Information | Analytics | Expertise

© 2014 IHS / ALL RIGHTS RESERVED

GLOBAL POLYESTER OVERVIEW

– SUPPLY EXPLOSION IN CHINA Mumbai, India

Aug. 2014

Wei Ding, Director (Aromatics & Fibers )

Wei.Ding@ihs.com

© 2014 IHS

Agenda

2

• Demand Overview

• Supply Explosion

• Feedstock

-- The Tale of PTA

© 2014 IHS

Polyester Demand Outpaces GDP

3

0

10

20

30

40

50

60

70

80

90

38,000 42,000 46,000 50,000 54,000 58,000 62,000 66,000

GDP (Billion 2005 $)

Polyester, Million Metric Tons

2010

2011

2012

2000

2017

2013 2014

2015 2016

2018

Polyester Growth = 2.6 X GDP Growth

© 2014 IHS

PET TEXTILE FIBER INDUSTRIAL USE FILM OTHERS

Regional Disparity In Derivatives Distribution

© 2014 IHS

Polyester Captures the Bulk of Fiber Demand Growth

5

-3

-2

-1

0

1

2

3

4

5

-4,000

-2,000

0

2,000

4,000

6,000

8,000

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Growth of Cotton Growth of Polyester

Growth of Other Fibers GDP Growth

Fibers, Million Metric Tons GDP Growth (%)

© 2014 IHS

PET Still Has a Great Potential

6

-2

0

2

4

6

8

10

-5000 5000 15000 25000 35000 45000

CHI ISC SEA KOR NAM SAM

WEP CEP FSU AFR MDE JAP

Per Capita GDP, USD

Per Capita Demand , KG

World Average = 2.6 KG

© 2014 IHS

0

20

40

60

80

2008 2010 2012 2014 2016 2018

Polyester Fiber PET Resin Others

All In Melt Equivalent, Million Metric Tons

AAGR: 6.1%

AAGR: 5.0%

AAGR: 4.4%

Fibers Are Leading the Way

© 2014 IHS

Asia Dominates Demand Growth

8

0

20

40

60

80

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Americas Europe Africa & Middle East Asia (Exclude China) China

Million Metric Tons

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Demand Engines in China Have Been Slowing

9

-8

0

8

16

24

32

2003 2005 2007 2009 2011 2013

SOFT DRINK FABRIC GDP

YOY Growth, %

© 2014 IHS

Agenda

10

• Demand Overview

• Supply Explosion

• Feedstock

-- The Tale of PTA

© 2014 IHS

Overbuild is Intensifying

11

50

60

70

80

90

100

-4

0

4

8

12

16

2008 2010 2012 2014 2016 2018

Polyester Poly Condensation

Demand Growth Hypo Capacity Growth China Asia (Exclude China) Africa & Middle East CIS & Baltic States Europe Americas Operating Rates %

Forecast

Operating Rate (%) Million Metric Tons

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PSF – Always Affected by Substitutes

12

50

60

70

80

90

100

0

5

10

15

20

25

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

World Capacity World Demand World Op Rate

Million Metric Tons Operating Rate Operating Rate (%)

© 2014 IHS

Filament – Investment Rush

13

50

60

70

80

90

100

0

12

24

36

48

60

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

World Capacity World Demand World Op Rate

Million Metric Tons Operating Rate

Operating Rate, %

© 2014 IHS

PET – a Hard Time is Underway

14

50

60

70

80

90

100

0

8

16

24

32

40

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

World Capacity World Demand World Op Rate

Million Metric Tons Operating Rate

Operating Rate (%)

© 2014 IHS

PET – Investments More Than The Market Can Handle

40

50

60

70

80

90

100

-1

0

1

2

3

4

5

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Polyester Bottle Resin

Demand Growth Americas Europe Africa & Middle East China Asia (exclude China) Operating Rate Effective Operating Rate

Million Metric Tons Operating Rate (%)

© 2014 IHS

Radical Changes to Regional Export Landscape

16

0.0

1.0

2.0

3.0

4.0

2003 2008 2013

CHI KOS TAI

Million Metric Tons

© 2014 IHS

Overbuilds Depress Profitability

17

0

50

100

150

200

250

300

0

500

1000

1500

2000

2500

3000

Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13

PET EXPORT PET POY PSF

Domestic, CNY Export, USD

© 2014 IHS

Will Investor Fervor Cool Off?

