elastomer feedstock markets have been in transition for years -...
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Bill HydeBill HydeSenior Director Olefins and ElastomersSenior Director Olefins and ElastomersIHS ChemicalIHS Chemical
55th AGM * “A Solid Past…A Successful Future”
IHS ChemicalIHS Chemical
Synthetic Rubber Feedstocks: Will The Transition Ever Finish?
Elastomer Feedstock Markets Elastomer Feedstock Markets Have Been In Transition for YearsHave Been In Transition for Years
Rise of Asia as demand driver
Heavy crackers will be favored
55th AGM * “A Solid Past…A Successful Future”
favored Middle East capacity wave North America Shale Gas On purpose production WILL IT EVER END?!
With Transition Comes VolatilityWith Transition Comes Volatility
600%700%800%900%
1000%
January 2000 = 100%
55th AGM * “A Solid Past…A Successful Future”
0%100%200%300%400%500%
Jan-00 Nov-01 Sep-03 Jul-05 May-07 Mar-09 Jan-11 Nov-12
Brent US Nat Gas Ethylene Propylene Butadiene Styrene
AgendaAgenda Fundamentals Economy Energy
Petrochemicals Ethylene
55th AGM * “A Solid Past…A Successful Future”
y Propylene Butadiene Styrene
Elastomers Conclusions
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AgendaAgenda Fundamentals Economy Energy
Petrochemicals Ethylene
55th AGM * “A Solid Past…A Successful Future”
Ethylene Propylene Butadiene Styrene
Elastomers Conclusions
EconomyEconomy
55th AGM * “A Solid Past…A Successful Future”
The GDP Recovery That Won’tThe GDP Recovery That Won’t
India
Russia
Brazil
55th AGM * “A Solid Past…A Successful Future”
-2.0 0.0 2.0 4.0 6.0 8.0 10.0
US
EuroZone
Japan
China
Hist. Average 2013
Base EnergyBase Energy
55th AGM * “A Solid Past…A Successful Future”
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Base Energy OutlookBase Energy Outlook
0.8
1
1.2
1
1.2
1.4
1.6
Price Ratio2007 = 1.0
55th AGM * “A Solid Past…A Successful Future”
0
0.2
0.4
0.6
0
0.2
0.4
0.6
0.8
02 03 04 05 06 07 08 09 10 11 12 13 14 15
WTI Price Gas/Oil Price Ratio
AgendaAgenda Fundamentals Economy Energy
Petrochemicals Ethylene
55th AGM * “A Solid Past…A Successful Future”
y Propylene Butadiene Styrene
Elastomers Conclusions
EthyleneEthylene Significant regional cost
differentials Massive investment
especially in cost
55th AGM * “A Solid Past…A Successful Future”
advantaged regions Feedslate continues to
trend lighter to the detriment of coproduct production
Chemical Projects Leveraging Local Chemical Projects Leveraging Local Natural Resources Gas/Coal/OilNatural Resources Gas/Coal/Oil
LPG/MTO investigations early
but promising
Numerous shale and LPG based projects.
Continued gas, liquid & LPG based investing
Numerous CTO / MTO
projects underway
55th AGM * “A Solid Past…A Successful Future”
Requires Infrastructure
and policy definition
Needs infrastructure
and government
supportFocus is primarily
LNG
Active ProjectsReserve potential
Potential for MTO
y
4
882
1102
1323
1543
US Dollars Per Metric Ton
Ethylene Cash Costs From Ethane in Saudi Arabia
Ethylene Cash Cost SnapshotEthylene Cash Cost Snapshot
2013 2023
55th AGM * “A Solid Past…A Successful Future”
0
220
441
661
882
Western Canada
US Ethane US Weighted Average
China CTO US Coprod. Int. Light Naphtha
West Europe
Naphtha
US Light Naphtha
Northeast Asia
Naphtha
Southeast Asia
Naphtha
China MTO
Ethylene Capacity AdditionsEthylene Capacity Additions
0 0
6.0
12.0
Million Metric Tons
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-12.0
-6.0
0.0
90 92 94 96 98 00 02 04 06 08 10 12 14 16 18
North America Total AsiaWest Europe Others Middle East Annual Demand Increase
PropylenePropylene
Hurt by lighter ethylene cracker feedslatesO
55th AGM * “A Solid Past…A Successful Future”
On purpose production already significant in the market
Cracker Production of Propylene Cracker Production of Propylene andandButadiene Falls Relative to EthyleneButadiene Falls Relative to Ethylene
95%
100%
105%
110%
2000 = 100%
55th AGM * “A Solid Past…A Successful Future”
70%
75%
80%
85%
90%
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23
P/E B/E
5
Propylene Producers AdaptPropylene Producers Adapt
60%
70%
80%
90%
100%
Other
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0%
10%
20%
30%
40%
50%
60%
00 02 04 06 08 10 12 14 16 18 20 22
Steam Cracker/FCC
Some More AggressivelySome More Aggressively
50%60%70%80%90%
100%
US Propylene Supply
50%60%70%80%90%
100%
China Propylene Supply
55th AGM * “A Solid Past…A Successful Future”
0%10%20%30%40%50%
00 02 04 06 08 10 12 14 16 18 20 22
Stm. Crackers FCC Splitters DehydroMetathesis Olefin Cracking Methanol to OlefinsMethanol to Propylene Coal to Olefins Coal to PropyleneHS FCC Others On-Purpose
0%10%20%30%40%50%
00 02 04 06 08 10 12 14 16 18 20 22
ButadieneButadiene
Demand has been weak relative to forecast for roughly two years.
