Foro PEMEX Petroquimica 2011 PE Demand

Global PE
Nick Vafiadis
Director Polyolefins North
America
Foro PEMEX Petroquimica 2011
Singapore
Shanghai
NewPetroquimica
York London Düsseldorf
ForoHouston
PEMEX
2011
Dubai
Global PE Demand Growth
Key Assumptions
•
PE resin remains cost competitive which supports global demand
growth. Global demand ~ 11 kg/capita consumption- developing
economies drive growth to ~ 13 kg/capita by 2015
•
LLDPE: New product opportunities continue to develop ex. Mlldpe is
growing through new uses such as displacing EVA’s, and film
equipment increasingly designed to accommodate LLDPE. Also stand
up pouches continue to gain market share
•
LDPE survives as no other material duplicates properties:
(autoclave)…. Extrusion coating and high EVA’s
•
HDPE demand benefits from reverse substitution away from high cost
PP. Ex… yogurt cups, stadium cups etc….
•
Environmental concerns continue to dampen global demand growth for
some large use end markets such as carry out bags etc….
Foro PEMEX Petroquimica 2011
primarily
Global Total PE Growth vs. GDP
Percent Change, %
14
Total PE Demand
Growth 10-15 = 5.4%
12
10
8
6
4
2
0
-2
-4
-6
-8
2000
2002
2004
2006
2008
2010
2012
GDP
HDPE
LLDPE
LDPE
TotPE
Foro PEMEX Petroquimica 2011
2014
Uneven Demand Growth
16%
30%
7%
% AAGR 10-15
NAM = 2.8
SAM = 6.0
WEP = 2.6
NEA = 7.4
World = 5.4
20%
27%
Total Global Demand 2010 = 72.5 Million Metric Tons
North America
South America
West Europe
Northeast Asia
Foro PEMEX Petroquimica 2011
Other
World PE Demand Year Over Year
World Polyethylene Demand
End Use
Percent Change, Year over Year
06
07
08
09
10
%AAGR
'05-„10
%AAGR
„10-'15
Film & Sheet
5.1
6.0
-3.9
2.8
5.8
3.1
5.3
Injection Molding
4.2
6.0
-4.8
5.0
5.6
3.2
5.6
Pipe & Profile
8.8
4.6
-2.7
0.8
6.1
3.5
5.8
Extrusion Coating
1.3
0.9
-2.0
-3.7
7.1
0.8
3.8
Blow Molding
3.5
3.4
-5.4
4.0
6.0
2.2
5.4
Wire & Cable
4.5
2.2
-0.6
0.5
5.6
2.5
3.5
Rotomolding
5.7
1.7
0.8
-0.9
6.4
2.9
5.8
Demand
5.1
4.9
- 4.8
2.3
5.6
2.5
5.4
Foro PEMEX Petroquimica 2011
Global LLDPE Supply/Demand
Million Metric Tons
40
Operating Rate
100%
35
95%
30
90%
25
85%
20
80%
15
75%
10
70%
5
65%
0
60%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Demand (4.4/5.8)
Total Capacity (5.2/4.4)
Operating Rate
Foro PEMEX Petroquimica 2011
Global HDPE Supply/Demand
Million Metric Tons
50
Operating Rate
100%
40
90%
30
80%
20
70%
10
60%
0
50%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Domestic Demand (3.2/5.8)
Total Capacity (4.8/3.9)
Foro PEMEX Petroquimica 2011
Operating Rate
Global LDPE Supply/Demand
Million Metric Tons
25
Operating Rate
100%
20
90%
15
80%
10
70%