18

(10.00)

0.00

10.00

20.00

30.00

40.00

50.00

0

20

40

60

80

100

120

2004 2007 2010 2013

Chemical Fiber Investment In China

Investment YOY Growth Rate

Billion CNY YOY Growth Rate

Positive Signs:

• Major producers have almost

completed an aggressive

expansion wave.

• NDRC’s guideline has changed,

no longer encouraging new

capacities in East China.

Complexity:

• Local governments.

• Projects may move inland.

• Consumers’ desire to integrate

upstream.

© 2014 IHS

Agenda

19

• Demand Overview

• Supply Explosion

• Feedstock

-- The Tale of PTA

© 2014 IHS

World PTA Capacity Versus Demand

20

2008 2013 2018 2023

0

25

50

75

100

0

25

50

75

100

China Asia-China EMEA Americas Operating Rate

Cap

acit

y

Dem

an

d

Million Metric Tons Operating Rate, %

© 2014 IHS

Global PTA Capacity Growth

21

50

60

70

80

90

100

-6.0

-3.0

0.0

3.0

6.0

9.0

12.0

2008 2010 2012 2014 2016 2018

Global Demand Growth China India Subcontinent NEA net China SEA Europe Middle East & Africa N. America S. America Operating Rate

Million Metric Tons Operating Rate (%)

PQS 640 KTA M&G 1.2 MMT

Lotte UK DAK US

© 2014 IHS © 2014 IHS, Inc. No portion of this presentation may be reproduced,

reused, or otherwise distributed in any form without prior written consent.

0

1

NAM

-1

0

SAM

-1

0

1

Europe

-3

-2

-1

0

MEA

-7

-6

-5

-4

-3

-2

-1

0

China 0

1

2

3

4

5

6

7

NEA

0

1

2

SEA -2

-1

0

1

ISC

Diminishing PTA Trade

2010/2013/2018 NET IMPORT/EXPORT MILLION METRIC TONS

© 2014 IHS

Asia PTA Spreads

23

55

70

85

100

0

100

200

300

2008 2010 2012 2014 2016 2018

PTA Spread Over PX PTA Global Operating Rate

Dollars Per Metric Ton Operating Rate, %

$125 Per Ton Spread

© 2014 IHS

Can the PTA Industry Realistically Rationalize?

24

2013 2018

Capacity (MMT): 67 95

Number of Plants: 117 140

Average Plant Size

(KMT):

567 675

To Achieve 85% Industry Utilization

Capacity to Rationalize (MMT): 9 20

Plant Size (KMT): <= 380 <= 520

Plants to Rationalize (#): 31 55

Demand (MMT): 49 64

Demand

Rationalize

Excess Capacity

© 2014 IHS

Can the PTA Industry Realistically Rationalize?

25

2013 2018

Capacity (MMT): 67 95

Number of Plants: 117 140

Average Plant Size

(KMT):

567 675

To Achieve 85% Industry Utilization

Capacity to Rationalize (MMT): 9 20

Plant Size (KMT): <= 380 <= 520

Plants to Rationalize (#): 31 55

Demand (MMT): 49 64

Demand

Rationalize

Excess Capacity

© 2014 IHS

Pricing Campaign -- Salvation or a Temporary Relief

26

0

300

600

900

1200

0

300

600

900

1200

Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14

Capacity Lost PTA(contract)-PX

Thousand Metric Tons CNY

© 2014 IHS

Conclusion

27

PTA:

A tough cycle remains on track until

after expansions slow down.

Proactive throughput management is

much better than forced shutdowns.

Polyester:

The market will continue to be

chronically oversupplied.

Trade barriers are likely to further

increase.

Relative disadvantage in feedstock

pricing negotiations may not

substantively change.