Ms. Prema Viswanathan

Head of Middle East/ South Asia MarketsICISSingapore

Reporting on the Asian and Middle East chemical industry and marketsfrom Singapore for over 14 years, Ms. Prema Viswanathan wasManaging Editor-Asia and Middle East at ICIS, prior to taking on thisrole.

She holds a Master’s degree in English literature from BangaloreUniversity and has worked as a journalist for leading Indian newspapersbefore joining ICIS.

She has given presentations on the petrochemical industry and marketsin Asia and the Middle East at several conferences and has also beeninvited to speak and chair at key industry forums.

Petrochemical Conclave 2013

18 March, Gurgaon

Petrochemical Market Trends and

Opportunities for South Asia

Prema Viswanathan

Head of Middle East, South Asia Markets

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Petchems on a roller-coaster ride

• Petchem prices recover on high crude, snug supply

• China demand growth not up to expectations

• Margins squeezed down the chain

• Middle East players still lead on cash costs

• But new US supply could be a game changer

• India - the new demand driver, after China?

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China demand growth slows - PE

Source: ICIS, China Customs

M tonnes

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China demand growth slows - PP

Source: ICIS, China Customs

M tonnes

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China polyester demand to grow by 7-8%

China’s polyester demand to keep a slower growth rate of 7-8% in the coming three years because of an oversupply in both polyester and textile industries

Source: ICIS pricing

+19%+12% +7%

+7%+7%

+8%

91%

87%

76%76%

77%

80%

0

10

20

30

40

50

60

2010 2011 2012E 2013E 2014E 2015E

Unit: million

tonnes/year

65%

70%

75%

80%

85%

90%

95%

Operating rate

China's polyester production China's polyester demand

China's polyester O/R

www.icis.com

Naphtha Cracking Margins To Bottom Out in 1H ‘13

Source: ICIS Consulting / Updated : Jan 4, 2013

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Low PE Margins Environment in „12 & „13

Source: ICIS Consulting / Updated : Jan 4, 2013

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Improving PP Margins Environment in „13

Source: ICIS Consulting / Updated : Jan 4, 2013

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Global PE, PP supply to outstrip demand in 2015

Source: ICIS Consulting

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Middle East PE capacity to hit 28m t/yr by 2015

Source: ICIS, Industry

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Middle East a key exporter, but faces hurdles

•Middle East moving up the cost

curve

•Propylene/PP economics not as

good as ethylene/PE

•Gas shortage in GCC, only Iran.

Qatar have surplus supply

•Sanctions impact Iran

investments, slow imports,

exports

•Labour shortages, logistics

woes, supply constraints

• Shifting govt priorities in GCC

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US ethylene capacity to expand by 38%

• New crackers: 8.6m tonnes* (7)

• Restarts: 380,000 tonnes (1)

• Expansions/debottlenecks: 1.2m tonnes (7)

• Total: 10.2m tonnes = 38% of US capacity

• US has 42 crackers with 26.6m tonnes/year

*Assumption of world-scale cracker at 1.25m tonnes/year Source: ICIS

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0

1000

2000

3000

4000

5000

6000

2012 2013 2014 2015 2016 2017 2018 2019Ad

dit

ion

al C

apac

ity,

‘00

0s

ton

ne

s/ye

arTiming of US ethylene expansions

Source: ICIS

www.icis.com

India - the new demand driver, after China?

• Polyolefins demand grew steadily in

2012, overriding a sluggish

economy.

• April to Nov 2012 Market

Estimate: PP demand increased by

16%, LLDPE by 15%, HDPE by 11%

and LDPE by 21%.

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India PE, PP demand (2013)

• Consumption in India is likely to see

steady growth in Q1 2013 on

domestic demand

• However, in early Feb 2013, India

projected weaker GDP growth in the

current fiscal

• Logistics challenges caused by weak

infrastructure

• Significance: Sluggish growth may

dampen polyolefins buying sentiment

Source: Plasopedia

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India PE, PP supply (2013)

• India lifted anti-dumping duty imposed

on Saudi-origin PP in Dec 2011,

supporting imports for most parts of

2012 and early 2013

• Haldia Petrochemical in financial

difficulties - running PE and PP plants

at reduced rates

www.icis.com

No PE addition in India (2012-2013);

Gradual PP addition (2012-2015)

[Pata] GAIL HDPE/LLDPE 500

HDPE/LLDPE 450 (Dec 2013-Jan 2014)[Panipat] Indian Oil

HDPE/LLDPE 650;

PP 600

[Jamnagar, Dahej,

Nagothane, Vadodara]

Reliance PE 1.2m t/yr;

PP 2.7m t/yr

LDPE 400; HDPE/LLDPE

500-600 (2015)

[Haldia] Haldia

HDPE/LLDPE 700;

PP 340

[Bathinda] HPCL-

Mittal Energy Ltd (HMEL)

PP 440 (Dec 2012)

[Assam] BCPL

HDPE/LLDPE 220;

PP 60 (Feb 2014)

[Mangalore] MRPL

PP 440 (Q3 2013)

[Dahej] OPaL

HDPE/LLDPE 2 x 360;

HDPE 340; PP 340

(End 2014)

Source: ICIS;

Note: Data in blue indicate additions;

All capacities are in kt/year

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South Asia PE, PP price outlook (Q1 2013)

Margins

• High feedstock naphtha and crude costs in Q1 2013

Supply

• PP plant capacity expansion in India is gradual in 2013; so, new material not expected to flood market immediately

Demand

• Continued strong demand in downstream markets

• HM film demand hit by plastic bag ban/restrictions across different states (New Delhi - blanket ban on sale, storage and use of plastic bags)

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India polyester capacity expands at high speed

Inflation running at 6-8% for over a year in 2012 and has hurt demand for polyester products

However, polyester capacity is to expand at double digit growth rate

Source: ICIS

India's Polyester Capacity Expansion

5.45.9

7.1

8.18.8 9.0

0

3

6

9

2010 2011 2012E 2013E 2014E 2015E

Unit: million

tonnes/year19%

15%

10%

www.icis.com

India’s polyester demand to grow at 8+%

Source: ICISNote: India‟s domestic polyester demand is assumed to grow at a similar rate as its local production because it exports only a small quantity of polyester.

+8%+8%+7%

+7%+19%

+8%

73%

69%70%

75%

79%

81%

0

3

6

9

2010 2011 2012E 2013E 2014E 2015E

Unit: million

tonnes/year

65%

70%

75%

80%

85%

Operating rate

India's polyester capacity India's polyester production

India's polyester O/R

www.icis.com

India’s edge over China

• Low per capita consumption

• High potential for demand growth

• Growing population

• Rising income levels

• Young consumer base

• Low labour costs compared with China

Challenges

• Unstable political system• Flip-flops in economic policy• Weak infrastructure

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Corporate Structure

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ICIS Global Presence

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What information does ICIS produce?

Chemicals Energy Fertilizers

“Trusted market intelligence for the global petrochemical, fertilizer and energy industries”

Contributions

Chow Bee Lin (Asia polyolefins)

beelin.chow@icis.com

Tel. +65 6780 4398

Muhamad Fadhil (Middle East and South Asia polyolefins)

muhammad.fadhil@icis.com

Tel: +65 6780 4334

Peh Soo Hwee (Asia olefins)

soohwee.peh@icis.com

Tel. +65 6780 4347

Becky Zhang (Asia Fibre Intermediates/Fibres)

becky.zhang@icis.com

Joseph Chang (ICIS Chemical Business)

joseph.chang@icis.com

Malini Hariharan (ICIS training)

malini.hariharan@icis.com