Caustic Soda Market Information. Sunny Jian Sales Director Formosa Plastics Corporation

Transcription

1 Caustic Soda Market Information Sunny Jian Sales Director Formosa Plastics Corporation

2 Global GDP Growth Forecast 2010~2020 Slow trade and investment UK's exit from the Eurozone China's structural reform U.S. Fed will raise the interest rate The International Monetary Fund is sounding louder and louder alarms about the state of the global economy. The IMF s latest reading of the global economy shows once again a weakening baseline. 1

3 Oil Price Forecast West texas intermediate (WTI) crude oil price dollars per barrel Historical spot price STEO price forecast NYMEX futures price 95% NYMEX futures upper confidence interval 95% NYMEX futures lower confidence interval $50 up & down 20 0 Jan 2015 Jul 2015 Jan 2016 Jul 2016 Jan 2017 Jul 2017 Note: Confidence interval derived from options market information for the 5 trading days ending Sep 1, Intervals not calculated for months with sparse trading in near-the-money options contracts. Source: Short-Term Energy Outlook, September

4 Crude Oil Supply Demand Balance Unit: MM barrel/day (Crude Oil Supply) (Crude Oil Demand) YEAR OECD NON-OECD Global Crude Oil Supply OECD NON-OECD Global Crude Oil Demand Source : US Energy Information Administration(EIA) Data updated in Oct,2016 3

5 Average shale wellhead breakeven prices are below 40 USD/bbl Cost down improved by technical improvement is quite limited. 2015:15~18% 2016:3~5% 4

6 Oil Production at Major Shale Fields A two years price rout has led U.S. shale producers to increase efficiency 5

7 The Factor that Supporting U.S. Oil Production Flexibility (1) Cost Down is the major factor Technical Improvement:Drilling on the same rig 50 grade fracking Cluster drilling Proppant over 2000 pound in each foot Financial Support Oil company can issue stock bond and debt recovery Chapter 7:Company liquidation Chapter 11:Corporate reorganization 6

8 The Factor that Supporting U.S. Oil Production Flexibility (2) Plenty of U.S.DUCs become the buffer when Oil production going down DUCs(Drilled Uncompleted Wells)-Finished drilling but not yet fracking. DUCs increased a lot in the end of 2014 Cost accounts for 60~70% of total cost, under financial strain, postpone of DUCs is the best workable solution DUCs on Oct,2016: 5,031 wells Land Lease (HBP-held by production) Oil lease is divided by two steps The first lease:lessee needs to start the drilling activity or get the oil/gas production to hold the lease. The second lease:if production stops for 90 days, then the second lease will be terminated. 7

9 Factors of Oil Output Declining The decay rate of Shale Oil is high The first year decay rate reach 60% Stable output need more new wells to supplement Less investment New Oilwell is decreasing The expenditure of top 30 U.S. oil company in 2016 is less than 2015 by 70%. 2,014:4500 rig,2,015:4000 rig A large number of corporate bankruptcies Market forecast there will be one-half U.S. Shale oil company bankrupt during the low oil price. 8

10 U.S. Oil Production V.S. Oil Price In case, Oil price keep around 40 USD/Barrel : U.S. oil production will be reducing 2015/4:968 million barrel/day 2015:943 million barrel/day 2016:860 million barrel/day 2017:804 million barrel/day Oil company cut back investment,the quantity of drilling machine reached to the lowest level historically. In case, Oil price keep around 50 USD/Barrel : Production will reduce or maintain, oil company can maintain operation or re-investment. In case, Oil price keep around 60 USD/Barrel : Production will increase 9

11 Jan-95 Aug-95 Mar-96 Oct-96 May-97 Dec-97 Jul-98 Feb-99 Sep-99 Apr-00 Nov-00 Jun-01 Jan-02 Aug-02 Mar-03 Oct-03 May-04 Dec-04 Jul-05 Feb-06 Sep-06 Apr-07 Nov-07 Jun-08 Jan-09 Aug-09 Mar-10 Oct-10 May-11 Dec-11 Jul-12 Feb-13 Sep-13 Apr-14 Nov-14 Jun-15 Jan-16 Oil Price and U.S. Dollar Index Index January 1997= U.S. Dollar Index Crude Oil Price(W.T.I.) U.S. Dollar Index Crude Oil Price(W.T.I.)

