Petrochemical Market Outlook What s in store for 2017? Malini Hariharan Head of South Asia Markets ICIS www.icis.com 1
Agenda Pricing & Margin Trends China & India Outlook www.icis.com 2
A strong start. but price corrections have set in 400 350 300 250 200 150 100 50 Asia IPEX v Brent US$/bbl 160 120 80 40 0 0 2006 2008 2010 2012 2014 2016 2017 Brent Crude Oil ($/bbl) Asia IPEX Prices were largely supported by demand and supply issues; Chinese buying But weaker crude oil, destocking and start up of new capacities are setting the tone for Q2 www.icis.com 3
3100 2600 2100 1600 1100 600 1300 1200 1100 1000 Olefins (US$/tonne) May'16 June'16 July'16 Aug'16 Sep'16 Oct'16 Nov'16 Dec'16 Jan'17 Feb'17 March'17 April'17 May'17 Propylene Ethylene Butadiene Polyolefins (US$/tonne) May'16 June'16 July'16 Aug'16 Sep'16 Oct'16 Nov'16 Dec'16 Jan'17 Feb'17 March'17 April'17 May'17 LLDPE PP 1200 1000 800 600 400 1000 900 800 700 600 500 AromaKcs (US$/tonne) May'16 June'16 July'16 Aug'16 Sep'16 Oct'16 Nov'16 Dec'16 Jan'17 Feb'17 March'17 April'17 May'17 Benzene Toluene Fibre Intermediates (US$/tonne) May'16 June'16 July'16 Aug'16 Sep'16 Oct'16 Nov'16 Dec'16 Jan'17 Feb'17 March'17 April'17 May'17 Paraxylene PTA Propylene weighed down by ample supplies in China; weakness in key derivatives Butadiene sharp correction after a 70% jump in prices led by tight availability and strong buying Excess supplies and downstream shutdowns have weighed down PX prices www.icis.com 4
But margins remain robust supported by lower oil prices 1000 Cracker Margins (US$/tonne) 900 800 700 600 500 400 300 200 100 0 2011 2012 2013 2014 2015 2016 2017 to date SE Asia naphtha (spot) Europe naphtha (contract) US ethane (contract) www.icis.com 5
Gains have extended to PE 1600 PE margins (US$/tonne) 1400 1200 1000 800 600 400 200 0 US - Contract Margin, Ethane Feed Europe - Contract Margin, Naphtha Feed NE Asia - Spot Margin, Naphtha Feed www.icis.com 6
How will China perform this year? Realignment of the economy slower growth a reality But demand for many products showed good growth in 2016 Speculative buying/trading activity helped But indications of tighter credit conditions this year Start up of new capacities CTO/MTO/PDH and wide range of derivatives And rising self sufficiency or excess capacity in some products has opened doors for competitively priced exports and constrained operating rates 35 30 25 20 15 10 5 0 Polypropylene (m tonnes) % 2015 2016 2017 2018 2019 2020 ProducKon Imports Self sufficiency (%) 90 88 86 84 82 80 78 76 74 Source: ICIS Supply and Demand Database www.icis.com 7
Capacity racing ahead of demand Phenol (m tonnes) Caprolactam (m tonnes) VAM (m tonnes) 3.5 100 5 95 4 70 3 2.5 2 1.5 1 0.5 80 60 40 20 4 3 2 1 90 85 80 75 70 3 2 1 60 50 40 30 20 10 0 2010 2015 2016 2018 2020 0 0 2010 2015 2016 2018 2020 65 0 2010 2015 2016 2018 2020 0 Capacity Demand Capacity Demand Capacity Demand OperaKng Rate (%) OperaKng Rate (%) OperaKng Rate (%) Source: ICIS Supply and Demand Database www.icis.com 8
Constraints setting in Source: ICIS Consulting; 2016 to-date www.icis.com 9
Several start-ups have been delayed with the current low oil environment '000 tonnes 4000 3500 3000 2500 2000 1500 1000 500 EsKmated CTO/MTO AddiKons in China (as at mid-2015) 0 Propylene Ethylene '000 tonnes 4000 3500 3000 2500 2000 1500 1000 500 0 Current EsKmated CTO/MTO AddiKons in China Propylene Ethylene Ethylene via CTO Ethylene via MTO Ethylene via CTO Ethylene via MTO Propylene via CTO Propylene via MTO Propylene via CTO Propylene via MTO Several planned CTO/MTO start-ups have lapsed; expected delay about 1-2 years Further out, development of methanol to olefins is expected to fizzle out, although investments in coal to olefins will remain. Source: ICIS Supply and Demand Database www.icis.com 10
Mixed fortunes in India Demonetisation impact temporary 2016-17 growth for key chemicals slower than previous year Medium and long-term prospects remain positive Startup of new capacities Two new crackers in 2017 Temporary surplus for some products Rising import dependency Imports of key chemicals continues to expand www.icis.com 11
Long-term prospects intact www.icis.com 12
Gearing up for significant ethylene capacity additions www.icis.com 13
