exec brief 1 final
TRANSCRIPT
REVOLUTION AND EVOLUTIONRedrawing the Map of Global Competitiveness in the Polyolefins Industry
E X E C U T I V E B R I E F I N G
Which side of the revolution are you on?feast or famine?Global polyolefin producers are facing key challenges:
1. How do I leverage advantaged feedstocks to maximize profitability?
2. How do I reduce costs to remain competitive in a global market?
the evolution of supply chain and manufacturingWhether a company thrives or survives is heavily influenced by global factors such as:
• Sourcing of raw materials• Production locations• Customers/Distribution/Market
Those that eschew ‘business as usual’ and evolve their supply chain and manufacturing strategies will be the victors in the Energy Revolution.
E X E C U T I V E B R I E F I N G
R E V O L U T I O N A N D E V O L U T I O N : R E D R AW I N G T H E M A P O F G L O B A L C O M P E T I T I V E N E S S I N T H E P O LY O L E F I N S I N D U S T R Y
2
North America• Increased capacity driven by advantaged feedstocks• After 2015, North America will become a net exporter for PE
China• Estimated to have the largest shale gas resources in the world
(1,115 Trillion ft³)• Coal-to-chemical investments to leverage abundant coal reserves• Will remain an importer of basic chemicals and derivatives• Strong demand will foster capacity additions
Europe• >75% of production based on expensive naphtha or condensate
based raw materials• ~10% of PE capacity forecast to be idled by 2017 • Main focus is on innovative chemistry
Middle East• Declining feedstock advantage due to North American shale gas • Significant exporter of basic chemicals and derivatives to China
South America• Polyolefins primarily supplied by North American producers
Shale gas is disrupting the Polyolefins Value Chain
E X E C U T I V E B R I E F I N G
R E V O L U T I O N A N D E V O L U T I O N : R E D R AW I N G T H E M A P O F G L O B A L C O M P E T I T I V E N E S S I N T H E P O LY O L E F I N S I N D U S T R Y
3
Low-cost shale feedstocks are
game changersNorth America has an abundant supply of Shale Gas derived feedstock that enables low cost production.
The large markets of Europe and Asia are competitively challenged. What can these regions do to remain viable?
Change in the Global Cost Curve for Ethylene and Renewed US Competitiveness
Global Supply (Cumulative in billions of pounds)
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
0 73 136 172 247 307
Prod
uctio
n Co
sts
($/p
ound
)
2005
2012MiddleEast
Middle East
UnitedStates
UnitedStates
China
Western EuropeChina
Western Europe
Other Northeast Asia
OtherNortheast Asia
American Chemistry Council May 2013, Economics & Statistics Department, Shale Gas, Competitiveness, and New US Chemical Industry Investment: An Analysis Based on Announced Project, pg. 21
E X E C U T I V E B R I E F I N G
R E V O L U T I O N A N D E V O L U T I O N : R E D R AW I N G T H E M A P O F G L O B A L C O M P E T I T I V E N E S S I N T H E P O LY O L E F I N S I N D U S T R Y
4
2017 2018 2019 2020
3,300 3,300
3,300
3,300 1,1002,200 1,760 3,000 2,300
1,200
$425 billion in petrochemical
investmentsOver the next few years, more than $425 billion in petrochemical investments are expected around the world with a large portion happening in North America to take advantage of the “shale revolution”. Regions that previously enjoyed a cost advantage, like the Middle East, are not as competitive as they once were.
Source: Accenture, Managing Capital Projects for Growth in the North American Petrochemical Industry, 2014
E X E C U T I V E B R I E F I N G
R E V O L U T I O N A N D E V O L U T I O N : R E D R AW I N G T H E M A P O F G L O B A L C O M P E T I T I V E N E S S I N T H E P O LY O L E F I N S I N D U S T R Y
5
Realign assets and products to remain
cost competitive.
With a liquids-heavy cracking feedslate, European polyolefin producers are competitively disadvantaged. The combination of higher feedstock costs and a tightening regulatory environment has eroded margins. Producers are idling high-cost assets and are struggling to restructure their businesses to remain viable. European producers will need to focus on realigning their asset and product mix to minimize cost.
75%of their raw materials being naphtha or condensate based, European petrochemical producers are at a distinct disadvantage ...
WITH MORE THAN
E X E C U T I V E B R I E F I N G
R E V O L U T I O N A N D E V O L U T I O N : R E D R AW I N G T H E M A P O F G L O B A L C O M P E T I T I V E N E S S I N T H E P O LY O L E F I N S I N D U S T R Y
6
Drive operational excellence to satisfy growing Asian demand.
The Middle East is investing significantly in polyolefins capacity for export to the rapidly growing Asian markets. However, China has launched an ambitious coal-to-chemicals effort to leverage their vast coal reserves. Other Asian producers are challenged by high feedstock costs. To supply the rapidly growing Asian markets, both Asian and Middle East producers will need to drive operational excellence.
E X E C U T I V E B R I E F I N G
R E V O L U T I O N A N D E V O L U T I O N : R E D R AW I N G T H E M A P O F G L O B A L C O M P E T I T I V E N E S S I N T H E P O LY O L E F I N S I N D U S T R Y
7
Adapt your feedstock strategyIntegrated polyolefins producers are modifying their crackers to accommodate lighter feedstocks. Some are evaluating the importation of ethane from North America. Will these decisions remain profitable? How will producers manage the inevitable volatility in feedstock pricing?
Manage global supply and demandThe ripple effects of the radically shifting international trade flows will be felt in commodity plastics as well as further downstream in the specialty plastics segment. Realigning where and how these products are made will significantly alter supply and demand patterns and magnify the importance of re-optimizing an increasingly complex product mix over a smaller number of production lines.
Focus on operational excellence and technology optimizationIncorporating a holistic approach to integrate operations management methodologies in order to optimize people, assets, and processes is essential for sustaining plant operations and supporting production efficiency. Concepts of operations excellence have not been necessary for regions such as the Middle East, Europe, and Asia, but now they must get better at it to remain competitive.
Embracing change: adapting strategies to change the game in your favor
E X E C U T I V E B R I E F I N G
R E V O L U T I O N A N D E V O L U T I O N : R E D R AW I N G T H E M A P O F G L O B A L C O M P E T I T I V E N E S S I N T H E P O LY O L E F I N S I N D U S T R Y
8
Conclusion
The importance of low cost natural gas to the chemical industry is difficult to overstate and is forcing producers to re-examine the supply chain economics for ethylene and corresponding downstream derivatives. Whether downstream manufacturers are able to capture cost-saving opportunities will depend on how well positioned they are to adapt their strategies around product innovation, manufacturing, and supply chain management.
For more information:www.aspentech.com
E X E C U T I V E B R I E F I N G
R E V O L U T I O N A N D E V O L U T I O N : R E D R AW I N G T H E M A P O F G L O B A L C O M P E T I T I V E N E S S I N T H E P O LY O L E F I N S I N D U S T R Y
9