platts apic presentations friday may 20 2016 michelle kim(final)
TRANSCRIPT
WILL ASIAN SM REMAIN A WINNER IN LOW COST ERA?
MICHELLE CHAEWON KIM SENIOR EDITOR, PETROCHEMICALS APIC May 20, 2016, Singapore
A GLOBAL LEADER IN MARKET INTELLIGENCE
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KEY AGENDA ITEMS
Will SM remain a winner in low cost era?
• SM prices and margins were on an uptick in 2015. Will this trend continue in 2016?
• Will firm ethylene support SM prices?
• How will weaker feedstock BZ market impact on SM prices?
ABS Styrene
Toluene
Xylene
Ethylene
Benzene
6
SM VALUE CHAIN
6
Steam Cracker Natural Gas
BTX Extraction Coal
Reformer Crude Oil
Source: Platts
7
0 100 200 300 400 500
Ethylene
SM
Isomer-MX
BZ
PX
Toluene
2015 Annual Average Production Margin
SM MARGIN WAS THE BEST IN AROMATICS
ICEBrent
atSingaporeMOCMo01
Naphtha
C+FJapa
nCargo
BZFOB
Korea
PropylenePoly
GradeFOB
Korea
TLFOB
Korea
PXFOB
Korea
Iso-MX
FOBKorea
SMFOB
Korea2
EthyleneFOB
KoreaWeekl
y
YoY change(%) -46.217 -43.1 -43.396 -38.698 -36.296 -31.886 -31.603 -28.553 -22.081
2014 average($/mt) 99.6296 861.921 1212.07 1282.35 1038.07 1210.23 1028.39 1489.6 1375.52
2015 average($/mt) 53.5839 490.433 686.08 786.101 661.297 824.339 703.385 1064.28 1071.79
-50
-45
-40
-35
-30
-25
-20
-15
-10
-5
0
0
200
400
600
800
1000
1200
1400
1600SM & C2 did not drop as much as crude
Source: Platts Unit: $/mt
8
SM IN Q1 SHOWS SIMILAR PATTERN -WHAT IT BE LIKE IN Q2-Q4?
•Jan, Feb
•Higher
Firm SM
Higher Firm
C2
•Loss in H1
•Similar TA
•Asahi •320
kt/y Scrap
•Mar avg
•Lower Stock
•Mar avg PS
•Higher Down
Similar Uptick in SM price?
Unit: $/mt
Source: Platts
Downtrend Begins?
0
200
400
600
800
1000
1200
1400
1/2/2015 2/2/2015 3/2/2015
Styrene FOB Korea Q1 2015
0
200
400
600
800
1000
1200
1400
1600
4/1/2015 5/1/2015 6/1/2015 7/1/2015 8/1/2015 9/1/2015 10/1/2015 11/1/2015 12/1/2015
Styrene FOB Korea in Q2-Q4 2015
0
200
400
600
800
1000
1200
1/4/2016 2/4/2016 3/4/2016
Styrene FOB Korea Q1 2016 $1,128/mt Mar 7
$1,154/mt Mar 9
Bullish factors in Q1
DEMAND ANALYSIS
WHAT IMPACTS SM PRICES? - CHINESE EPS, PS, ABS MARKETS IMPORTANT
0.00
0.20
0.40
0.60
0.80
1.00
EPS FR GPPS Benzene HIPS Toluene ICE BrentFuture
Naphtha CIFJapan
Ethylene Paraxylene ABS
26%
32% 21%
4%
4% 5% 8%
Asia Pacific styrene demand (2014)
EPS
PS
ABS
SBR
SBL
UPR
Others
17%
13%
11%
1%
25% 33%
58%
Global SM demand by regions (%) Europe
N.America
Others
ME
Asis(ex China)
China
Coefficient of correlation
Source: Platts, Nexant, METI
WILL CHINA BUY MORE? A CLOSER LOOK AT CHINA’S SM IMPORTS
0
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2010 2011 2012 2013 2014 2015
Annual SM imports into China
Others
Singapore
Taiwan
Japan
Iran
Kuwait
Saudi Arabia
US
Korea -20
-15
-10
-5
0
5
10
15
0
50000
100000
150000
200000
250000
300000
350000
400000
Jan Feb Mar
Monthly SM imports into China
2014 2015 2016 YoY (%)
Korea 33%
US 9% Saudi
Arabia 13%
Kuwait 6%
Iran 5%
Japan 12%
Taiwa
n 12%
Singapore 5%
Others 5%
China’s SM imports by origin
Unit: $/mt Unit: $/mt
+9.4%
Source: METI, China customs
WILL CHINA BUY MORE? A CLOSER LOOK AT CHINA’S DOMESTIC MARKET
