Global Polyolefins Market
and Pricing Outlook
Remko Koster, Director Polyolefins
Europe and Africa
March 2014
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Global GDP increasing in 2014
3
-3,0
-2,0
-1,0
0,0
1,0
2,0
3,0
4,0
5,0
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
(Constant 2005 U.S. Dollars)
Forecast
Source: IHS Global Insight
Percent, %
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Oil Price Forecast Moving Down in 2014/15
0
20
40
60
80
100
120
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20
WTI Brent Dubai
Forecast
US$ / BBL
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5
Tight Oil developments have resulted in unprecedented growth in U.S. supplies …
Million Barrels per Day
0
1
2
3
4
5
6
7
8
9
10
1980 1985 1990 1995 2000 2005 2010 2015 2020
Tight Oil Alaska
Gulf of Mexico Other Lower 48
© 2014, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
U.S. Natural Gas Has New Life
Sources: IHS CERA, PGC, EIA
0
10
20
30
40
50
60
70
80
2003 2005 2007 2009 2011 2013 2015
Other Supplies Shale Gas & Tight Oil
U.S. Natural Gas Production By Type, BCF/D
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Natural Gas
Crude
Oil
From Oil/Gas to Polyolefin
Naphtha
Gas Oil
Condensate
Propane
Ethane
Butane
Pygas Benzene
Toluene/Xylene
Heavy Aromatics
C5/C6 Non Aromatics
Fuel Oil
Ethylene
Unit
Gas Processing
Unit
REFORMER BTX Extraction
Raffinate FCC
Refinery
Steam
Reformer
Methanol
Synthesis
SynGas
Propylene
Ethylene
Butadiene Mixed Butylenes
Methane/Hydrogen
Benzene
Toluene
Xylene
Propylene
Methanol
PP
PP
PE
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0%
20%
40%
60%
80%
100%
120%
140%
0
20
40
60
80
100
120
95 97 99 01 03 05 07 09 11 13 15 17
Energy Ratio
Ratio Crude Oil Pipeline Gas TX US
Dollars Per Barrel Oil Equivalent
Brent Crude Oil vs. U.S. Natural Gas
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U.S. & West Europe
Integrated Polyethylene Cash Margins
9
0
100
200
300
400
500
600
700
800
900
1000
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
US Ethane to PE Chain Margin W. Europe Naphtha to PE Chain Margin
Dollars per Metric Ton
Forecast
© 2014, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Shale Gas in Europe or Ethane Imports ?
10
Shale gas in Europe is progressing very slowly
• Significant plays in England, Poland, Germany, France
• Resistance in France and Germany
• Composition of the gas is largely unknown
• May only compensate for the loss of gas from conventional fields
There will be no repeat of the shale gas boom in the US
Ethane imports from the US into Europe an alternative
• Ineos imports ethane into Rafnes (Norway) from 2015 onwards
• In spite of transport costs, advantaged position for Norway cracker
• Ineos aims for a repeat in Grangemouth UK
• Coastal competitors Borealis / Versalis / Total studying
Ethane imports a differentiator giving some sites an advantage
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High Oil Benefits Middle East Olefins
11
0
250
500
750
1000
1250
1500
1750
janv.-12 juil.-12 janv.-13 juil.-13 janv.-14 juil.-14 janv.-15 juil.-15
Forecast
Dollars Per Metric Ton
Middle East (Saudi Arabia) ethane
cracker compared with a West Europe
typical cost naphtha cracker (both
integrated with HDPE)
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CTO in China: An Innovation On Old Ideas
Coal
Gasification Methanol
Synthesis
Sulfur
Recovery
H2+CO
Ethylene
Propylene
MTO
Acid Gas
Removal
MTP
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Chinese CTO Is Very Cost Competitive Even
On Global Basis
2012 LLDPE GLOBAL CASH COSTS BY SITE
Integrated, Total Cash Cost Basis (Ethylene: Light Olefins Production Basis)
NEA Avg.
NAM Avg.
SEA Avg.
MDE Avg.
WEP Avg.
10 20 30 40 50 60
CUMULATIVE CAPACITY (Million Metric Tons)
NEA Avg. NAM Avg. SEA Avg. MDE Avg.