New US crackers complete, under construction, FID made Company C2 capacity (kt/year) Downstream (kt/year) Location Start-Up OxyChem/Mexichem 544 Feed existing VCM plant of 1,050 Ingleside, Texas Q1 2017 (done) Dow Chemical 1,500 ExxonMobil Chemical 1,500 Chevron Phillips Chemical 1,500 Formosa Plastics 1,250 ELITE PE (400), LDPE (350), EPDM (200), elastomers (320) mlldpe plus LLDPE (650 x2) at Mont Belvieu Bimodal HDPE (500), mlldpe (500) at Sweeny PE (525), LDPE (625.5), MEG (1,000), plus DEG, TEG, PEG Freeport, Texas Mid-2017 (mech complete Q1) Baytown, Texas End 2017 Cedar Bayou, Texas Q4 2017, PE mid-2017 Point Comfort, Texas H2 2018 Sasol 1,500 LDPE (450), LLDPE (450), EO/EG (300), ethoxylates, detergent alcohols (300) Lake Charles, Louisiana H2 2018 LDPE early 2019, Others H2 2019 Westlake (Axiall)/Lotte 1,000 Shintech 500 MEG (700) by Lotte, feed into existing PVC for Westlake VCM (300), PVC (300), caustic soda (200) St Charles, Louisiana Q4 2018 Plaquemine, Louisiana 2018 Shell 1,500 HDPE/LLDPE (550 x2), HDPE (500) Monaca, Pennsylvania Early 2020s 9 new crackers = 10.8m tonnes/year Through 2018/2019 = 9.3m tonnes/year www.icis.com 14
Expansions of existing US crackers, plus 1 restart Company Capacity (kt/ year) Location Status/Start-Up Dow Chemical 250 Plaquemine, Louisiana Started up Nov/Dec 2016 LyondellBasell 363 Corpus Christi, Texas Westlake Chemical Indorama (restart) Completed Jan 2017 but op issues. End Q2 expected 32 Calvert City, Kentucky H1 2017 370 Lake Charles, Louisiana End 2017 LyondellBasell 250 Channelview, Texas Evaluating for 2020s Expansions about 1m tonnes/year + new crackers 9.3m = 10.3m, or 36% of exiskng US capacity by 2018/2019 www.icis.com 15
North America PE expansions Company C2 capacity (kt/year) Downstream (kt/year) Location Start-Up Dow Chemical 750 ELITE PE (400kt), LDPE (350kt) Freeport, Texas Mid-2017 (mech complete Q1) Chevron Phillips Chemical 1,000 Bimodal HDPE (500kt), mlldpe (500kt) Sweeny, Texas Mid-2017 ExxonMobil Chemical 1,300 mlldpe plus LLDPE (2 x 650kt) Mont Belvieu, Texas End 2017 INEOS/Sasol 470 HDPE LaPorte, Texas Q4 2017 Formosa Plastics 1,150 PE unspec (525kt), LDPE (625.5kt) Point Comfort, Texas H2 2018 H2 2018 (LLDPE), 2019 Sasol 890 LLDPE (470kt), LDPE (420kt) Lake Charles, Louisiana (LDPE) LyondellBasell 500 HDPE LaPorte, Texas Mid-2019 Total/Borealis/NOVA* 625 Borstar PE Bayport, Texas End 2020 HDPE/LLDPE (2x 550kt), HDPE Shell 1,600 (500kt) Monaca, Pennsylvania Early 2020s PTT Global Chemicals* 700 HDPE (2x 350kt) Belmont County, Ohio 2021 NOVA Chemicals* 450 LLDPE Sarnia, Canada 2022 SABIC/ExxonMobil* NA PE unspec (2 units) US Gulf Coast NA *No FID yet ** Assuming 1,300kt PE for SABIC/ExxonMobil, start-up by 2022 Through 2019 = 6.1m tonnes/year Through 2022 = 10.7m tonnes/year** www.icis.com 16
The US 2 nd wave visibility clearing Company Capacity (kt/year) Downstream (kt/year) Location Start-up Status Total/Borealis/ NOVA 1,000 Borstar PE (625) + existing PE (400) Port Arthur, Texas End 2020 FID end 2017 Shell 1,500 HDPE/LLDPE (2x 550), HDPE (500) Monaca, Pennsylvania Early 2020s Construction late 2017 SABIC/ ExxonMobil 1,800 PE (2 units), MEG Corpus Christi, Texas --- PTT Global Chemicals 1,000 HDPE (700), MEG (500), EO (100) Belmont County, Ohio 2021 Evaluating, FID Q4 2017 Formosa Plastics Odebrecht/ Braskem 1,200 LDPE, HDPE, EG Louisiana --- Evaluating 1,050 PE (3 units) Wood County, West Virginia --- On hold www.icis.com 17
PE 2020 product flow 0.7 0.3 Former USSR 0.2 M tonnes 0.3 North America 5.8 Europe 4.0 0.2 6.5 2.1 1.7 3.9 0.3 Middle East 15.7 North East Asia 9.7 0.8 2.3 2.3 1.2 S&C America 2.4 North America Exports 2020 vs 2015, 000 tonnes Africa 3.0 2.7 Asia & Pacific 2.1 0.4 Northeast Asia +1,280 Asia & Pacific +827 S&C America +402 Copyright 2016 ICIS Europe +269 Source: ICIS Supply and Demand Database www.icis.com 18
Conclusion Slowing Middle East Slower pace of investments Focus on value-added derivatives Resurgent US First wave of cracker expansions heading towards completion Strong interest points to a second wave Trade flows set to change Balancing Asia Low oil prices sustains margin recovery for naphtha crackers China - moving towards increasing self-sufficiency; pace of expansion slows Healthy demand growth across key markets www.icis.com 19
THANK YOU Malini Hariharan malini.hariharan@icis.com Mobile: +91 9820629926 www.icis.com 20
Market intelligence for the energy, chemical and fertilizer industries www.icis.com 21
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