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Market Reporting
Consulting
Events
Capacity Growth Trends in Hydrocarbon Resin Production
2020 Pine Chemicals Association International Virtual Conference
Steve WilliamsVP, C5 Monomers and Polymers1 October 2020
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• About Argus
• Monomer Supply Fundamentals
• HCR Production Capacities/Dynamics
◦ C5/C9/HHCR capacities
◦ HHCR Capacity Growth
• Market Structure
• Summary Points
Agenda
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3
A view of Argus
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4
Market Reporting
Consulting
Events
Monomer Supply Fundamentals
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Feed supply chain and tackifier resins & polymers
• Tackifier resin
feeds come
primarily from
naphtha and
gas oil
• Isoprene is
the key driver
for recovery of
Crude C5
stream
Ethylene Cracker (Liquids)
CrudeC5’s
(CC5)DCPD
Piperylenes
Isoprene
Unsaturated Polyester ResinHydrogenated Waterwhite Tackifers
Ink Resins
C5 Tackifier Resins
SIS
Polyisoprene Rubber
C9 Aromatic Resin Oil
Ink ResinsC9 Resins
Hydrogenated Resins Isoprene Extractive
Distillation Unit (IED)
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Natural rubber vs isoprene
New tree plantings
Price of isoprene is expected to remain depressed as demand is slack due to continued slow demand for natural rubber
-Argus.
IED expansions
Longest “quiet” period
in recent history
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Naphtha Cracker Capacity by Region
NEA dominates in terms of naphtha cracking capacity, with only WE and SEA with significant other capacity
- Argus
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Global feedstock and polymer balance
Short on monomers to
supply existing and future
demand
Growing
monomer
extraction
and
polymer
capacity
and
capability
Americas and European monomer consumers and polymer producers will continue to rely on Asian manufacturers to supply monomers and to balance polymer demand with products made in Asia. European crack slates are moving a little lighter, exacerbating this issue.
Market Reporting
Consulting
Events
HCR Production Capacities/Dynamics
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Resin end-use matrix
• Some applications very flexible, others much less so
• Some markets have significantly higher affordability
• HHCR has increased market share in Label and Adhesives markets at the expense of non-hydrogenated hydrocarbon resins and rosin ester resins
Inks
Hydrocarbon Resins
Rosin/HCR Hybrids
LabelsRoadmarking
Tapes
Rosin
Hot Melt Adhesives
Tires
HydrogenatedHydrocarbon
Resins
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Global HCR Picture
- Argus
We are seeing capacity expansions well in excess of demand growth, hence global operating rates are expected to decrease. Most growth is seen in HHCR capacity.
-Argus
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Global C5 HCR Capacity
- Argus
Nearly all growth in C5 resin capacity has come from Asia-Pacific over the last five years. 2018 saw new Yikesi Huizhou facility, 2019 Xinjiang Tianli, 2021 will see HengHe and Jinhai Chenguang expansions.
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Global C9 HCR Capacity
- Argus
Some C9 capacity has been converted to HHCR production and several facilities shutdown due to stricter regulations, with little capacity growth on the horizon. HengHe planning 2021 expansion.
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Global HHCR Capacity
Most (but not all) capacity growth for HHCR has taken place in Asia-Pacific, with most of this occurring within China.
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Hydrogenated resin volume expansion
- Argus
With readily available hydrogenation technology and the Made in China 2025 mandate, producers in China are both installing new facilities and upgrading current facilities to produce more hydrogenated resins. Based on all expansions already in place and planned, by 2021, producers in China are expected to make 130% of the entire global capacity of 2012. Between 2015 and 2021, 712kT of capacity will have been added, most in China
,000t
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Hydrogenated resin volume expansions
- Argus
Producer 2018 2019 2020E 2021E
Arakawa 20
Braskem 9
Eastman 4
ExxonMobil 90
Hanwha 50
Henghe 50 20 100
Huizhou Wanbangde 50
Idemitsu 25
Jinhai Chenguang 20
Kolon 3
Luhua 30 20
Neville 15
Rain Carbon 50
Shandong Qilong 20
Taixing Tianma 20
Xiamen Zhongyi 20
Xinjiang Liming Xintong 40
Xinjiang Tianli 15
Zeon 18
Zhejiang Derong 50
Totals 188 163 153 235
,000t
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Hydrogenated resin capacity footprint
-Argus
Half of all HHCR manufacturing sites in the world are expected to be located in China by 2021 producing 43% of the total volume
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Effect of higher HHCR volume
• Through 2019, over 350kT of capacity has been added globally since 2015, There is a further 358 kT of capacity being added to the market during 2020-21, and 596kt during 2020-23
◦ Most, but not all of the new facilities going forward are in Asia-Pacific
• The price gap between HHCR and C5, C9 and Rosin Ester resins has narrowed/almost flat in some cases and HHCR resins have taken increased market share
◦ This market share shift is expected to be irreversible in most cases
• It is expected HHCR resin manufacturers will experience higher volume growth but at lower margins
◦ Rapid HHCR volume growth has lead to margin compression, and during 2020, reduced pricing for all HCR’s. Going forward we expect HHCR growth at organic levels of 2X GDP
Dem
and
HHCR dynamic C5, C9 and RE resin dynamic
Supply Demand
Price
Market Reporting
Consulting
Events
HCR Market Structure
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Market Structure
• Industry continues to consolidate with newer, larger facilities and more integrated producers. Quality of resins from new production meets adhesives standards
• Hydrogenated market seeing consolidation faster with newest facilities, C9 remains the most fragmented with a number of smaller facilities still operating in China
HCR Market Number of Producers
Top Five Producers as pc of Capacity
Pc of Producers for 80pc of Capacity
Overall 60 41 47
C5 25 53 56
C9 37 34 59
Hydrogenated 20 67 40-Argus
Market Reporting
Consulting
Events
Summary
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Key Summary Points
• Ethylene crackers continue to crack lighter in North America and to a lesser extent Europe, as a result NA and Europe continue to import both C5 monomer feeds and hydrocarbon resins
• C5 monomer market will continue to be dependent on price and availability of natural rubber and global tire demand. At the moment, NR and in turn isoprene are in a sustained period of lower pricing
• HHCR are taking market share from C5, C9 and rosin esters. This has been going on for several years and HHCR should return to organic growth (2X GDP) going forward
• HCR capacity has been increasing, with most expansion coming from hydrogenated resin capacity expansions. Most, but not all of the capacity increases are coming from Asia-Pacific
• HCR production is consolidating to fewer, larger players led by the hydrogenated HCR market
Argus has offices around the world’s key energy and commodity producing, trading and consuming centres
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Steve WilliamsVP, C5 Monomer and Polymers
Steven.Williams@argusmedia.com
+1 (713) 968-0000
Houston, Texas
www.argusmedia.com
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