5
60%
0
50%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Domestic Demand (1.5/3.5)
Total Capacity (2.0/2.7)
Foro PEMEX Petroquimica 2011
Operating Rate
Global Operating Rates
Accelerate
% Operating Rate
95
90
85
80
75
70
2005
World
2006
2007
2008
North America
2009
2010
West Europe
2011
2012
2013
Middle East
Foro PEMEX Petroquimica 2011
2014
2015
Northeast Asia
HDPE Cash Cost vs. Price
Cents Per Pound
100
Dollars Per Metric Ton
2,640
2,200
80
1,760
60
1,320
40
880
20
440
0
Jan-07
Dec-07
Nov-08
Oct-09
NAM Integrated Total Cash Cost
China HDPE Spot
0
Sep-10
Aug-11
Jul-12
NAM HDPE Disccounted
WEP HDPE Discounted
Foro PEMEX Petroquimica 2011
NAM PE Prices
Cents Per Pound
100
Dollars Per Metric Ton
2,205
90
1,984
80
1,764
70
1,543
60
1,323
50
1,102
40
882
30
Jan-07
661
Oct-07
Jul-08
LDPE GP
Apr-09
Jan-10
Oct-10
HDPE BM
Jul-11
Apr-12
LLDPE C4
Foro PEMEX Petroquimica 2011
Global HDPE Non-Integrated Margins
Dollars Per Metric Ton
549
Cents Per Pound
25
15
329
5
109
-5
-111
-15
-331
-25
-551
-35
Jan-07
-771
Dec-07
Nov-08
NAM
Oct-09
WEP
Sep-10
Aug-11
SEA
Foro PEMEX Petroquimica 2011
Jul-12
Global PE Capacity Additions
Million Metric Tons
10
8
7
Global Capacity AAGR 10-15: 3.7%
Global Demand AAGR 10-15: 5.4%
5
4
2
1
-1
-3
-4
2005 2006 2007 2008 2009 2010 2011
Asia/Pacific
Africa/ Middle East
Central Europe/ CIS
South America
Global Demand Change
2012
2013 2014 2015
North America
West Europe
Foro PEMEX Petroquimica 2011
Polyethylene Capacity Changes
NAM
Company
WEP
kta Company
MDE
kta Company
1Q-10
Borealis BEL HD (200)
HD/
Borealis SWE LL (90)
SABIC
UK LD 400
NEA / SEA / ISC
Yansab KSA HD 400 Sinopec/SABIC JV
Sharq
KSA HD 400
Qatofin QAT LL
450
2Q-10
GFR HD 250
Borealis SWE LD 350
SABIC NET LD (120)
Bangkok PE
Panjin Eth.
THA HD 250
CHI HD 300
HD/
IND LL x 125
Zhenghai Ref. CC
CHI
LL 450
MOC
THA
LL 300
3Q-10
Indian Oil
Baotou Shenhua
CNOOC & Shell
Gail
LG Chem
4Q-10
HD/
LL 600
THA LD 300
TPE
CNOOC & Shell
Indian Oil
HD/
Borouge UAE LL 600
CHI
PTT Chem
Haldia
LBI
Net
kta Increase
kta Company
2,935
THA HD 400
CHI LD 75
IND HD 300
HD/
IND LL 350
HD/
CHI LL 300
CHI HD 75
IND LL 50
2,355
KOS HD
1,065
40
Polimeri
Nova CAN LD x 60
Eur. FRA LD 260 Q-Chem II QAT HD 350
Amir Kabir IRN LD 300
970
Foro PEMEX Petroquimica 2011
Polyethylene Capacity Changes
MDE
NEA / SEA / ISC
4Q-11 3Q-11 2Q-11 1Q-11
Company
Kayan
kta Company
SAR
HD
400
0
ExxonMobil
ExxonMobil
SIN
SIN
HD/LL
LL
650
650
1,300
Zhongyuan
Evolue Japan
CHI
JAP
LL
LL
60
50
110
NEA / SEA / ISC
Company
1Q-12
Net Increase
400
MDE
4Q-12 3Q-12 2Q-12
kta
QAPCO
Llam PC
kta Company
kta
Net Increase
QAT
IRN
LD
HD
250
300
Hanwa Chem.
