-high availability for Acrylates and Polyols & Isocyanates Medium low Epichlorohydrin and bisphenol A and PTA / IPA Resins Limited availability of epoxy, acrylic and PU resins Other Materials Medium-low availability of film formers, pigments, solvents and additives Lack of Coating Formulation services and laboratories Limited presence in coating manufacturing equipment Limited presence of advanced maintenance facilities (dehumidifiers, robotic equipment) Low levels of technical assistance for Coatings and Paints because of production levels Limited SC infrastructure due to low levels of production Source: NOV Manufacturing. Saudi Aramco analysis

13 The value chain provides opportunities for manufacturing several products at each stage Feedstock Intermediates Resins Formulators End use customers Petro-chemicals (C2,C3,C4, Benzene) Mining minerals Monomers Acrylates Styrene Polyols Intermediates and derivatives Amines Vinyl Ethers Fine chemicals Resins Alkyd Resin Polyester Resin Epoxy Resin Polyurethane Resin Solvents and additives Ketones Alcohols Glycol ether ~15% ~17% Paints & Coatings formulator and marketers Architectural / Deco Construction and wood Automotive and Refinish Industrial ~50% Inorganic chemicals Pigments and additives ~17% ~17% Marine and Protective Consumer electronics ~50%

14 KSA has significant imports of key coatings resins- potential to localize these resins is strong Applicability in final products Water borne Solvent borne Power Radiation curing KSA imports (2015, KTPA) Salient features Acrylic resins 80 Alkyd resins 5 Epoxy resins Polyurethane resins Very high resistance to weather conditions High durability Environmentally friendly Heat and weather resistant >40 2 High chemical resistance, Electrical insulation capacity Mechanical strength > 40 2 Water resistant High impact resistance Vinylic resins (250) export 1 Good biodegradation resistance Cross linking agent Polyester resins 1. KSA is net exporter of PVA and PVC 2. Based on market surveys Source: UN Comtrade, market surveys, Saudi Aramco analysis 4 Strong mechanical and chemical resistance More economical compared to other resins

15 SAGIA has embarked on launching specialized industrial cities focused on paints and coatings Specialized P&C Industrial Cities Specialized Utilities Skilled Manpower Medical Services Financial Services Strategic ProcurementCo. Logistics (SCM) Plug & Play City Managing Co. The specialized Industrial City. Paint and Coatings Warehouse Market I Info. Center Office Facilities & Accommodation Project Management Contractor / Engineering Co. Raw Material ITCompany Industrial Support T&I Center Seaport Airport Railroads Roads Saudi Arabia aspires to Become the Center for Global Paints and Coatings Supply Chain Source: SAGIA

16 Key messages and next steps Key messages Chemical building blocks required for coatings are readily available in KSA These building blocks can be leveraged to produce key coating resins such as acrylics, epoxy and polyurethane The market of end formulations is large- in particular strong localization potential exists for industrial coatings with an unlocalized market of ~$750 mn in 2016 Local formulation of industrial coatings from resins can also stimulate additional equipment (e.g. dehumidifiers, robotics) and services (e.g. testing, inspection, technical services) In case you are interested in discussing this opportunity further, please contact Khazisyed Ahmedjeelani Industrial Development Department Saudi Aramco Source: Saudi Aramco analysis

17 Table of Content Coatings Elastomers Adhesives Polyurethanes

18 Rationale Opportunity Key opportunities for localization Elastomers Building blocks and intermediates Organic synthesis products Finished goods Establish local production of acrylonitrile, ENB and isoprene Produce additional plants each of SBR, PBR, Carbon black and EPDM Augment existing portfolio with local production of NBR, Butyl rubber, chloroprene rubber etc. Develop local conversion facilities for tires Develop local conversion facilities for non-tire applications such as shock absorbers and conveyor belts No local production of these raw materials in KSA ENB is essential to EPDM production Acrylonitrile and isoprene are key to nitrilics and butyl rubber (not produced in KSA) Demand of ~370 ktpa in excess of existing 400 ktpa rubber production in 2016, with expected demand of ~2200 ktpa in 2025 Demand of ~50 ktpa in excess of existing ~50 ktpa carbon black production ~500 ktpa annual imports of tires in 2016 ~500 ktpa annual imports of other rubber products in Composition and demand to be determined after discussion with leading players Source: Saudi Aramco analysis