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
E. China monthly SM inventory
2015 2016 5-Year Average
Unit: mt
+50%
-120
-70
-20
30
80
130
0
200
400
600
800
1000
1200
1400
1600
3/2
6/2
015
4/2
6/2
015
5/2
6/2
015
6/2
6/2
015
7/2
6/2
015
8/2
6/2
015
9/2
6/2
015
10/2
6/2
015
11/2
6/2
015
12/2
6/2
015
1/2
6/2
016
2/2
6/2
016
3/2
6/2
016
RMB SM < USD SM in 2016
Styrene CFR China MarkerChina domestic SM import parityUSD/RMB spread
Unit:$/mt
USD/RMB spread widens
-$110.97/mt
41.0
43.0
45.0
47.0
49.0
51.0
53.0
55.0
57.0
Ja
n 1
1
Ma
y 11
Se
p 1
1
Ja
n 1
2
Ma
y 12
Se
p 1
2
Ja
n 1
3
Ma
y 13
Se
p 1
3
Ja
n 1
4
Ma
y 14
Se
p 1
4
Ja
n 1
5
Ma
y 15
Se
p 1
5
Ja
n 1
6
Improving China’s PMI
Apr 49.4
Source: Platts, Caixin
WILL DOWNSTREAM REQUIRE MORE SM? – EXPANDABLE POLYSTYRENE
-100
-50
0
50
100
7/1/2015 8/1/2015 9/1/2015 10/1/2015 11/1/2015 12/1/2015 1/1/2016 2/1/2016 3/1/2016 4/1/2016
EPS margin improves
Unit: $/mt
+24%
-30
-20
-10
0
10
20
30
0
5000
10000
15000
20000
25000
30000
Jan/Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2015 Output of Cement(10000 tons) 2016 Output of Cement(10000 tons)2015 Growth Rate(Y-o-Y %) 2016 Growth Rate(Y-o-Y %)
China’s monthly cement output
0
10000
20000
30000
40000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
China’s monthly EPS exports
2015 2016 3-year avg
+7.5%
Source: Platts, China customs, National Bureau of Statistics of China
+9.7%
-10
-5
0
5
10
15
0
5000
10000
15000
Jan/Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2015(100 million yuan) 2016(100 million yuan)2015 Growth Rate(Y-o-Y %) 2016 Growth Rate(Y-o-Y %)
China’s monthly real estate investment
WILL DOWNSTREAM REQUIRE MORE SM? -POLYSTYRENE
-1500
-500
500
1500
2012 2013 2014 2015 2016 2017 2018
Asia PS net balance India
Japan
Indonesia
Vietnam
China
Thailand
Singapore
Korea
Taiwan
Unit: kt
+8.4%
-5
0
5
10
15
0
200
400
600
800
1000
1200
Jan/Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2015(10000 tons) 2016(10000 tons)2015 Growth Rate(Y-o-Y %) 2016 Growth Rate(Y-o-Y %)
China’s monthly plastic products output
0
50,000
100,000
150,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
China’s monthly PS imports
2015 2016 5-year average
-200
-100
0
100
200
300
7/1/2015 8/1/2015 9/1/2015 10/1/2015 11/1/2015 12/1/2015 1/1/2016 2/1/2016 3/1/2016 4/1/2016
GPPS margin improves
GPPS production margin
-15.7%
Source: Platts, METI, National Bureau of Statistics of China
WILL DOWNSTREAM REQUIRE MORE SM? -ABS
0
50,000
100,000
150,000
200,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
China’s monthly ABS imports
2015 2016 5-year average
+4.5%
-200
-100
0
100
200
7/1/2015 8/1/2015 9/1/2015 10/1/2015 11/1/2015 12/1/2015 1/1/2016 2/1/2016 3/1/2016 4/1/2016 5/1/2016
Improving ABS margin dips again
ABS production margin
Firm BD, SM Firm ACN, BD
-30
-20
-10
0
10
20
0
100
200
Jan/Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
China’s monthly car output
2015 Output of Cars(10000 units)2016 Output of Cars(10000 units)2015 Growth Rate(Y-o-Y %)2016 Growth Rate(Y-o-Y %)
-4%
-15
5
25
-500
500
1500
2500
Jan/Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
China’s monthly color TV output