12 Ethylene Production Cost CRUDE OIL (USD/Barrel) NAPHTHA (USD/MT) ETHYLENE (USD/MT) , , ,359 Asia Ethylene Market price in Oct ,050 USD/MT 11

13 U.S. Cracker Demand is less than Supply after Expansion 10 cracker projects were already confirmed as of Jun 2016 Likely that more than 2.5mil ton ethylene from these crackers will be surplus in U.S. PE Surplus! 12

14 Global Ethylene Supply and Demand & Forecast Capa, Demand (KMT) Operating Rate % 200,000 94% 180, , ,000 90% 91% 91% 90% 90% 89% 92% 90% 120,000 88% 88% 87% 100,000 80,000 60,000 83% 84% 85% 86% 86% 87% 87% 86% 84% 82% 40,000 20,000 80% Capacity Demand Operation 78% Approximately 3million tons Chinese CTO/MTO are planned on stream in 2016~

15 Ethylene Price Trend Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Platt s CFR NEA(USD/MT) 14

16 Who s the next champion? Carbide Process PVC Ethylene Process PVC Carbide Process PVC (Inner Area) Ethylene Process PVC (Costal Area) Reduce Caustic Soda Export 15

17 World PVC Supply & Demand Capa, Demand (KMT) 70,000 Operating Rate % 100% 60,000 87% 2015, 62, , 61,520 90% 80% 50,000 75% 72% 75% 70% 40,000 71% 69% 68% 66% 67% 69% 60% 50% 30,000 40% 20,000 10,000 Global PVC oversupply,operation is lower. PVC expansion is getting slower. 30% 20% 10% % Capacity Demand 16 16

18 Asia PVC Supply & Demand UNIT: KMT/Year 40,000 90% 35,000 30,000 64% 67% 65% 67% 71% 74% 78% 80% 70% 25,000 20,000 15,000 60% 50% 40% 30% 10,000 20% 5,000 10% Capacity Production Demand Demand/Capa 0% UNIT: KMT (E) Capacity 29,587 30,696 32,599 33,926 33,035 32,692 31,392 Production 19,150 20,590 20,852 23,019 23,983 24,274 24,428 Demand 19,012 20,469 21,049 22,677 23,497 24,118 24,603 Demand/Capa 64% 67% 65% 67% 71% 74% 78% 17

19 China PVC Balance UNIT: KMT/Year 產能 Capacity 生產量 Production 進口 Import 出口 Export 需求 Demand 需求成長率 Demand Growth 30,000 25,000 20,000 15,000 10,000 5, Capacity 17,805 20,430 21,630 23,410 24,760 23,890 23,480 Production 9,065 11,300 12,952 13,416 15,295 16,296 16,280 Import 1,715 1,297 1,148 1, Export , Demand 10,541 12,372 13,714 14,081 15,548 15,993 16,125 Growth rate 16% 17% 11% 3% 10% 3% 1% 18 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0%

20 U.S. PVC Balance UNIT: KMT/Year Capacity Production Export Demand Demand Growth Capacity 7, ,316 7,314 7,734 7,779 7,779 7,847 7,892 Production 6, ,647 6,178 6,331 6,719 6,751 6,592 6,836 Export ,128 2,732 2,927 3,018 2,924 2,665 2,675 Demand 6, ,675 3,660 3,647 3,957 4,085 4,168 4,351 Growth Rate 7% % -0.4% -0.4% 9% 3% 2% 4% 19

21 U.S. and Canada Monthly PVC Domestic Sales 20

22 Unit: Thousand Unit(Adjusted to Annual Rate) 2,500 U.S New Housing Starts 2,000 1,500 1, Data:U.S. Department of Commerce:Census Bureau 21

23 UNIT: KMT/Year Indian PVC Balance Capacity Production Import Demand Demand Growth Capacity 1,195 1,345 1,360 1,360 1,450 1,495 1,550 Production 1,018 1,210 1,220 1,210 1,210 1,324 1,357 Import ,010 1,066 1,239 1,282 Export Demand 1,831 1,981 1,978 2,215 2,275 2,562 2,638 Growth Rate 26% 8% -0.15% 12% 3% 13% 3% 22

24 Global PVC Trading Flow in 2015 UNIT: KMT/Year N.America Export: 2,244 Import: 190 Mexico Export: 304 Import: 282 Brazil Export:73 Import:322 Turkey Export:8 Import: 792 Russia Export:47 Import: 223 India Import:1,282 Bangladesh Import:129 China Export:780 Import: 820 Australia & New Zealand Import:98 Japan Export:598 Import: 7 Korea Export:690 Import: 75 Taiwan Export:1,114 Import: 27 23