Total Cash Cost Inner Mongolia CTO Xinjiang CTO Shandong CTO Shanghai CTO
1st Quartile 2nd Quartile 3rd Quartile 4th Quartile
WEP Avg.
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HDPE 17%
LLDPE 12%
LDPE 9%
PP 26%
PS 5%
ABS 3%
PVC 18%
PET 9% PC
2%
2013 World Polymer Demand = 216 Million Metric Tons
PO : 63% of Global Polymer Demand
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PO Domestic Demand %AAGR 2013 - 2018
15
0123456789
10
Polyethylene Polypropylene
Average Annual Growth Rate, %
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West Europe Polyethylene Closures 2013-15
16
Company Product Location Time Capacity, kta
Dow HDPE Tessenderloo Q1 2013 180 kt
LBI HDPE Wesseling Q3 2013 100 kta
Versalis LLDPE Priolo Q3 2013 180kta
Total HDPE Antwerp 2014 70 kta
Borealis HDPE Burghausen Q4 2014 175 kta
Versalis LDPE Gela Q1 2014 215 kta
Repsol HDPE Puertollano 2014/2015 100 kta
• 1.0 MTA closures in 2013-2015 (7% capacity)
• Mainly HDPE
• Next wave foreseen in 2017-2019
European closures focus on HDPE
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North America PE Projects
North America - New Polyethylene Projects
Company Location Country LDPE LLDPE HDPE Resin Type TBA Startup
2012-2013
Equistar LaPorte, TX United States 23 (4) Q4 2012
Equistar Morris, IL United States 45 (4) Q4 2012
2014
Equistar Bay City United States 100 (6) Q2 2014
2015-2016
Ineos Sasol Deer Park, TX United States 475 (7) Q2-Q3 2015
Braskem Idesa Nachital Mexico 300 (2) 750 (6,7) Q3-Q4 2015
Nova Joffre Canada 450 (4) Q1 2016
Equistar * Corpus Christi, TX United States 500 (3) 2016
Dow Freeport, TX United States 400 (2) 650 (5) Q4 2016
2017
ExxonMobil Mont Belvieu, TX United States 650 (4) 710 (4) Q2 2017
Formosa Point Comfort, TX United States 300 (2) Q3 2017
CPChem Sweeny, TX United States 500 (5) 500 (7) Q3 2017
2018-2019
Sasol Lake Charles, LA United States 420 (2) 450 (4) Q3 2018
Nova* Sarnia Canada 430 (3) Q3 2018
Shell* Marcellus United States 500 (3) 1000 (4,7) Q3 2019
Ascent (Braskem)* Marcellus United States 1500 (3) 2019
Totals, 000's MT 1420 3698 3535 2000 10,653
*Reported projects not fully verified or approved and not included in IHS capacity database.
**Processes: (1) Autoclave, (2) Tubular, (3) TBA, (4) Gas Phase, (5) Other, (6) Ziegler, (7) PF Loop
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Global PE Capacity Additions
18
-4
-3
-1
1
2
4
5
7
8
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Asia/Pacific Africa/ Middle EastNorth America Central Europe/ CISSouth America West EuropeGlobal Demand Change
Million Metric Tons
Forecast
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Global PE Domestic Demand
19
82
83
84
85
86
87
88
89
0
20
40
60
80
100
120
140
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
North America South America West EuropeCentral Europe & CIS Middle East & Africa Indian SubcontinentAsia Total Capacity Capacity (inc Hypo)Operating Rate
Million Metric Tons Operating Rate, Percent
Forecast
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All PE Global Net Trade
20
-25
-20
-15
-10
-5
0
5
10
15
20
25
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Asia (ex China) China Europe & CIS N.America Middle East Other
Net trade, Million Metric Tons
Exports
Imports
Forecast
© 2014, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 21
-400
-200
0
200
400
600
800
1000
1200
1400
1600
janv.-2009 janv.-2010 janv.-2011 janv.-2012 janv.-2013 janv.-2014
Margin WEP HDPE Blow Moulding Contract
Margins, Euros per Metric Ton
Forecast
HDPE Price and Margin
Contract price, Euros per Metric Ton
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New PP Plants in China
22
