moving from “irrational exuberance” to a “new …...market share (2017) 42m tonnes (2017) 0.34...

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Moving from “Irrational

Exuberance” to a “New

Normal” in the Polyester &

PET Value Chain

JENNY YISENIOR ANALYST

ANALYTICS &

CONSULTING,

ICIS, ASIA

www.icis.com 2

ICIS is an independent data and analytics provider

focusing on global energy, petrochemical and fertilizer

markets.

Corporate Structure

35years in petrochemical

benchmarks

More than

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ICIS Supply & Demand DataThe ICIS Supply & Demand Database delivers an end-to-end perspective of the global petrochemicals market, covering 160 countries and over 100 products.

Data includes:

Historical and forecast data (1978-2040)

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Import, export and consumption volumes

Plant capacity, production and operating status

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Data breakdown by country, region, product or product family

Key information on over 12,000 refinery units, and 18,500 petrochemicals plants

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Agenda

PET Value Chain Review

Global PET Market Outlook

Macroeconomic Trend for PET

Global PET Supply and Demand balance

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PET Value Chain Review

www.icis.com 10

Polyester Film

ParaxylenePET Melt

PTA(Purified

Terephthalic Acid)

Polyester Fibre

PET Resin

MEG(Mono Ethylene Glycol)

Polymer Demand

Avg. Annual growth

2011-2017

5.5%

5.2%

4.1%

5.8%

5%

28%

66%

Market Share

(2017)

42m tonnes

(2017)

0.34

0.860.67

CF - conversion

factor

CF CF

CF

Melt phase

86m tonnes

(2017)

62m tonnes

(2017)

4.1%

5.1%

5.4%

5.1%

Polymer Demand

Avg. Annual growth

2017-2023

Source: ICIS Supply & Demand Database

Polyester fibre and PET resins are key consumers ofPET melt with a combined market share of >90%

28m tonnes

(2017)

www.icis.com 11


Global PET melt demand maintained rapid growth andoutpaced GDP growth rate

Global PET melt demand

growth trend tracks GDP

growth movements

The average PET melt demand

growth rate was at 7% in 2000-

2017, while the average of GDP

growth rate was at 2.6%

Population growth and better

quality living continue to drive

PET melt demand growth

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

2000

2001

2002

2003

2004

2005

2006

2007

200

8

2009

2010

2011

2012

2013

2014

201

5

2016

2017

Global PET Melt Demand Growth Rate

PET Growth Rate GDP Growth Rate

AA

GR

,%

www.icis.com 12Source: ICIS Supply & Demand Database

Driven by demand, capacity growth of PET value chain outpaced GDP growth rate as well

Global PET capacity growth drives thedevelopment of raw materials PTA andPX

2000-2017 CAGR

PET Melt: 6.5%

PTA: 6.1%

PX: 5.3%

0%

4%

8%

12%

16%

0

20

40

60

80

100

120

20

00

20

01

20

02

20

03

200

4

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

Global PET Melt Capacity Growth Rate

Capacity Growth Rate

Mill

ion

To

nn

es

7.6%

5.5%

-4%

0%

4%

8%

12%

16%

0

20000

40000

60000

80000

20

00

20

01

20

02

20

03

20

04

200

5

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17Global PTA Capacity Growth Rate


Mill

ion

To

nn

es

6.8%5.4%

-4%

0%

4%

8%

12%

16%

0

10000

20000

30000

40000

50000

60000

200

020

01

200

220

03

200

420

05

200

620

07

200

820

09

201

020

11

201

220

13

201

420

15

201

620

17

Global PX Capacity Growth Rate


Mill

ion

To

nn

es

5.1%5.3%

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PET value chain prices were at historically high levels during the rapid development of the markets

PET Value Chain Prices

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Global PET Market Outlook

www.icis.com 15

Source: Lenzing, Textile World

105m tonnes

Synthetic fibres lead the fibres market while polyester leads the synthetic fibres market

Driven by rapid demand growth, polyester fibres now take up not only the largest share in

synthetic fibres, but also the biggest portion in the global fibres market

The demand for polyester fibres will be growing fastest among all fibres, followed by cotton

Total Fibre Demand (million tonnes)

Synthetic fibers, 64%

Wood-based cellulose fibers, 6%

Cotton, 24%

Wool, 1%

Other natural fibers, 4%

Global Fibres consumption in 2017

www.icis.com 16

Note: "A" Index-is a proxy for the world price of cotton.