Longer term coproduct supply
55th AGM * “A Solid Past…A Successful Future”
will not be sufficient to meet demand growth
Biggest strategic question in the industry: On purpose where and when?
U.S. Miles Not DrivenU.S. Miles Not Driven
55th AGM * “A Solid Past…A Successful Future”
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Supply Gap EmergesSupply Gap Emerges
1.3
1.4
1.52013 = 1.0
55th AGM * “A Solid Past…A Successful Future”
1.0
1.1
1.2
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Crude C4 Production Butadiene Demand
On Purpose BD Becomes On Purpose BD Becomes SignificantSignificant
8%
10%
12%
14%
US
Share of Global Supply
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0%
2%
4%
6%
8%
2008 2010 2012 2014 2016 2018 2020 2022
US
China
Russia
StyreneStyrene
Global styrene balances are slowly improving, Asia (China) leads the way.
Demand growth is below GDP,
55th AGM * “A Solid Past…A Successful Future”
supply discipline required. North American producers are
the beneficiaries of shale gas but must keep benzene supplied by imports.
80%
90%
100%
30.0
40.0
50.0
Million Metric Tons Operating Rate
Styrene Balances Are Styrene Balances Are Slowly ImprovingSlowly Improving
55th AGM * “A Solid Past…A Successful Future”
50%
60%
70%
0.0
10.0
20.0
08 09 10 11 12 13 14 15 16 17 18 23Demand (2.1/2.8) Production (2.3/2.8)Total Capacity (1.7/2.6) Forecast Line
(% AAGR = 08-13/13-23)
7
18%
20%
22%
30
35
40
45
Million Metric Tons Percent
The Declining Influence of POSMThe Declining Influence of POSM
55th AGM * “A Solid Past…A Successful Future”
10%
12%
14%
16%
5
10
15
20
25
1990 1995 2000 2005 2010 2015
Conv SM POSM POSM % Of SM Capacity
Product Substitution: ConsumerProduct Substitution: Consumer--facing facing endend--use markets moving away from use markets moving away from polystyrenepolystyrene
PLA
PET
55th AGM * “A Solid Past…A Successful Future”
PSPP
PS PET
PS PaperPS Paper
Petrochemical Price OutlookPetrochemical Price Outlook
400%
500%
600%
700%
2000 = 100%
55th AGM * “A Solid Past…A Successful Future”
0%
100%
200%
300%
400%
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23
Ethylene Propylene Butadiene Styrene
AgendaAgenda Fundamentals Economy Energy
Petrochemicals Ethylene
55th AGM * “A Solid Past…A Successful Future”
Ethylene Propylene Butadiene Styrene
Elastomers Conclusions
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Synthetic RubberSynthetic Rubber Significant capacity over
build threatens operating rates for several years.
Transition from eSBR to sSBR?
55th AGM * “A Solid Past…A Successful Future”
sSBR? New tire production
capacity in geographies with tight domestic rubber balances.
Commodity Synthetic Rubber Commodity Synthetic Rubber Operating RatesOperating Rates
75
80
85
90
Operating Rate, %
55th AGM * “A Solid Past…A Successful Future”
50
55
60
65
70
05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23
sSBR eSBR PBR
ConclusionsConclusions Economic growth
returns but developed world leads for a while
Crude Oil prices remain relatively flatNatural Gas remains
55th AGM * “A Solid Past…A Successful Future”
Natural Gas remains inexpensive relative to oil
Cost advantaged ethylene is added faster than demand growth
ConclusionsConclusions Propylene demand
growth is met by on purpose capacity additions.
Butadiene markets tighten and on
55th AGM * “A Solid Past…A Successful Future”
tighten and on purpose production is needed, but where and when?
Styrene balance improves and costs stabilize.
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ConclusionsConclusions Most petrochemical
prices are well behaved in the forecast, butadiene is not.
Significant synthetic
55th AGM * “A Solid Past…A Successful Future”
Significant synthetic rubber capacity increases will take some time to be absorbed into the market.
Bill HydeBill HydeSenior Director Olefins and ElastomersSenior Director Olefins and ElastomersIHS ChemicalIHS Chemical
55th AGM * “A Solid Past…A Successful Future”
IHS ChemicalIHS Chemical
Synthetic Rubber Feedstocks: Will The Transition Ever Finish?