Nylon & ABS Market OverviewNylon & ABS Market Overview

Paul BlanchardPaul BlanchardDirector Director –– Engineering ResinsEngineering Resins

North AmericaNorth America

SingaporeSingapore ShanghaiShanghai HoustonHouston New YorkNew York LondonLondon DüsseldorfDüsseldorf DubaiDubai

Motor Vehicle Metal & Resins ConferenceMotor Vehicle Metal & Resins ConferenceTroy, MI Troy, MI

May 12, 2011May 12, 2011has

acquired

CMAI CMAI -- A Global Organization Of Over A Global Organization Of Over 180 180 Full Full --Time Associates…Time Associates…

CMAI CMAI -- A Global Organization Of Over A Global Organization Of Over 180 180 Full Full --Time Associates…Time Associates…

HOUSTONHOUSTONLONDONLONDON

DubaiDubai

New YorkNew York

ShanghaiShanghai

DusseldorfDusseldorf

SINGAPORESINGAPORE

DubaiDubai ShanghaiShanghai

Bangkok (2011)Bangkok (2011)

IHS IHS –– Who We AreWho We Are

We are 5,500 people, in 30 countries, speaking 50 languages – all working each day to:

• Serve businesses and all levels of governments worldwide

• Ranging from 80% of Global Fortune 500 to small

businesses

• Customers in 180 countries• Customers in 180 countries

• Provide comprehensive content, software and expert analysis

and forecasts

Customers around the world use our products and services to make

faster and more confident decisions.

Advancing Decisions that Advance the World

CMAI is the premier provider of consulting services to the CMAI is the premier provider of consulting services to the petrochemical and related downstream industries.petrochemical and related downstream industries.

Market Advisory Services

Market Advisory Services

Business Advisory Services

Business Advisory Services

Planning Advisory Services

Planning Advisory Services

•• Continuous industry analysis Continuous industry analysis on a multion a multi--client basisclient basis

•• Access to leading industry Access to leading industry expertsexperts

•• Daily, weekly, monthly and Daily, weekly, monthly and annual industry reportsannual industry reports

•• SingleSingle--client, tailored analysesclient, tailored analyses•• Assist clients with strategic Assist clients with strategic

and commercial decisionsand commercial decisions•• Support major capital Support major capital

investments and transactionsinvestments and transactions•• Customized market and Customized market and

competitive analysescompetitive analyses•• Assist clients with legal issuesAssist clients with legal issues

ServicesServices ServicesServices ServicesServices

•• Enhanced cost analysis and Enhanced cost analysis and price forecastingprice forecasting

•• Capacity, trade and S/D analysis Capacity, trade and S/D analysis and forecastand forecast

•• Competitive cost studiesCompetitive cost studies•• TrainingTraining•• Economy/scenario forecastingEconomy/scenario forecasting•• Company analysisCompany analysis

Nylon Chain OverviewNylon Chain Overview

•• Nylon 6 and 6,6Nylon 6 and 6,6

–– Feedstock impactFeedstock impact

–– Supply / demand Supply / demand

effectseffectseffectseffects

–– Price and margin Price and margin

outlookoutlook

In the beginning……In the beginning……

•• Nylon’s first Nylon’s first application was in application was in fibersfibersfibersfibers

•• Fibers continue Fibers continue to be nylon’s to be nylon’s largest marketlargest market

Staple FiberStaple Fiber2%2%

BCFBCF9%9%

Textile Filament Textile Filament YarnYarn

Engineering Engineering Resin (ETP)Resin (ETP)

41%41%

2010 Global Nylon Demand2010 Global Nylon Demand

2010 Demand = 5.8 Million Metric Tons

YarnYarn33%33%

Industrial Industrial Filament YarnFilament Yarn

15%15%

ETP

PA 6 1.4 M Tons

PA 6,6 1.0 M Tons

Total Fiber

PA 6 2.8 M Tons

PA 6,6 0.6 M Tons

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

Net Exports

Million Metric TonsMillion Metric Tons

Global Nylon Resin TradeGlobal Nylon Resin Trade

-1.0

-0.8

-0.6

-0.4

2005 2006 2007 2008 2009 2010

N. America S. America W. Europe C. Europe

CIS & Baltics Africa Middle East Indian Subc.