19 Raw material availability from 2016 can stimulate conversion and manufacturing of elastomer finished products Not Exhaustive Organic synthesis Synthesized rubbers have now come online Unrealized potential (300 ktpa) Conversion with potential to stimulate local conversion Finished products and displace imports of finished products Tire imports ( ktpa) Local production (400 ktpa) Exports ktpa Local conversion (30-50 ktpa) Limited conversion capacity is forcing massive exports from KSA (which could otherwise be consumed locally) Building additional conversion will stimulate local demand for additional organic synthesis production and limit imports of final products Rubber product imports ( ktpa) Local production (30-50 ktpa) Source: Saudi Aramco analysis

20 Several Building blocks are abundant in KSA, however potential exists to enhance portfolio of organic synthesis products Selected Petrochemicals in the synthetic rubber value chain Not Exhaustive Inputs Building Blocks Selected Intermediates Rubbers Selected Applications Natural Gas NGLs Natural Gas Liquids C2 Ethylene Styrene VAM ENB Ethylene Vinylacetate rubber (EVM) Ethylene Propylene Diene Monomer (EPDM) Polybutadiene rubber (BR) Construction, Manufacturing Automotive (e.g. seals) Tires (66%) Crude Oil Ethane Propane Butane Refining (Naphta, Gas Oil) C R A C K E R C3 C4 C6 Propylene 1,3-Butadiene Isobutane Benzene Acrylonitrile Isobutylene Chlorine Hydrogen Isoprene Bromine Chlorine Styrene Butadiene rubber (SBR) Chloroprene rubber (CR) Acrylonitrile Butadiene rubber (NBR) Hydrated NBR (HNBR) Regular Butyl rubber (IIR) Bromobutyl rubber (BIIR) Chlorobutyl rubber (CIIR) Tires (75%), Automotive (20%) Adhesives, Automotive Automotive, Manufacturing Tires (85%) Tires, Construction, industrial applications Largely localized Further localization potential exists Source: HSBC, Lanxess, Saudi Aramco analysis

21 While most precursors are available, localization potential exists for acrylonitrile, ENB and isoprene Synthesized rubber Produced in KSA? Precursor (building blocks) Available in KSA? Opportunities SBR PBR NBR EVA EPDM Styrene Butadiene Butadiene Butadiene Acrylonitrile Ethylene Acrylic Acid Ethylene Propylene Leverage existing raw materials to enhance KSA elastomer portfolio. Invest in facilities to manufacture, NBR, Rubber processing oils, EVA etc. Produce raw materials to completely localize all production of elastomersinvest in small to medium facilities to produce ENB, Isoprene rubber, acrylonitrile etc. ENB Butyl Rubber Isobutylene Isoprene Carbon Black Coke Rubber Processing Oils Heavy Naphtha

22 The market for organic synthesis is expected to grow at 8% CAGR in line with growth in synthetic rubber finished products KSA Organic Synthesis market size and supply ( 000 Tons) Import Domestic 2, % 1, , ,874.6 By 2030, it is expected that the demand for organic synthesis products will be 5 times that of current production Source: Saudi Aramco analysis,, CDSI, Marketline, Freedonia Group, Grandview, SRI reports, EIU, RCJY Reports

23 The GCC market for synthetic rubber finished products is forecasted to grow at ~8% annually until 2030 GCC Elastomers market expected size evolution ( 000 Tons) Rest of GCC KSA Tires occupy ~50% of the finished good market, with other applications accounting for the remainder No conversion for tires exists and only ~50 ktpa conversion for other products exists 8% 2,011 2,170 2, ,052 1,106 1,194 1,285 3,928 1,768 2,160 5,688 2,560 3, Future demand will be driven by the rapid industrialization and the Vision 2030 s infrastructure development in KSA Source: Saudi Aramco analysis, CDSI, Marketline, Freedonia Group, Grandview, SRI reports, EIU, RCJY Reports, UN Contrade

24 Shock absorber in wheels Side stop Insulation of steel springs Secondary safety suspension system Antivibration systems Propulsion and break transmission Valve housings Vertical and side transmission In addition to tires, six main non-tires elastomers segments present a sizeable localization opportunity in Saudi Arabia ( 000 Tons) ($ Mn) Civil engineering Bridge bearings Humidity protection Other: expansion joints, marine fenders Transportation / rolling stock Antivibration mechanisms in rolling stock Antivibration mechanisms in rail tracks Power utilities Industrial Overvoltage protection Distribution devices/ switches Gaskets and seals in out. transformers Mining (e.g., conveyor belts, seals, ) Upstream (e.g., packers ) Petrochemicals (e.g., O-rings) Automotive / non-tires Engine mountings Suspension arms bushes Shock absorbers Other Healthcare tubes & catheters Diesel engine belts Rubber sealants Source: Saudi Aramco

