2 nd Asia Bauxite & Alumina Conference

Transcription

1 2 nd Asia Bauxite & Alumina Conference Global Caustic Update: Challenges and Opportunities, from a buyer s perspective. Eddie Kok Director IHS Chemical Eddie.kok@ihs.com

2 Caustic, Impact To The Alumina Industry? Global alumina industry will spend close to 4.0 billion on caustic purchase in 2012 A critical component in alumina production with significant cost impact. Reliability of supply source, typically involve multiyear contracts Where are the competitive suppliers/sources?

3 Global Caustic: Agenda Buyer s challenges & opportunities Caustic supply/demand Regional cash cost and margins comparison Caustic trade flows Market outlook and highlights Conclusions

4 What Are The Challenges? Cash cost pressure at producer s end, overall higher ECU cost Reliability of supply Chlorine/Caustic balance issue Fair and reasonable contract pricing mechanism

5 What About Opportunities? Volatility in caustic pricing provide room for control Leverage on large volume, stable demand Understanding the industry dynamics Capacity to supply is definitely in excess, does this translate to lower cost?

6 Global Caustic Supply/Demand Million metric tons Operating Rates, Percent 100 Forecast Capacity Demand Op rate 40

7 Caustic Demand Growth NEA (ex CHN) 8% WEP 13% ROW 15% US 16% ISC 5% SEA 7% CHN 36% Region % AAGR ISC 7.2 China 4.3 SEA 4.0 US 1.3 WEP 0.8 NEA (ex China) 1.0 Rest of World 4.3 Total Global Demand 2012 = 66 Million Metric Tons

8 Caustic Demand Sectors Pulp & Paper Alumina 25% 12% 14% Propylene Oxide Epichlorohydrin 5% 12% 9% 6% 11% 4% Organic Chemicals Soaps & Detergents Textile Inorganic Chemicals Water Treatment Others Total Caustic Application Demand 2012 = 66 Million Metric Tons

9 Global GDP vs. Caustic into Alumina Demand vs Caustic demand Percentage Forecast % Change in Alumina Sector Dem % Change in Global Caustic Dem % Change in Global GDP

10 Is Supply In Excess? Million Dry Metric T ons to 2012, Overbuilt 2012 to 2017, Recovery 7.1 China Rest of the world Net Capacity expansion World Million Dry Metric Tons Forecast China Rest of the world Net Demand expansion World

11 Energy Price Trends % Change, U.S. Dollars Per Metric Ton, Q Basis Dubai Crude Oil Coal(Qinhuangdao)

12 North America Energy Price Trends $ / MM Btu Gas as a % of Crude, BTU Basis 18 60% 16 55% 14 50% 12 45% 10 40% 8 35% 6 30% 4 25% 2 20% 0 15% Crude (WTI) Natural Gas Gas as % of Crude

13 Electricity Impact on ECU Cash Cost U.S. Dollars per ECU Metric Ton Estimated Average Regional ECU Cash cost for 2012 WestEurope Membrane Asia Membrane 170 North America Membrane Electricity Costs (Cents/kWh) North America = 2.7 Europe = 6.8 NEA = 4.6 Middle East Membrane 13

14 ECU Margins vs. Operating Rates in China U.S. Dollars per metric ton 100 Operating rates, percent Forecast ECU Margin Operating rates 0

15 ECU Margin vs. Operating Rates in U.S. U.S. Dollars per metric ton 300 Operating rates, percent Forecast ECU Margin Operating rates

16 Regional ECU Margins U.S. Dollars per ECU ton Forecast US WEP NEA 16

17 What It Mean To Caustic Buyers? Price set by higher cost producers, i.e. NEA CA plant utilization rate primarily dictate by chlorine demand, lower rate, less caustic produce. China s growth as a large caustic exporter constraint by cost, and s/d balance. Lower ECU locale may not translate to lower prices

18 Regional Spot Caustic Price Comparison U.S. Dollars per dry metric ton US ECU Cash Cost NAM NEA WEP

19 Northeast Asia Caustic Prices & ECU Cash Cost U.S. Dollars per dry metric ton NEA ECU Cash Cost Spot Caustic, FOB NEA Alumina Contract, FOB NEA

20 Global Caustic Trade Balance, Million metric tons 8 6 Net Exports Forecast Rest of world NAM WEP NEA SEA SAM ISC

21 Global Caustic Trade Flows 1.1 NAM WEP 0.6 MDE ISC NEA SAM Unit: Million Dry Metric Ton SEA

22 U.S Chlor-alkali Industry Chlor-alkali & Vinyls sector is undergoing a renaissance due to energy and feedstock advantage - shale gas play Price taker with substantial margin buffer Ability to leverage on its lower cost position. Export its excess ECU, protect domestic margins.

23 How is China As a Supply Source? Will remain the largest caustic producing country Capacity still expanding Export volume still growing, at a slower pace Increasing cash cost pressure, largely due to energy price inflation Need to build reputation as a reliable supplier Only a few port/exporters able to handle CABU size parcel.

24 Supply Highlights Integrated US and MDE producers are cost leader US will back out some import volume. Export mostly to South America market MDE export mostly to SEA/Australia and ISC. NEA remains the largest exporting region.

25 Demand Highlights SEA/Australia is the largest export destination. ISC will need to increase its import, lack of domestic expansion Demand growth from alumina sector expansions in Australia, India, Vietnam and SAM is critical. Freight differential, a critical factor in regional trade flow.

26 Caustic Trade Flows, Freight Element 110 (To USWC) 540 CFR USWC NAM 430 FOB USGC 80 WEP MDE CFR IWC ISC 90 NEA 430 FOB NEA SAM 80 SEA 495 CFR Aus 130 (From USGC) Freight Unit: USD per Dry Metric Ton

27 CAU Per Capita Potential Per Capita Demand, Dry Kg Per Person u.s U.S NEA NEA (ex CHN) (ex CHN) 6.0 WEP 5.7 WEP Triangle size denote ranking in per capita consumption CHN 23.8 CHN ISC ISC SEA SEA Market Size, MMT

28 Conclusions Price setting region will be NEA producers. Energy advantage is THE factor in generating competitive ECU cost and higher margins Capacities is in excess, but not necessary translate to lower prices. Demand growth from the alumina sector is critical to CA industry, especially in term of global trade.