Fushun PC (300kt)
Datang Int'l Power (500kt)
Sichuan PC (450kt)
Ningxia Refinery (100kt)
SINOPEC Wuhan (400kt)
Shanghai PC (200kt)
Daqing Refinery (300kt)
Hohhot Refining (150kt)
Sinopec BeiHai PC (200kt)
Yulin Energy & Chemical Co. (600kt)
Luoyang PC (140kt)
PuCheng Clean Energy (400kt)
Hebei Haiwei (300kt)
Ningbo Heyuan Chemical (300kt)
Shaanxi Yanchang (250kt)
Yankuang Guohong Chem. (300kt)
Shanxi Coking Corp. (300kt)
Sinopec-KPC PC JV (745kt)
CNOOC & Shell PC (700kt)
Yili Meidianhua (300kt)
Guangzhou PC (200kt)
Maoming PC (200kt)
Qinghai Salt (160kt)
Shenhua Ningmei (500kt)
SINOPEC Zhijin (300kt)
Shenhua Xinjiang (450kt)
2012
2013
2014
2015
2016
2017
Shandong Shenda (200kt)
Huating Coal Group (200kt)
Ningxia Yongda PC (120kt)
Baofeng Energy (300kt)
Jiutai Energy (IM) (300kt)
Sinopec /Wanbei JV (300kt)
Fujian ZhongJiang PC (350kt)
Fujian Zhongjing PC (350kt)
China Coal Crop. Yuheng (300kt)
Qingdao Ref&Chem (350kt)
Zhongtian Hechuang (700kt)
Shenhua Xiwan (380kt)
CPI/Total JV (400kt)
Sinopec Hainan R&C (400kt)
Yangzijang 400 KT
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PP Expansions in Middle East and Africa
Company Related to Country Capacity (kt) Timing
Saudi Polymers CPC Saudi Arabia 400 Q1 2013
Borouge Borealis UAE 960 Q3 2014
Total Polypropylene Net Capacity Increase 1360
Middle East Tsunami becomes a Ripple
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PP Capacity Build Mainly In China
24
-2,0
-1,0
0,0
1,0
2,0
3,0
4,0
5,0
6,0
7,0
8,0
-2,0
-1,0
0,0
1,0
2,0
3,0
4,0
5,0
6,0
7,0
8,0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
North America South America West Europe
Africa/Middle East Indian Sub. Northeast Asia
Southeast Asia Global Demand Growth
Demand, Million Metric Tons Capacity, Million Metric Tons
Forecast
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Global PP Domestic Demand
25
79
80
81
82
83
84
85
86
87
0
10
20
30
40
50
60
70
80
90
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
North America South America West Europe
Central Europe & CIS Middle East & Africa Indian Subcontinent
Asia Total Capacity Capacity (inc Hypo)
Operating Rate
Million Metric Tons Operating Rate, Percent
Forecast
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All PP Global Net Trade
26
-10
-8
-6
-4
-2
0
2
4
6
8
10
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Asia (ex China) China Europe & CIS N.America Middle East Other
Net trade, Million Metric Tons
Exports
Imports
Forecast
© 2014, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
-200
-100
0
100
600
800
1000
1200
1400
1600
1800
janv.-2009 janv.-2010 janv.-2011 janv.-2012 janv.-2013 janv.-2014
WEP Margin WEP PP Contract
27
PP Price and Margin
Contract Price, Euros Per Metric Ton Margin, Euros Per Metric Ton
Forecast
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PE
• China adds most PE plants in 2014-2016 → stagnant imports
• NAM (shale) leads expansion 2016-2020 → exports
• Rationalization in Europe – 1 Mta in 2013/14 and in 2016-2019
• Slow down in ME expansions
PP
• China adds even more PP plants in 2014-2016 → less imports
• NAM builds less PP, but no focus on exports
• Rationalization in Europe (but more modest)
• No expansions in ME
Conclusions PE and PP
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• Aging asset base – last cracker built in 1994
• Ethane imports from NAM may give some PE producers
some cost advantage
• Shale gas development in Europe: too little too late
But:
• Imports can not serve every segment – slow process
• Increasing import duties for GCC producers 1st Jan 2014
• Improving economy in Europe in 2014
So what about Europe?
Long Term – Gradual Decline
Short Term – Improvement