Sichuan PC
KOS
CHI
LD
HD/LL
30
600
Saudi Polymers SAR
HD
1100
Qilu PC
Fushun PC
CHI
CHI
HD
HD/LL
250
450
2,530
Fushun PC
CHI
HD
350
800
Honam PC
KOS
HD
210
210
0
Foro PEMEX Petroquimica 2011
Middle East Improves
PE Operating Rates, %
120
100
80
60
40
20
0
2005 2006 2007 2008 2009 2010
Middle East
Saudi Arabia
Iran
2011
Kuwait
2012 2013 2014 2015
Qatar
Foro PEMEX Petroquimica 2011
United Arab Emirates
N. America View
Foro PEMEX Petroquimica 2011
NAM PE Demand Growth
Key Assumptions
North America is a mature market: anticipating growth
approximating GDP levels
Production growth driven by feedstock advantages
from shale gas
Exports remain competitive and support high op rates
and help maintain producer margins
Demand loss due to down-gauging mostly complete
with little potential for future impact
Flexible packaging continues to displace rigid
applications
Reverse substitution from higher cost materials like PP
(increases demand for HDPE)
Foro PEMEX Petroquimica 2011
PE Demand: Negative to Positive
Rotomolding
Wire & Cable
Blow Molding
Extrusion Coating
Pipe & Profile
Injection Molding
Film & Sheet
-5
0
5
10
Growth Rate Percent
15
AAGR 05-10
Demand Change 09-10
AGGR 10-15
(-2.7%)
(AAGR 7.8%)
(2.8%)
Foro PEMEX Petroquimica 2011
20
U.S.
Trade
Trends
Million Metric Tons
6
Percent
40
5
35
3
30
2
25
0
20
-2
15
-3
10
-5
5
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Imports
Exports
Production as a % of Exports
Foro PEMEX Petroquimica 2011
Thousand Metric Tons
40
Exports
20
Mexico PE Trade
0
-20
-40
-60
-80
-100
-120
Imports
-140
Jan-09
Apr-09
Jul-09
LDPE
Oct-09
Jan-10
Apr-10
Jul-10
LLDPE
Foro PEMEX Petroquimica 2011
HDPE
Oct-10
Jan-11
Mexico PE Trade
Thousand Metric Tons
400
Exports
200
Thousand Metric Tons
0
-200
0
-400
-200
-400
-600
-600
-800
-800
-1,000
-1000
-1,200
-1200
-1,400
-1400
-1600
Imports
-1,600
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
HDPE
LLDPE
LDPE
Net Exports
Foro PEMEX Petroquimica 2011
U.S. PE Bags Imports
Percent
100%
Billion Units
70
90%
60
80%
50
70%
60%
40
50%
30
40%
30%
20
20%
10
10%
0
0%
1Q-04 4Q-04 3Q-05 2Q-06 1Q-07 4Q-07 3Q-08 2Q-09 1Q-10 4Q-10
China Share of Total
World
China
Foro PEMEX Petroquimica 2011
High Density Polyethylene
International Spot Arbitrage Opportunities 2012 (US$/Metric Ton)
Integrated Cash Costs vs. Contract and Spot* Prices
N.W. Europe
409
•Cost:1430 $/ton
87
Del: 1904 $/ton
243
U.S. Gulf
Cost:1017 $/ton
Del:1543$/ton
224
316
N.E. Asia*
Middle East*
147
Cost: 217 $/ton
CFR: 1485 $/ton
Cost: 1468 $/ton
CFR: 1400 $/ton
367
97
433
Inter-region trade flows / arbitrage movements
Inter-region arbitrage movement limited / closed
Logistics & Import Tariffs
Foro PEMEX Petroquimica 2011
•~
Linear Low Density Polyethylene
International Spot Arbitrage Opportunities
2012 (US$/Metric Ton)
Integrated Cash Costs vs. Contract and Spot* Prices
N.W. Europe
409
Cost:1471 $/ton
Del: 1859 $/ton
•
U.S. Gulf
Cost:1093 $/ton
Del: 1653 $/ton
224
87
243
316
Middle East*
147
•
433
Inter-region trade flows / arbitrage movements
Inter-region arbitrage movement limited / closed
Cost 2247 $/ton
CFR: 1480$/ton
N.E. Asia*
Cost:1520 $/ton
CFR: 1345 $/ton
367
97
Logistics & Import Tariffs
Foro PEMEX Petroquimica 2011
•~
Low Density Polyethylene
International Spot Arbitrage Opportunities
2012 (US$/Metric Ton)
Integrated Cash Costs vs. Contract and Spot* Prices
N.W. Europe
Cost: 1527 $/ton
Del: 2063 $/ton
415
U.S. Gulf
90
345
Cost:1098 $/ton
Del:1962 $/ton
295
329
Middle East
150
Cost: 248 $/ton
Del: 1790 $/ton
453
Inter-region trade flows / arbitrage movements
Inter-region arbitrage movement limited / closed
N.E. Asia
Cost: 1564 $/ton
Del: 1660 $/ton
106
Logistics & Import Tariffs
Foro PEMEX Petroquimica 2011
373
LDPE New Math = New Life
Then
•Obsolete,
replaced by
LLDPE
•High cost, low
volume plants
•Minimal
investment in
new capacity
Foro PEMEX Petroquimica 2011
LDPE New Math = New Life
Now
•“Specialty
status”
•Tight supply
globally
•Expanding
margins
•EVA driving
demand
•Limited
capacity build
Foro PEMEX Petroquimica 2011
NAM: LDPE ISSUES
Numerous 2010 outages created shortage
Most units are old and running at capacity
Price delta developed (sustainable?)