NE Asia SE Asia

Net Imports

Global Nylon ETP DemandGlobal Nylon ETP Demand

Automotive and Automotive and TruckTruck35%35%

Wire and CableWire and Cable

ConsumerConsumer10%10%

IndustrialIndustrial//MachineryMachinery

13%13%

OtherOther6%6%

Electrical and Electrical and ElectronicElectronic

11%11%AppliancesAppliances8%8%

Film and CoatingFilm and Coating16%16%

Wire and CableWire and Cable1%1%

2010 Demand = 2.4 Million Metric Tons

Nylon 6 Nylon 6

Nylon 6 Chain Overview

Benzene Cyclohexane Caprolactam Nylon 6

Benzene

Cyclo-

HoneywellBASF, DSM,

UBE, CPDC,

Baling PC,

Mitsubishi

Nylon 6 Producers:

Cumene PhenolCyclo-

hexanone

Propylene

00

2020

4040

6060

8080

100100Cents Per PoundCents Per Pound

ForecastForecast

Caprolactam Economics

North America

--4040

--2020

JanJan--0909 JulJul--0909 JanJan--1010 JulJul--1010 JanJan--1111 JulJul--1111 JanJan--1212 JulJul--1212

Cyclohexane ContributionCyclohexane ContributionHydrogen ContributionHydrogen ContributionAmmonia ContributionAmmonia ContributionAmmonium Sulfate CreditAmmonium Sulfate CreditSulfuric Acid ContributionSulfuric Acid ContributionNet of Ammonia,Sulfur and Ammonium SulfateNet of Ammonia,Sulfur and Ammonium SulfateCaprolactam Total Cash CostCaprolactam Total Cash Cost

8080

100100

120120

140140

160160

180180

Cents Per PoundCents Per Pound

North America Nylon 6 Resin Cash Cost North America Nylon 6 Resin Cash Cost aand ETP Market nd ETP Market PricePrice

North America Nylon 6 Resin Cash Cost North America Nylon 6 Resin Cash Cost aand ETP Market nd ETP Market PricePrice

ForecastForecast

--2020

00

2020

4040

6060

JanJan--0808 JulJul--0808 JanJan--0909 JulJul--0909 JanJan--1010 JulJul--1010 JanJan--1111 JulJul--1111 JanJan--1212 JulJul--1212

Nylon 6 Cash CostNylon 6 Cash Cost Nylon 6 PreNylon 6 Pre--tax Margintax Margin N6 Market PriceN6 Market Price~~

40%40%

50%50%

60%60%

70%70%

80%80%

90%90%

100%100%

2.02.0

3.03.0

4.04.0

5.05.0

6.06.0

MillionMillion Metric TonsMetric TonsMillionMillion Metric TonsMetric Tons Operating RateOperating Rate

ForecastForecast

WorldWorldWorldWorldNylon 6 Resin Supply & DemandNylon 6 Resin Supply & Demand

0%0%

10%10%

20%20%

30%30%

40%40%

0.00.0

1.01.0

2.02.0

20052005 20062006 20072007 20082008 20092009 20102010 20112011 20122012 20132013 20142014 20152015

Engineering Plastic Demand Fiber Demand

Operating Rate,% Global Caprolactam Operating Rate

2,0002,000

2,5002,500

3,0003,000

3,5003,500

4,0004,000

4,5004,500Dollars Per Metric TonDollars Per Metric Ton

ForecastForecast

Nylon 6 ETP Prices ConvergingNylon 6 ETP Prices Converging

00

500500

1,0001,000

1,5001,500

2,0002,000

JanJan--0808 AugAug--0808 MarMar--0909 OctOct--0909 MayMay--1010 DecDec--1010 JulJul--1111 FebFeb--1212 SepSep--1212

NAM Market PriceNAM Market Price WEP Market PriceWEP Market Price NEA Market PriceNEA Market Price

Nylon 6 SummaryNylon 6 Summary

•• Nylon 6 growth in Asia ETP and fiber Nylon 6 growth in Asia ETP and fiber tightening supply/demand balance for tightening supply/demand balance for resin and caprolactamresin and caprolactam

–– Planned investments will provide supply Planned investments will provide supply –– Planned investments will provide supply Planned investments will provide supply

assurance but prices will move upwardassurance but prices will move upward

•• Additives impact compoundsAdditives impact compounds

Nylon 6,6 Nylon 6,6

Nylon 6,6 Chain OverviewNylon 6,6 Chain Overview

Benzene Cyclohexane Adipic Acid

Adipo-

nitrileHMDA

Nylon 6,6

Crude C4 Butadiene

Ascend

Asahi

Invista, Rhodia DuPont, ShenmaNylon 6,6 Producers:

Propylene

Ammonia

Acrylonitrile

Adiponitrile LimitsAdiponitrile LimitsButachimieButachimie

32%32%

InvistaInvista45%45%

AscendAscend18%18%

Asahi Kasei Asahi Kasei 5%5%

ADN Capacity = 1.6ADN Capacity = 1.6 Million Metric TonsMillion Metric Tons

5.05.0

5.55.5

6.06.0

BD vs Ethylene PercentBD vs Ethylene Percent

Butadiene Shortage Continues to Butadiene Shortage Continues to

Get WorseGet Worse

3.03.0

3.53.5

4.04.0

4.54.5

1010 Q2Q2 Q3Q3 Q4Q4 1111 Q2Q2 Q3Q3 Q4Q4 1212 Q2Q2 Q3Q3 Q4Q4

4040

5050

6060

7070

8080

9090

100100

11

22

22

33Operating Rate, PercentOperating Rate, PercentMillion Metric TonsMillion Metric Tons

Global Demand for Nylon 6,6 ResinGlobal Demand for Nylon 6,6 Resin

00

1010

2020

3030

4040

00

11

11

20042004 20052005 20062006 20072007 20082008 20092009 20102010 20112011 20122012 20132013 20142014 20152015

Nylon 6,6 ETP Demand Nylon 6,6 Fiber Demand

Capacity Operating Rate

100100

120120

140140

160160

180180

200200

Cents Per PoundCents Per Pound

North America Nylon 6,6 Resin Cash Cost North America Nylon 6,6 Resin Cash Cost And Market Price And Market Price

(Non-Integrated Producer)

North America Nylon 6,6 Resin Cash Cost North America Nylon 6,6 Resin Cash Cost And Market Price And Market Price

(Non-Integrated Producer)

ForecastForecast

00

2020

4040

6060

8080

100100

JanJan--0808 JulJul--0808 JanJan--0909 JulJul--0909 JanJan--1010 JulJul--1010 JanJan--1111 JulJul--1111 JanJan--1212 JulJul--1212

Nylon 6,6 Cash CostNylon 6,6 Cash Cost Nylon 6,6 MarginNylon 6,6 Margin N66 Market PriceN66 Market Price~~

2,0002,000

2,5002,500

3,0003,000

3,5003,500

4,0004,000

4,5004,500

Regional Nylon 6,6 Engineering Resin Market PricesRegional Nylon 6,6 Engineering Resin Market PricesRegional Nylon 6,6 Engineering Resin Market PricesRegional Nylon 6,6 Engineering Resin Market Prices

Dollars Per Metric TonDollars Per Metric Ton

ForecastForecast

00

500500

1,0001,000

1,5001,500

2,0002,000

JanJan--0808 AugAug--0808 MarMar--0909 OctOct--0909 MayMay--1010 DecDec--1010 JulJul--1111 FebFeb--1212 SepSep--1212

NAM Market PriceNAM Market Price WEP Market PriceWEP Market Price NEA Market PriceNEA Market Price

Nylon 6,6 SummaryNylon 6,6 Summary

•• Nylon 6,6 upstream intermediates face Nylon 6,6 upstream intermediates face constrained supply of adiponitrile that constrained supply of adiponitrile that supports price levelssupports price levels

–– New capacity in 2014 will be just in timeNew capacity in 2014 will be just in time

•• Additives impact compoundsAdditives impact compounds

ABSABS

Building & Building & Const.Const.