Source: ICIS & National Cotton Council or America

PET fibres is preferred relative to cotton due to lower cost and predictable availability

Cotton and PET fibres can

replace each other in

applications

Cotton is more susceptible to

natural factors due to long

growth cycle

Polyester fibres have a price

advantage over cotton0

40

80

120

160

200

0

1000

2000

3000

4000

200

5

2006

200

7

2008

200

9

2010

201

1

2012

201

3

2014

201

5

2016

201

7

Cotton VS PET Fibres

PET Fibre Grade FOB NEA Cotton "A Index"

$/t

on

ne

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Source: Statista 2018

PET bottle leads the packaged beverage business, primarily driven by awareness for healthy living

PET bottle is the largest packaging type in the world thanks to its many advantages

Concerns over ground water contamination and quality of tap water drives consumption of

bottled water

Concerns over sugar intake drives consumption of smaller soft drinks packaging

35%

24%

19%

11% 11%

0%

5%

10%

15%

20%

25%

30%

35%

40%

PET Class bottles Cans Cartons Other

Pack mix of beverages worldwide in 2017, by packaging type

share

of

glo

bal p

ack

mix

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Bubble size refers to populations Bubble size refers to populations

PET resins consumption per capita in Asia is below global average and presents an opportunity for further growth

The average consumption per capita of

global PET resins was approximately 3kg in

2016. The consumption level at Asia stood

lower than the global average, which

indicates growth potential in the future.

The average consumption per capita of

global PET fibres was approximately 6.5 kg

in 2016. The consumption level at Asia was

higher than the global average level as

China is the world's largest textile exporter.

GDP (K$/capita) GDP (K$/capita)

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Global PET melt demand forecast growth continues to outpace global GDP growth driven by consumption into PET fibres and PET resins

The growth rate of PET melt demand is

expected to be stable from 2017-2023,

although still higher than global GDP growth

The increase in demand for PET melt is

mainly attributed to demand growth in PET

fibres and PET resins, with fibres

accounting for the largest share, while

resins’ growth will be the highest

3%

4%

5%

6%

10

15

20

25

30

35

2011-2017 2017-2023

PET Melt Phase Demand Growth

Incremental AAGR

Mill

ion

To

nn

es

AA

GR

0%

1%

2%

3%

4%

5%

6%

0

5

10

15

20

25

PET Fibre PET Resins PET Film

PET Melt Phase Demand Growth (2017-2023)

Incremental Demand AAGR

Mill

ion

To

nn

es

AA

GR

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86m tonnes

Asia has the largest consumption area in the world, accounting for 81% of the global total,

largely driven by intake from China

China is expected to remain as the major PET melt consumer in 2017-2023, predominantly in

Polyester fibres

Potential shift in PET fibre demand to low cost manufacturing countries due to R-PET ban in

China

PET melt phase consumption is led by Asia, especially China, and is expected to remain the same in the forecast period

North America8%

Europe6%

Middle East2%

Others3%

China58%

the rest of Asia23%

Asia81%

PET Melt Phase Consumption by Region (2017)

0

5

10

15

20

China ASIA (ExclChina)

NorthAmerica

EUROPE Middle East

Incremental Demand by Key Region (2017-2023)

PET RESINS POLYESTER FIBRES POLYESTER FILM PES RESINS

Mill

ion

To

nn

es

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113m tonnes

Most PET melt phase capacities are forward integrated with PET resins, PET fibres and PET

film manufacturing

Asia is the largest production base, particularly in China

PET melt phase supply by region is very similar to demand

North America

7%

Europe6%

Middle East3%

Others3%

China59%

the rest of Asia22%

Asia81%

PET Melt Phase Capacity by Region (2017)

0

2

4

6

8

10

China ASIA (ExclChina)

NorthAmerica

EUROPE Middle East

Incremental Capacity by Key Region (2017-2023)

Incremental Capacity

Mill

ion

To

nn

es

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20m tonnes

Global recycled PET capacity has enjoyed a stable growth in the past 10 years and more

China is also taking a lead in the global recycled PET capacity, followed by Europe and NorthAmerica

Recycled PET can save resources and reduce environmental pollution, but the lack ofadvanced technology may lead to secondary pollution

Recycled PET capacity in 2017 was dominated by China

ASIA ( Excl China & India )

6%EUROPE

8%

North America8%

China69%

India5%

Others4%

Recycled PET Melt Phase Capacity (2017)