25 Caustic Soda New/Closed Capacity North East Asia South East Asia Middle East Indian Subcontinent West Europe Central Europe CIS & Baltic States Africa North America South America After 2017,very few expansion and much closure of Caustic Soda!! 24

26 China Liquid Caustic Soda Export Unit : DMT 250, , , ,000 50,000 Export volume is on the downward trend 0 25

27 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 China Caustic Soda Export V.S. Domestic Price Unit:USD/DMT Unit:KDMT 250, , , , , China Export Volume China Domestic Price Deduct Export Price 26

28 Caustic Soda Trade Flow West Europe Capacity:11,138 Demand: 9,152 Import: 385 Export: 415 Middle East Capacity: 3,050 Demand: 1,546 Export: 828 India Capacity:3,200 Demand:3,313 Import: 421 China Capacity: 39,520 Demand: 28,856 Export: 974 Korea Capacity: 2,095 Demand: 1,288 Export: 572 To S.E.Asia 50~60$/DMT S.E.Asia Capacity:2,358 Demand:2,435 Import:379 Japan Capacity: 4,927 Demand: 3,180 Export: 650 Taiwan Capacity: 1,908 Demand: 1,270 Export: 533 To Australia 35~40$/DMT To USWC & CAWC 90 $/DMT Australia Capacity: 159 Demand: 2,171 Import: 2,250 Unit:KDMT North America Capacity:16,233 Demand:11,899 Import: 1,226 Export: 2,611 South America Capacity:2,626 Demand:3,623 Import:1,970 27

29 Caustic Soda New Project in the future Unit: KDMT Country Producer Current Capacity Expansion Capacity After Expansion Complete Schedule U.S. Shintech 1, ,260 <Vinyl> 2016 Indonesia Asahimas <Vinyl> 2016 Q1 Korea Hanwha <EDC> 2017 LG <SAP> 2017 Saudi Arabia Al-Qahtani Qadar QVC

30 Alumina New Project Unit:10KMT Country Company's name Location Alumina Original Capacity Alumina Capacity after Expansion Additional Capacity Caustic Consumption Building Day Complete Day Indonesia Antam Kalimantan /Q Vietnam Vinacomin Lamdong & Nhan Co /Q4 Indonesia Hong Qiao Group Kalimantan India Nalco Damanjodi UAE EGA(Emirate Global Aluminium) Abu Dhabi Indonesia Antam & Inalum Kalimantan /Q Indonesia Guinea Smelter Grade Alumina Refinery(SGAR) Guinea Aluminia Corporation,GAC Kalimantan Guinea Guinea Rusal Friguia Total Approximately 6,150KMT new Alumina project are located in Indonesia 29

31 Forecast of Chlorine Value in EDC Cl2 Value in EDC EDC CFR NEA C2 cost( Spot C2 *0.29) Estimate ethylene price will reduce further due to additional expansion form U.S. EDC Chlorine Value should become positive after

32 U.S. Caustic export to AU is increasing 90,000 80,000 80,856 70,000 60,000 60,528 60,040 62,571 50,000 51,141 40,000 39,653 30,000 29,605 30,443 30,469 20,000 19,736 20,000 21,012 15,013 10,000 9,593 9,916 10,087 10, Unit : DMT 31

33 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Australia Delivery Price Comparison CFR Australia(From N.E.Asia) CFR Australia(From U.S.Gulf) Unit : USD/DMT 32

34 Europe Becomes a Net Caustic Importer 33 33

35 The Price of China PVC & Caustic Soda are booming Environmental Protection Inspection Paris Climate Agreement signature by China & U.S. Central Government send specialist to local for strictly environmental protection inspection. Penalty and sent to jail China new solid, liquid and gaseous state emission measure 34

36 The Price of China PVC & Caustic Soda are going up New Transportation Regulation Enforcement period:2016/9/21~2017/7/31 Many trucks are unable to get on the high way Overloading is strictly forbidden Freight rate dramatically increase by 30% Coal Price is increasing De-capacity and freight rate increase Normal coal increase by 250 RMB/Ton or more High quality coal increase by 500 RMB/Ton 35

37 China s low cost advantage no longer exit Cost and price will keep at high level High coal price High freight cost Strictly Environmental request PVC & Caustic Soda expansion are forbidden PVC & Caustic soda export will be less and less 36

38 Conclusion Reasonable Oil price should be lower than 60 USD/Barrel. Ethylene price should be much lower than now. Carbide process PVC lose competiveness Global Caustic Soda will become shortage European de-capacity Reducing export from China Increasing demand from S.E.Asia and India Obviously positive future for Asian Chlor-Alkali market 37

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