2015 Output of Color TV(10000 sets) 2016 Output of Color TV(10000 sets)
2015 Growth Rate(Y-o-Y %) 2016 Growth Rate(Y-o-Y %)
+25.2%
Firm ACN
Source: Platts, METI, National Bureau of Statistics of China
SUPPLY ANALYSIS
GLOBAL SM SUPPLY – LAGGING EXPANSION, TIGHTER SUPPLY
0
5000
10000
15000
20000
25000
30000
35000
40000
2012 2013 2014 2015 2016 2017 2018
Global SM capacity expansion
Others
NorthAmerica
Middle East
Europe
Asia
Unit: kt
Region North
America Middle East Europe Asia Total
AVG Growth Rate (2012-2018) 0% 0% 0% 3% 1.6%
-6000
-4000
-2000
0
2000
4000
6000
2012 2013 2014 2015 2016 2017 2018
Global SM net balance Malaysia
Europe
India
S. America
China
Korea
Singapore
Japan
N.America
ME
Unit: kt
Source: METI
GLOBAL SM TRADE FLOW
Unit: kt
9%
33%
25%
12%
Source: METI
WILL MORE US SM FLOW INTO ASIA?
-300
-200
-100
0
100
200
300
400
500
0
200
400
600
800
1000
1200
1400
1600
US-Asia SM arbitrage window
Styrene FOB Korea Marker Styrene FOB USG cts/lb
US-Asia SM arbitrage window
Unit: $/mt
Company Location Capacity (kt/year)
Timing Estimated Loss(kt)
Styrolution Sarinia, ON, Canada
0.95(bil/lb) 431(7% among total 6,022)
May, 30 days 35.92
0
500000
1000000
1500000
2000000
2500000
2014 2015
Annual US SM exports by destination
S. America
Europe
Asia Total
Unit: mt
0
200
400
600
800
US NEA WEP
SM production cost comparison
Energy
Ethylene
Unit: $/mt
Source: Platts, Stylorution
SM TRADE FLOW US-ASIA
Source: U.S. Department of Commerce and the U.S. International Trade Commission
01000020000300004000050000600007000080000
Jan Feb Mar
US SM exports to Korea
2015
2016
Unit: mt
0
10000
20000
30000
40000
50000
60000
70000
Jan Feb Mar
US SM exports to China
2015
2016
Unit: mt
China
Korea
20%
6.3%
US
WILL EU SM COMPETE WITH ASIA FOR US SM?
-100
0
100
200
300
400
500
0
200
400
600
800
1000
1200
1400
1600
US-Europe SM arbitrage window
Styrene FOB USG Styrene FOB ARA US-Europe SM arbitrage
Unit: $/mt
Company Location Capacity (kt/year)
Timing Estimated Loss(kt)
Shell Moerdijk, NL
450 Late Mar, 35 days
43.75
Trinseo Boehien, Ger
300 Late Mar, 55 days
45.84
Synthos Oswiecim, PL
130 Q2 2016, 30 days
10.84
Total Capacity Affected
880(17% among total 5,165
Estimated Loss H1
100.43
Source: Platts
European SM TA schedule
SM TRADE FLOW US-EUROPE
Source: U.S. Department of Commerce and the U.S. International Trade Commission
0
10000
20000
30000
40000
50000
Jan Feb Mar
US SM exports to Europe
2015
2016
Unit: mt
Europe
26%
US
TIGHT ASIA-ORIGIN SM
-4500
-3500
-2500
-1500
-500
500
1500
2500
2014 2015 2016 2017 2018
Asia SM net balance
India
Thailand
Vietnam
Taiwan
Indonesia
China
Singapore
Malaysia
Japan
Korea
7% 7%
6%
5%
4%
4%
4%
3%
3%
3% 3%
51%
Asian major SM producers by capacity
Sinopec FCFC Hanwha Total CNOOC-Shell
SKGC LG Chem Secco Lotte
Ellba Idemitsu JP Asahi Kasei Others
Total= appx 17.9 mil mt Korea origin=appx 19%
Unit: kt
Source: METI, Platts
SM TRADE FLOW TO KOREA
13.62%
8.84%
73.75%
96%
Source: Korea customs
SM & DERIVATIVES STARTUP PLANS 2016-2018 – DOWNSTREAM EXPANSION EXCEEDS SM
Product Country Company Location 2016 2017 2018
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
SM
China
Abel Taxing Jiangsu 250?