New Capacity likely
Metallocene now cheaper / Converters
blending more LLDPE
Autoclave premium ? ?
Supply / Demand eases in 2011
Foro PEMEX Petroquimica 2011
PE Take-Away‟s
Hindsight: Energy shift, start up delays, export options, and
unplanned outages transform would-be trough to record
profits for US resin producers – expansions likely
Demand: Global growth dependant on emerging economies –
N.Am growth near gdp
Price: increasingly tied to global naphtha price trends, and spot
Asia export options
– unplanned outages remain the wildcard
Margins: US - Remain strong (integrated and non-integrated)
New capacity: in MDE and China will be absorbed – less
dramatic impact on pricing and margins
Caution: Rapid increases in crude oil price could kill demand
and resin prices could fall as in 2008
Foro PEMEX Petroquimica 2011
Polypropylene
Foro PEMEX Petroquimica 2011
Polypropylene‟s New Paradigm
From 2008
High cost
High price
Reduced demand
growth rate
Improved profitability, in
spite of apparent
global loose supply
and demand balance
Foro PEMEX Petroquimica 2011
P/E Ratio: Fundamental Shift
Propylene to Ethylene Price Ratio
1.6
1.4
1.2
1.0
0.8
0.6
0.4
00
01
02
03
04
North America
05
06
07
West Europe
08
09
10
11
Southeast Asia
Foro PEMEX Petroquimica 2011
12
PP Shifts from Inexpensive To Expensive
PVC
2010
2005
LLDPE
HDPE
PS
PET
LDPE
PP
ABS
0.0
1.0
2.0
3.0
Cents Per Cubic Inch
Foro PEMEX Petroquimica 2011
4.0
5.0
Prices Volatile
Price Ratio, Cents Per Pound
1.5
1.4
1.3
1.2
1.1
1.0
0.9
0.8
0.7
0.6
Jan-2009 Aug-2009 Mar-2010 Oct-2010 May-2011 Dec-2011 Jul-2012
PP Spot Export North America/PS High Heat Net Trans. North America
PP Spot Export North America/HDPE Disc. Contract North America
Foro PEMEX Petroquimica 2011
ACN and Production Impact PGP Price
ACN, $/Ton
3,000
C3, Cents per Pound
90
2,500
75
Cracker
Turnarounds
December C3
Production
Issues +
High Cotton
Prices +
High ACN
Prices
Extreme TX
Weather +
Refinery
Turnarounds
+ High ACN
Prices
2,000
1,500
60
45
1,000
30
500
15
0
Jan-09
0
May-09
Sep-09
Jan-10
ACN Asia
May-10
Sep-10
PGP NAM
Foro PEMEX Petroquimica 2011
Jan-11
North American Prices: One Notch
Above
The
Rest
Dollars Per Metric Ton
Cents Per Pound
120
2,640
100
2,200
80
1,760
60
1,320
40
880
20
440
Jan-09
Aug-09
Mar-10
Oct-10
May-11
Dec-11
Jul-12
Northeast Asia PP Spot
West Europe PP Discounted Price
North America PP Spot Export
North America PP Discounted Price
Foro PEMEX Petroquimica 2011
Polypropylene More Expensive
Price, Cents Per Pound
100
Price Ratio
2.0
75
1.5
50
1.0
25
0.5
0
0.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
PS High Heat Net Trans North America
PP Spot Export North America
PS/PP Price Ratio
Foro PEMEX Petroquimica 2011
Volatility Affecting Demand
Cents Per Pound
110
N. Am PP Demand & Exports, Billion Pounds
1.7
1.6
100
1.5
90
1.4
80
1.3
70
1.2
1.1
60
1.0
50
Sep-10
Nov-10
Domestic Demand
Jan-11
Exports
Mar-11
May-11
Jul-11
PP Homopolymer Discounted Price NAM
Foro PEMEX Petroquimica 2011