25 Key messages and next steps Key messages Key raw materials for production of elastomers have now come online from Kemya (SBR, PBR, EPDM, carbon black) These raw materials can help significant displace ktpa tire imports into KSA via local production Local players can also help enhance the existing portfolio to include, NBR, NB Latex, Chloroprene rubber etc. This enhanced portfolio will presents opportunities to develop several non-tire applications such as shock absorbers, conveyor belts etc. New developments in elastomers will present opportunities to establish inspection and testing, advanced maintenance, distribution and after sales services In case you are interested in discussing this opportunity further, please contact Khazisyed Ahmedjeelani Industrial Development Department Saudi Aramco Source: Saudi Aramco analysis

26 Table of Content Coatings Elastomers Adhesives Polyurethanes

27 Rationale Opportunity Key opportunities for localization Adhesives Input chemicals and materials System houses and conversion Transport and distribution Establish local manufacturing of raw materials for polymer dispersion, hot melt, solvent based and water based adhesives (e.g. C5 HCR, PVP, Polychloroprene, cellulose derivatives) Establish 1-2 local conversion facilities (25-50 ktpa) for all major types of adhesives Develop local distributors Develop inspection and testing facilities Develop advanced maintenance offerings No local production of these raw materials in KSA Imports of ~50 ktpa in KSA and >120 ktpa in Middle East Potential for new distributors should 50 ktpa capacity be localized Growth in adhesives consumption (~9% CAGR will drive growth in raw material demand Imports taking place across all adhesive product types Absence of inspection and testing facilities in KSA 1. Composition and demand to be determined after discussion with leading players Source: Saudi Aramco analysis

28 KSA adhesives imports ( 000 MT) KSA has demonstrated rapid growth of 9% CAGR, with the adhesives imports equaling ~50 KTPA in 2016 Volume ( 000 MT) % KSA s fast growing construction market (~7% CAGR) is expected to be a key driver of adhesives demand going forward Value ($mn) Source: : Un Comtrade, Technavio

29 Adhesives value chain KSA has abundance of building blocks localization potential exists for other key raw material and conversion facilities Building blocks Intermediates & raw materials Converters Finished adhesives Ethylene Natural polymer raw materials Distribution Natural polymer Propylene Polymer dispersion raw materials Distribution Polymer dispersion Butadiene Hot melt raw materials Distribution Hot melt Crude C5 Crude C5 Solvent based adhesives raw materials Reactive adhesive system raw materials Distribution Distribution Conversion of raw materials into final products (very limited existing capacity) Solvent based Reactive system Transport After Sales support End customer Aromatics Water based adhesive raw materials Distribution Water based Vegetable and animal products Pressure sensitive adhesive raw materials Distribution Pressure sensitive Largely localized/limited localization potential Opportunity for localization Source: Saudi Aramco analysis

30 Several synthetic raw materials are already available in KSA, however there is potential for new plants Raw materials availability per category Category 1 2 Natural polymers Polymers dispersion/emulsion Vegetable dextrins Vegetable starches Protein (casein) adhesives Animal glues Polyvinyl acetate EVA copolymers Acrylics SBR PU dispersions Raw material/ Formulation Availability Yanbu Jubail Jubail Yanbu & Jubail 3 4 Hot melt Solvent based adhesives Polyolefins C5 resins (DCPD/HCR) SM copolymers (SBS/SIS/SEBS) Polyurethanes Silicone PVC copolymers Plastisols (PVC dispersions in plasticizers) Polychloroprene Yanbu & Jubail Yanbu & Jubail Yanbu & Jubail Yanbu & Jubail Yanbu Note: ASC, CATIA and FEICA are the USA, China and Europe industry associations, representing over 70% of the world adhesives and sealants market Source: ASC; CATIA; FEICA

31 producing among others PVP, PVA, cellulose derivatives and silicone polymers Raw materials availability per category Category 5 6 Reactive adhesive system Raw material/ Formulation Epoxies Unsaturated Polyester Acrylates (incl. Cyanoacrylate) Silicones (1C & 2C) Formaldehyde resins Silone modified polymers Polyvinyl Alcohol Availability Jubail Yanbu Jubail Yanbu Jubail Cellulose derivatives Water based Ployvinylpyrrolidone 7 Natural rubber Yanbu & Jubail Synthetic rubbers Yanbu & Jubail Pressure sensitive adhesives Polyacrylates Yanbu & Jubail Source: ASC; CATIA; FEICA