Changzhou Xinri New Solar Jiangsu 300
CNOOC Ningbo Daxie Zhejiang 300
CNOOC-Shell 700
Total(kt/year) 600 NA 700
Total SM start up in 2016: 600 kt
ABS
China CNOOC-LG Chem Huizhou 150
Keyuan Plastic Guangxi 150
Korea Samsung SDI Yeosu 30
LG Chem Yeosu 100
Saudi Arabia Petrochemya(Sabic) Al-Jubail 50 150
Iran Jam PC Badar Assluyeh 200
Total(kt/year) 330 300 200
Total ABS start up in 2016: 330 kt
PS
China
Astro Chem(Chevron PS) Zangjiagang 120
Sunchem 120
Chimei Zhenjiagang 75
Korea Hyundai EP Ulsan 110
Iran Iran EPS 250
Entekhab Industrial Assaluyeh 100
Total(kt/year)
490 185 100
Total PS start up in 2016: 980 kt
SM SU balance 2016 SM new supply(600 kt) < SM new demand( 688kt)
Source: Platts
WILL TURNAROUNDS SUPPORT SM? PRODUCTION LOSS IN H2>H1
Company Location Capacity (kt/year)
Timing Estimated Loss(kt)
LG Chem Daesan, Korea 170 Mid May, 20 days 9.68
Asahi Mizushima, Japan
390 Mid Feb, 40 days 43.60
Idemitsu
Chiba, Japan 210 Mid Apr-May, 45 days
26.55
Pasir Gudang, Malaysia
240 Mid Apr, 50 days 33.50
Denka Chiba, Japan 270 End May, 60 days 45
NSSM Oita, Japan 190 End Feb, 30 days 15.90
Oita, Japan 230 End Mar, 30 days 19.20
Grand Pacific Tashe, Taiwan 220 Mid Apr, 50 days 31
Total Capacity Affected
1920 Estimated Loss H1 224.43
Company Location Capacity (kt/year)
Timing Estimated Loss(kt)
SKGC Ulsan, Korea 405 Oct, 30 days 33.90
Hanwha Total Daesan, Korea 650 Sep, 20 days 36.20
Idemitsu
Tokuyama, Japan
120 Sep, 30 days 10.20
Tokuyama, Japan
220 Sep, 30 days 18.60
Taiyo Ube, Japan 370 Sep, 30 days 30.90
Secco CaoJing, China 670 Sep, 30 days 56.10
FCFC Mailiao, Taiwan 600 Aug, 30 days 50.10
Shell Seraya, Singapore
360 Jul-Aug, 30 days 30
IRPC Rayong, Thailand
230 Nov, 30 days 19.20
Total Capacity Affected
3625 Estimated Loss H2 285.20
1.05 2.99 2.63
4.71
1.45 2.14
4.21
9.82
2.19 1.24
0.00
5.00
10.00
15.00
-200
-100
0
Feb Mar Apr May Jun Jul Aug Sep Oct Nov
Production loss Percentage in total Asia monthly capacity(%)Unit: kt
Source: Platts
KEY AGENDA ITEMS
Will SM remain a winner in low cost era?
• SM prices and margins were on an uptick in 2015. Will this trend continue in 2016?
• Will firm ethylene support SM prices?
• How will weaker feedstock BZ market impact on SM prices?
28
ETHYLENE TO REMAIN FIRM?