6%6%

TransportationTransportation12%12%

Electronics/Electronics/ElectricalElectrical

25%25%

World ABS DemandWorld ABS Demand

ApplianceAppliance41%41%AlloysAlloys

4%4%

Other Other (Medical, Toys, (Medical, Toys,

Rec.)Rec.)12%12%

2010 ABS Demand 2010 ABS Demand -- 7.3 Million Metric Tons7.3 Million Metric Tons

ABS ChainABS Chain

Benzene

Ethylene

Ethyl

BenzeneStyrene

ABS Resin

Propylene

Crude

C4

Butadiene / PBR

Acrylonitrile

Global Benzene Prices Very HighGlobal Benzene Prices Very High

800800

1,0001,000

1,2001,200

1,4001,400

1,6001,600

250

300

350

400

450

500Cents Per Gallon Dollars Per Metric TonDollars Per Metric Ton

00

200200

400400

600600

0

50

100

150

200

JanJan--0707 JanJan--0808 JanJan--0909 JanJan--1010 JanJan--1111 JanJan--1212

Delta Benzene Spot Naphtha cif

Global Styrene Improving From Low Global Styrene Improving From Low

RatesRates

80%80%

85%85%

90%90%

95%95%

100%100%

20.020.0

25.025.0

30.030.0

35.035.0

40.040.0

MillionMillion Metric TonsMetric Tons OperatingOperating RateRate

ForecastForecast

60%60%

65%65%

70%70%

75%75%

80%80%

0.00.0

5.05.0

10.010.0

15.015.0

20.020.0

20052005 20062006 20072007 20082008 20092009 20102010 20112011 20122012 20132013 20142014 20152015

DemandDemand Total CapacityTotal Capacity Operating RateOperating Rate

5.05.0

5.55.5

6.06.0

ForecastForecast

PercentPercent

Butadiene Shortage Continues to Butadiene Shortage Continues to

Get WorseGet Worse

3.03.0

3.53.5

4.04.0

4.54.5

1010 Q2Q2 Q3Q3 Q4Q4 1111 Q2Q2 Q3Q3 Q4Q4 1212 Q2Q2 Q3Q3 Q4Q4

7575

100100

125125

150150

175175

16531653

22052205

27562756

33073307

38583858Dollars Per Metric TonDollars Per Metric Ton

Butadiene Price ForecastButadiene Price ForecastS. Korea, West Europe, and the United StatesS. Korea, West Europe, and the United States

Cents Per PoundCents Per Pound

ForecastForecast

00

2525

5050

7575

00

551551

11021102

16531653

0808 MayMay SepSep 0909 MayMay SepSep 1010 MayMay SepSep 1111 MayMay SepSep 1212 MayMay SepSep

Spot Korea, FOBSpot Korea, FOB Contract WEP, CIFContract WEP, CIF Contract USA, FOBContract USA, FOB

1,5001,500

2,0002,000

2,5002,500

3,0003,000

Regional Acrylonitrile Price Regional Acrylonitrile Price DifferencesDifferences

Dollars Per Metric TonDollars Per Metric Ton

00

500500

1,0001,000

1,5001,500

JanJan--0808 OctOct--0808 JulJul--0909 AprApr--1010 JanJan--1111 OctOct--1111 JulJul--1212

North America Acrylonitrile PriceNorth America Acrylonitrile Price Northeast Asia Acrylonitrile PriceNortheast Asia Acrylonitrile Price

North AmericaNorth AmericaNortheast AsiaNortheast Asia

68%68%

Southeast AsiaSoutheast Asia6%6%

EuropeEurope10%10%

AfricaAfrica//Middle Middle EastEast

3%3%

ABS Demand Split By Region

North AmericaNorth America9%9%

South AmericaSouth America1%1%

CIS & BalticsCIS & Baltics1%1%

Indian Subc.Indian Subc.2%2%

68%68%

2010 Global Demand 2010 Global Demand -- 7.3 Million Metric Tons7.3 Million Metric Tons

World ABS ProducersWorld ABS Producers

North North AmericaAmerica

8%8%

Europe/CISEurope/CIS10%10%

Southeast Southeast AsiaAsia7%7%

SHARESHARE

OWNEROWNER % OF TOTAL% OF TOTAL

Chi MeiChi Mei 17.217.2%%

LG GroupLG Group 12.2%12.2%

Formosa GroupFormosa Group 8.0%8.0%

BASF SEBASF SE 7.8%7.8%

IneosIneos 6.8%6.8%

SamsungSamsung GroupGroup 5.0%5.0%

TorayToray 4.9%4.9%

AfricaAfrica//Middle Middle EastEast//

Indian Indian SubcontinentSubcontinent

3%3%Northeast Northeast

AsiaAsia72%72%

2010 Global ABS Capacity = 8.6 Million Metric Tons2010 Global ABS Capacity = 8.6 Million Metric Tons

TorayToray 4.9%4.9%

SABICSABIC 4.5%4.5%

DowDow 3.7%3.7%

Grand PacificGrand Pacific 3.6%3.6%

CNPCCNPC 3.4%3.4%

JSRJSR 2.6%2.6%

Kumho GroupKumho Group 2.4%2.4%

SINOPECSINOPEC 2.3%2.3%

28 Others28 Others 15.4%15.4%

--0.20.2

0.00.0

0.20.2

0.40.4

0.60.6

0.80.8

1.01.0

ForecastForecastForecastForecastNet ExportsNet Exports

MillionMillion Metric TonsMetric TonsMillionMillion Metric TonsMetric Tons

World ABS Trade ForecastWorld ABS Trade ForecastWorld ABS Trade ForecastWorld ABS Trade Forecast