32 Technical assistance & customers relationship, key in adhesives, can be covered by SMEs supported initially by OOK partners Top success factors within the adhesives industry Not Exhaustive Key Success Factor Importance low medium high Key findings Consistent product and process quality is a basic requirement for performance and prevents rework (ppm) Product & process quality Competent sales & service Relationship management Basic requirement Technical competence and flexibility of both sales and service personnel is key for customer satisfaction Relationship management and cooperation is essential for a value-adding partnership Innovative products Competitive pricing Differentiation by innovative products is the only way to maintain profitability Price sensitivity is more important for commoditized adhesives rather than for premium products Source: SRI. Frost & Sullivan

33 Key messages and next steps Key messages Key building blocks for production of adhesives are available in abundance Key raw materials for several adhesives types (polymer dispersion, hot melt, reactive and pressure sensitive) are available in KSA Local players have the opportunity to complement the existing raw materials with others (e.g. C5 HCR, polychloroprene) to fully localize all raw materials The existing raw materials can already be leveraged to develop converting facilities for key finished products Once converting facilities are up, local players can also support by offering distribution and value added after sales services In case you are interested in discussing this opportunity further, please contact Khazisyed Ahmedjeelani Industrial Development Department Saudi Aramco Source: Saudi Aramco analysis

34 Table of Content Coatings Elastomers Adhesives Polyurethanes

35 Rationale Opportunity Key opportunities for localization Polyurethanes Input chemicals and materials System houses and conversion Transport and distribution Establish local production of polyester polyols and recycled polyester polyols Vertically integrate production of input materials and develop blending facilities Establish local toll blending facilities Develop local distributors Provide transportation and loading e.g. iso containers, drums and trucking No local production of these raw materials in KSA Expected demand of ~140 ktpa in KSA and ~480 ktpa in Middle east by 2021 Limited availability of polyurethanes and raw materials in remote areas Growth in polyurethanes consumption, especially CASE and rigid foams, will necessitate higher requirements for these polyols Only 40 ktpa of capacity in existing system houses in KSA Significant imports of finished products (~110 ktpa for rigid foam) Demand for ~40 flatbed trucks and ~15,000 IBC containers in KSA (24,000 liter) by Composition and demand to be determined after discussion with leading players Source: Saudi Aramco analysis

36 Polyurethane demand in the Middle East is expected to grow to ~480 ktpa by 2018 with a CAGR of ~6% ME Polyurethane expected market size evolution Rest of ME KSA In KSA, raw materials are produced in sufficient volume; but, they are exported, blended, and converted abroad Over 100 ktpa localization potential exists Volume 000 MT Value $ MM 3% ,060 1,126 1, Source: Saudi Aramco analysis KSA SMEs can fill in the production gap by adding 2-3 conversion plants to capture more PU market share

37 Value Chain for polyurethanes Building blocks are available in abundance- opportunity for localization exists across all other value chain domains Building blocks Intermediates & raw materials System houses Finished goods Ethylene/ Ethelene oxide Polyether polyols (400 ktpa) Distribution Rigid foam (70 ktpa import) Propylene Polyester and recycled polyester polyols Distribution Conversion of Benzene MDI (200 ktpa) Distribution Polyols and isocyanates into raw polyurethanes (only 40ktpa Transport Flexible foam (70 ktpa import) Transport After Sales support End customer Hydrogen TDI (200 ktpa) Distribution existing capacity) CASE (>100 ktpa imports) Toluene Largely localized Opportunity for localization

38 Presence of competent local distributors can promote capillarity, technical assistance and stimulate additional system houses Polyurethanes distribution options/models Manufacturers of Polyols / Isocyanates System house Distributor Distributor Opportunities Opportunity for local distributors to: Stimulate smaller system houses in remote areas Direct supply of raw material Direct supply of raw polyurethane Distributors for raw material supply System house Enhance capillarity of raw material distributions Understand customer requirements & offer tailored, technical services End Converters of PU finished products Current KSA distribution setup Limited presence of competent distributors Source: Saudi Aramco analysis, expert interviews

39 Key messages and next steps Key messages Key raw materials for production of polyurethanes have now come online from Sadara or will be coming online from Converge (polyols, TDI, MDI) Local players can utilize these raw materials to significantly enhance system house capacity from 20 ktpa to ~250 ktpa Enhanced system house capacity can stimulate local production of rigid and flexible foams and CASE thereby displacing imports In case you are interested in discussing this opportunity further, please contact Khazisyed Ahmedjeelani Industrial Development Department Saudi Aramco Growth in the polyurethanes industry will also present opportunities for local trucking, storage, maintenance, testing and inspection services Source: Saudi Aramco analysis