-3000
-2000
-1000
0
1000
2000
3000
4000
5000
2012 2013 2014 2015 2016 2017 2018
Asia ethylene net balance India
Thailand
Philippines
Taiwan
Indonesia
China
Singapore
Malaysia
Japan
Korea
Unit: kt
-400
-300
-200
-100
0
100
200
300
Weakening downstream PE, MEG margins
HDPE margin MEG margin
Unit: $/mt
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2014 2015
China’s ethylene imports by origin Others
Philippines
Thailand
SG
US
Taiwan
Korea
Japan
Unit: mt
Company Location Capacity (kt/year)
Timing
CPC Kaohsiung, Taiwan
500 End Dec 2015
Sumitomo Chemical
Chiba, Japan 415 May 11 2015
Asahi Kasei Mizushima, Japan
470 Feb 15 2016
Total Capacity Affected
1.39 mil mt/year
3% of total Asia capacity(57.3 mil mt/year)
Permanent shutdown of ethylene plants
Source: METI, Platts
29
WILL FIRM C2 SUPPORT SM PRICES?
-100
0
100
200
300
400
500
0
200
400
600
800
1000
1200
1400
1600
1/2
/20
15
2/2
/20
15
3/2
/20
15
4/2
/20
15
5/2
/20
15
6/2
/20
15
7/2
/20
15
8/2
/20
15
9/2
/20
15
10/2
/20
15
11/2
/20
15
12/2
/20
15
1/2
/20
16
2/2
/20
16
3/2
/20
16
Ethylene CFRNE Asia
Styrene FOBKorea Marker
EBSM Margin
Unit: $/mt Firm C2 erodes SM margin
Integrated
Non-integra
ted
Partly integra
ted
Most SM plants integrated in Asia
Integrated
Non-integrat
ed
Partly integrat
ed
Chinese SM plants less integrated
Company Location Capacity (kt/year)
Integration SU Timing
Changzhou Xinri New Solar
Jiangsu, China
300(SM)
C2(175) from MTO BZ from market
Mar-Apr 2016
CNOOC Ningbo Daxie
Zhejiang, China
300(SM) Fully integrated
Jul-Aug 2016
Source: Platts, Market
KEY AGENDA ITEMS
Will SM remain a winner in low cost era?
• SM prices and margins were on an uptick in 2015. Will this trend continue in 2016?
• Will firm ethylene support SM prices?
• How will weaker feedstock BZ market impact on SM prices?
31
WILL BENZENE MARKET REMAIN LONG?
-6000
-4000
-2000
0
2000
4000
6000
2012 2013 2014 2015 2016 2017 2018
US BZ deficit decreased CIS
Africa
Europe
China
N. America
ME
S. America
India
Thailand
Japan
Korea
Unit: kt
-100
-50
0
50
100
150
0
100
200
300
400
500
600
700
800
900
1000
Korea-US BZ arbitrage window shut
Benzene FOB Korea Marker BZ FOB USG Mo03 Korea-US BZ arbitrage
Unit: $/mt
Source: METI, Platts
WHERE ASIAN BENZENE SURPLUS CONSUMED?
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Korean BZ exports to US
2014 2015 2016
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Korean BZ exports to China
2014 2015 2016
Unit: mt
US Korea
Source: Korea customs, China customs
33
WILL LONG BZ WEIGH ON SM PRICES?
-100
0
100
200
300
400
500
600
700
800
900
0
200
400
600
800
1000
1200
1400
1600
1/2
/20
15
2/2
/20
15
3/2
/20
15
4/2
/20
15
5/2
/20
15
6/2
/20
15
7/2
/20
15
8/2
/20
15
9/2
/20
15
10/2
/20
15
11/2
/20
15
12/2
/20
15
1/2
/20
16
2/2
/20
16
3/2
/20
16
BenzeneFOB KoreaMarker
StyreneFOB KoreaMarker
EBSMMargin
Unit: $/mt
-120
-100
-80
-60
-40
-20
0
Mar Apr May Jun Jul Aug Sep Oct
Unit: kt
Weak BZ adds downward pressure on SM BZ monthly production loss due to TA in Asia
Source: Platts
High SM inventory in Apr
Increased US-origin SM in Mar
Weaker European SM
Weak feedstock benzene
Weak but improving demand
Firm feedstock ethylene
Delayed plants startups
TA loss in H2
Recovering crude
CONCLUSION
SM in H2
Another uptick in
Q3?
Stable to weak?
Good margins?
THANK YOU CONTACT DETAILS: MICHELLE CHAEWON KIM, SENIOR EDITOR, PETROCHEMICAL PHONE: +65-6530 6425 EMAIL: [email protected]