0

20

40

60

80

100

120

140

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

PET Melt Phase Supply

Recycled Capacity Virgin Capacity

Mill

ion

To

nn

es

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In 2018, China banned the import

of post-consumer plastics and

restricted the import of post-

industrial plastics, which will be

prohibited from 2019

In 2018, as China’s R-PET imports

fell sharply, demand shifted to

virgin PET, which will push up

operating rates of virgin PET and

raw materials

Improved domestic recycling

systems and strengthened

recycling of domestic recycled PET

Accelerated the survival of the fittest among domestic recycled PET companies

Polyester manufacturing may shift to other emerging countries in Asia, which allow for the

import of R-PET

Source: China Customs

China’s R-PET Import Ban will boost virgin PET demand

0

100

200

300

400

500

600

700

800

China's import ban on waste plastics

Waste PET Waste PE Waste other plastic

Th

ou

san

d T

on

nes

www.icis.com 24

0%

20%

40%

60%

80%

100%

Naphtha-PX PX-PTA PTA-PET Melt MEG-PET Melt PET Melt-PET,Fib,Film

% in

tegr

ated

cap

acit

y

Lower integration in the mid-stream is likely to result in heavy influence of supply-demand fundamentals on the mid-stream price spread

Naphtha – PX – PTA – PET Melt – PET Resins, Fib, Film

Lower integration in mid

stream in the PET chain

Naphtha-PX, PET melt-PET fibres/resins/film are highly integrated, while integration level is

lower in the mid-stream sectors

The supply-demand fundamentals in the mid-stream sectors have heavy influence on price

spreads

Some major PET producers will begin to extend into the upstream to cover the entire industry

chain


www.icis.com 25

+940

North America

South & Central America

Africa

Europe

CIS

Asia (excl China)

Middle East

PET Net Surplus / Deficit by Key regions (thousand tonnes) (2017 VS 2023)

China

Surplus PET Resins

Deficit PET Resins

PET net trade flows from Asia to rest of the world; China is also the biggest exporter

Surplus PET Fibres

Deficit PET Fibres


-807 -1005-248 -306

2017 2023

-550 -492-761 -692

2017 2023

-1774 -1883

-718 -488

2017 2023-129 -50-304 -304

2017 2023

-266 -379-744 -595

2017 2023

-121

1025705

2017 2023

2195 24581950 1650

2017 2023

1414 1336832

20

2017 2023

www.icis.com 26

+940

North America

South & Central America

Africa

Europe

CIS

Asia (excl China)

Middle East

PX/PTA Net Surplus / Deficit by Key regions (thousand tonnes) (2017 VS 2023)

China

China is the world’s largest PX importer, with cargoes coming from Asia and Middle East, while PTA is roughly balanced in China

Surplus PTA

Deficit PTA

Surplus PX

Deficit PX


-290 -632

386 743

2017 2023

-54

0

-380 -524

2017 2023

185

-378-1090 -1011

2017 2023

90 260

-273 -75

2017 2023

2318 2724

-570 -100

2017 2023

-14039 -13869

-494

1082017 2023

12182 11806

2651 1387

2017 2023

www.icis.com 27

Trade War between China and the US may affect the textile and apparel industry and upstream PET; However, SE Asia may see some gains

269b dollars

106b dollars

United States, 17%

Vietnam, 8%

Indonesia, 10%

Pakistan, 8%

India, 6%

Rest of world, 52%

China PET fibers(Polyester staple fiber) Exports in 2017

United States, 2%

Vietnam, 10%

Turkey, 17%

Pakistan, 8%

Egypt, 14%

South Korea, 8%

Rest of world, 40%

China PET fibers(Polyester filament) Exports in 2017

1.5m tonnes 1m tonnes

United States, 17%

Vietnam, 5%

Japan, 8%

Hong Kong Special Administrative

Region, 5%

United Kingdom, 4%

Rest of world, 62%

China Textiles and Apparel Exports Value 2017

China, 37%

Vietnam, 11%

Indonesia, 4%

India, 7%

Bangladesh, 5%

Rest of world, 35%

US Textiles and Apparel Imports Value 2017

Source: OTEXA, China Customs

www.icis.com 28

Summary

The PET value chain has maintained rapid growth in the past 10 years and more,

especially before the 2008 economic crisis

Under the “new normal” mode, global PET demand and capacity growth is expected to

be flat

Global PET melt phase forecast growth continues to be driven by population growth,

increasing income, higher standards of healthy living

Global PET melt demand forecast growth continues to outpace global GDP growth

driven by consumption into PET fibres and PET resins

Asia is the largest consumption and supply area in the world, predominantly driven by

China, and is expected to remain the same in the forecast period

China’s R-PET Import Ban will boost virgin PET demand

Jenny Yi

Senior Analyst, ICIS Analytics & Consulting

[email protected]

+86-21-5155 0243

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moving from “irrational exuberance” to a “new …...market share (2017) 42m tonnes (2017) 0.34...

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