In Spite of Higher Costs, Demand to
Grow
Injection
Molding
5.2%
Film &
Sheet
5.8%
Raffia
2010
2015
7.3%
Fiber
5.1%
Other
4.0%
Pipe &
Extrusion
5.0%
Blow
Molding
•2010-2015
Average Annual
Growth Rate, Total
Demand: 5.6%
4.9%
0
5
•%: 2010 to 2015 Average Annual Growth Rate
10
15
20
Global Demand, Million Metric Tons
Foro PEMEX Petroquimica 2011
25
Global PP Market Outlook
Demand/Capacity, Million Metric Tons
90
Operating Rate, %
94
80
92
70
90
60
88
50
86
40
84
30
82
20
80
10
78
0
76
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Domestic Demand (3.9/5.6)
Exports (6.8/1.3)
Total Capacity (6.1/4.5)
Imports (6.8/1.3)
Operating Rate
Foro PEMEX Petroquimica 2011
Investments Begin To Slowdown
PP Capacity Increases, Million Metric Tons
6.0
2005-2015
5.0
Average
Annual Growth
4.0
Demand
3.0
2.0
1.0
0.0
-1.0
2005
2006
2007
Northeast Asia
Southeast Asia
North America
South America
2008
2009
2010
2011
Middle East
CIS & Baltic States
West Europe
2012
2013
2014
2015
Indian Subcontinent
Africa
Central Europe
Foro PEMEX Petroquimica 2011
Transitional Economies Driving
Growth
Per Capita Consumption, Kg/person
25
2.6%
2015 Population, Billions
2.0
20
1.6
6.6%
15
1.2
10
0.8
5.7%
5
11.2%
0
0.4
0.0
West Europe
•%: 2010-2015 Demand
Average Annual Growth Rate
South America
2010
North East Asia
ISC
Population
2015
Foro PEMEX Petroquimica 2011
North America PP Market Outlook
Demand/Capacity Million Metric Tons
12
Operating Rate, %
92
10
90
8
88
6
86
4
84
2
82
0
80
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Domestic Demand 1.9/2.5
Total Capacity -0.8/-0.8
Operating Rate
Exports 22.9/-22.2
Imports 2.9/0.5
Foro PEMEX Petroquimica 2011
Latin America Consumption by
Country
Brazil
5.4%
Mexico
5.4%
Argentina
2010
2015
3.8%
Colombia
6.5%
Venezuela
2010-2015 Average
Annual Growth
Rate, Total
Demand: 5.5%
5.8%
Other
3.7%
0.0
%: 10-15 Average Annual
Growth Rate
0.5
1.0
1.5
Consumption by Country, Million Metric Tons
Foro PEMEX Petroquimica 2011
2.0
Latin America Consumption by End
Use
Injection
Molding
Film and
Sheet
5.3%
6.6%
Fiber
2010
2015
5.4%
Other
5.2%
Raffia
3.8%
Blow
Molding
Pipe and
Extrusion
6.2%
4.7%
0
%: 10-15 Average Annual Growth Rate
2010-2015 Average
Annual Growth
Rate, Total
Demand: 5.6%
0.5
1
1.5
Consumption, Million Metric Tons
Foro PEMEX Petroquimica 2011
2
Mexico PP Trade
Thousand Metric Tons
200
Exports
100
Thousand Metric Tons
0
-100
0
-100
-200
-200
-300
-300
-400
-400
-500
-500
-600
-600
-700
-800
-900
-700
Imports
-800
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Polypropylene
Net Exports
Foro PEMEX Petroquimica 2011
Conclusions
North American demand growth and capacity
closures improves operating rates
Exports to suffer, but will reach a balanced level
Spreads/margins to expand only marginally;
propylene plus contracts expected to remain
in place as long as volatility rules market
Long term prices line up after propylene
capacity and imports help balance propylene
market
Foro PEMEX Petroquimica 2011