--1.01.0

--0.80.8

--0.60.6

--0.40.4

20052005 20062006 20072007 20082008 20092009 20102010 20112011 20122012 20132013 20142014 20152015

North AmericaNorth America South AmericaSouth America EuropeEurope

CIS & BalticsCIS & Baltics Africa/Middle EastAfrica/Middle East Indian Subc.Indian Subc.

NE AsiaNE Asia SE AsiaSE Asia

Net ImportsNet Imports

600600

800800

1,0001,000

1,2001,200

Huge ABS Capacity Additions In 2013

Thousand Metric TonsThousand Metric Tons

00

200200

400400

20102010 20112011 20122012 20132013 20142014 20152015

Northeast AsiaNortheast Asia CIS & Baltic StatesCIS & Baltic States Middle EastMiddle East

West EuropeWest Europe Southeast AsiaSoutheast Asia

70%70%

80%80%

90%90%

100%100%

6.06.0

8.08.0

10.010.0

12.012.0

ABS Operating Rates StableABS Operating Rates StableMillion Metric TonsMillion Metric Tons Operating RateOperating Rate

40%40%

50%50%

60%60%

0.00.0

2.02.0

4.04.0

20052005 20062006 20072007 20082008 20092009 20102010 20112011 20122012 20132013 20142014 20152015

Domestic DemandDomestic Demand Total CapacityTotal Capacity Operating RateOperating Rate

15001500

20002000

25002500

30003000

35003500

6060

8080

100100

120120

140140

160160Cents Per PoundCents Per Pound

SomeSome Relief For ABS PricesRelief For ABS PricesSomeSome Relief For ABS PricesRelief For ABS Prices

ForecastForecastForecastForecast

Dollars Per Metric TonDollars Per Metric Ton

00

500500

10001000

00

2020

4040

6060

JanJan--0909 JulJul--0909 JanJan--1010 JulJul--1010 JanJan--1111 JulJul--1111

Styrene ContributionStyrene Contribution Acrylonitrile ContributionAcrylonitrile Contribution

Butadiene Butadiene Conversion Costs (Var. + Fixed)Conversion Costs (Var. + Fixed)

GP ABS Market PriceGP ABS Market Price PrePre--tax margintax margin~~

55

66

77

88

99

1010

8080

100100

120120

140140

160160

180180Imports, Thousand TonsImports, Thousand Tons

UnitedUnited States ABS Prices & Imports From AsiaStates ABS Prices & Imports From AsiaUnitedUnited States ABS Prices & Imports From AsiaStates ABS Prices & Imports From Asia

Cents Per PoundCents Per Pound

00

11

22

33

44

--2020

00

2020

4040

6060

JanJan--0606 JulJul--0606 JanJan--0707 JulJul--0707 JanJan--0808 JulJul--0808 JanJan--0909 JulJul--0909 JanJan--1010 JulJul--1010 JanJan--1111

Imports Market Price Landed Spot Price Delta (Market Minus Spot)

2,5002,500

3,0003,000

3,5003,500

4,0004,000

Regional ABS PricesRegional ABS Prices

ForecastForecastForecastForecast

Dollars Per Metric TonDollars Per Metric Ton

500500

1,0001,000

1,5001,500

2,0002,000

JanJan--0808 OctOct--0808 JulJul--0909 AprApr--1010 JanJan--1111 OctOct--1111 JulJul--1212

NAM Price ContractNAM Price Contract WEP Price ContractWEP Price Contract Asia SpotAsia Spot

ABS ABS SummarySummary

• ABS market pressure from rising raw material costs is easing in North America

• New Asian capacity being quickly • New Asian capacity being quickly absorbed but arbitrage window between Asia and US now open

• Expect increased ABS imports from Asia to limit further price increases

Thank YouThank You