polyethylene global overview
TRANSCRIPT
Polyethylene
Global Overview
Esteban Sagel, Director Polypropylene
Foro Pemex
Junio 2012
Ciudad de Mexico
© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
•Global Overview
•Mexico In The Global Context
•Short Term Forecast & Dynamics
Today’s Presentation
© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
•Global Overview
•Mexico In The Global Context
•Short Term Forecast & Dynamics
Today’s Presentation
© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Polyethylene: Still The Largest Polymer
HDPE 17%
LLDPE 11%
LDPE 9%
PP 25%
PS 5%
ABS 4%
PVC 18%
PET 9%
PC 2%
2012 World Polymer Demand = 211 Million Metric Tons
© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 5
Cost Position Beneficial for PE Growth
0.0 1.0 2.0 3.0 4.0 5.0
ABS
PET
PS
PP
LDPE
HDPE
PVC
LLDPE
Delivered Discounted Basis
2007
2012
U.S. Price, Cents Per Cubic Inch
HDPE
LLDPE
LDPE
© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Growth Generalized, but Uneven
0
20
40
60
80
100
-2.5
-1.0
0.5
2.0
3.5
5.0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
World GDP Growth Demand TotPE Demand LDPE
Demand LLDPE Demand HDPE
GDP Growth, % Demand, Million Metric Tons
AAGR 06-11 AAGR 11-16
LDPE 0.6% 3.5%
HDPE 3.1% 5.3%
LLDPE 4.5% 5.8%
Tot PE 2.9% 5.0%
GDP 2.1% 5.7%
© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
North America
20%
South America
6%
West Europe
15%
Northeast Asia 31% Other
28%
2006-2011 AAGR
West Europe = -2.1%
North America = -1.3%
South America = 4.4%
Northeast Asia = 6.4%
Global = 2.9%
2011 Total Global Demand = 76 Million Metric Tons
Developing World Driving Growth
© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 8
Developing World Driving Growth
North America
18% South
America 7%
West Europe
13%
Northeast Asia 33%
Other 29%
2016 Total Global Demand = 97 Million Metric Tons
2011-2016 AAGR
West Europe = 1.7%
North America = 2.8%
South America = 5.8%
Northeast Asia = 6.5%
Global = 5.0%
© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
-4
-2
0
2
4
6
8
10
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Asia/Pacific Africa/ Middle East North America South America Central Europe/ CIS West Europe Global Demand Change
Capacity, Million Metric Tons
Capacity Continues To Grow
Global Capacity AAGR 11-16: 4.0%
Global Demand AAGR 11-16: 5.0%
© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
In Spite of Growth, Global Market Oversupplied
0%
2%
4%
6%
8%
10%
12%
14%
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
2000 2002 2004 2006 2008 2010 2012 2014 2016
Global Excess Capacity
Cumulative Global Excess Capacity
Excess Capacity as a % of Global Demand
Excess Capacity, Million Metric Tons Excess Capacity as a % of Global Demand
© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
In Spite of Growth, Global Market Oversupplied
82
83
84
85
86
87
88
89
90
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
2000 2002 2004 2006 2008 2010 2012 2014 2016
Global Excess Capacity Cumulative Global Excess Capacity
Global Operating Rate
Excess Capacity, Million Metric Tons Global Operating Rate, %
© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 12
Margins To Recover; Gas Based
Production Enjoys Higher Margins
-600
-400
-200
0
200
400
600
800
1,000
1,200
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
North America West Europe Asia
Dollars Per Metric Ton (Discounted Price, Integrated Producer)
© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 13
North America: Advantaged Production
30
35
40
45
50
55
60
65
70
75
80
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
North America West Europe Southeast Asia
(Integrated Producers) PE Cash Cost, Cents Per Pound
© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
10%
30%
50%
70%
90%
110%
0
4
8
12
16
20
90 92 94 96 98 00 02 04 06 08 10 12 14
Crude (WTI) Natural Gas Gas-to-Crude Ratio
Dollars Per MMBtu Gas -to-Crude-Ratio
Driver of Advantage: Shale Gas
© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 15
China Will Become Increasingly
Self Sufficient
30
35
40
45
50
55
0
5
10
15
20
25
30
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
China Domestic Demand Imports as a % of Domestic Demand
Domestic Demand, Million Metric Tons Imports as a % of Domestic Demand
© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Trade Will Become Very Competitive
15
20
25
30
35
40
0.0
0.5
1.0
1.5
2.0
2.5
Q1-09 Q3-09 Q1-10 Q3-10 Q1-11 Q3-11 Q1-12
China Imports Middle East as a % of China Imports
Imports, Billion Metric Tons % of Middle East
© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 17
Trade Flows to Change
7664
11377
2897
-1906
-1444
-5261
372
-1153
-1169
-6235
2470
-2691
-2789
860
-552
-2441
2011 Net Trade
2016 Net Trade
(Thousand Metric Tons)
© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Global Prices to Tighten Up
661
881
1,101
1,321
1,541
1,761
1,981
30
40
50
60
70
80
90
2006 2008 2010 2012 2014 2016
NAM LLDPE CHINA LLDPE (Spot) Mexico LLDPE WEP LLDPE
Cents Per Pound Dollars Per Metric Ton
© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
•Global Overview
•Mexico In The Global Context
•Short Term Forecast & Dynamics
Today’s Presentation
© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Mexican Petrochemical Demand and Production
0
5
10
15
20
25
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Domestic Demand Production
Million Metric Tons
© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
-6 -4 -2 0 2 4 6 8
Extrusion Coating
Film & Sheet
Pipe & Profile
Blow Molding
Wire & Cable
Injection Molding
Rotomolding
AAGR Domestic
Demand 11-16 = 5.5 %
Mexico Growth Rate, Percent
AAGR 06-11 Demand Change 10-11 AAGR 11-16
Polyethylene Demand in Mexico Growing
© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 22
Mexico: Net Polyethylene Importer
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
South America USA Canada Mexico Americas
Net Trade, Million Metric Tons
© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 23
Where is Material Going to Come From?
North America 98.3%
Middle East 1.0%
Other 0.8%
2011
2011 Total Imports 1.15 MMT
North America 90.0%
Middle East 6.8%
Other 3.2%
2016
2016 Total Imports 1.09 MMT
© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Thousand Metric Tons HDPE LDPE LLDPE Startup Type
2014
Dow Canada Prentiss, Alta Canada 200 (200) 2Q 2014
Westlake Lake Charles, LA United States 3Q 2014
2015
Braskem Idesa Coatzacoalcos Mexico 750 300 1Q 2015
Nova Sarnia Canada 100* 1Q 2015 hypo
Formosa Point Comfort, TX United States 4Q 2015 hypo
2016
Nova Sarnia Canada 400* 4Q 2016 hypo
2017
Chevron Phillips US Gulf Coast United States 500* 500* 3Q 2017 hypo
Dow US Gulf Coast United States 300* 300* 3Q 2017 hypo
Nova Prentiss, Alta Canada 350* 3Q 2017 hypo
2018
Shell Northeast US United States 500* 500* 2Q 2018 hypo
* No firm announcements, CMAI speculation
** Sasol announced a new cracker in Lake Charles, LA (1.4 million tons per year). The startup year was not released.
Braskem Idesa: Will Help Trade Balance;
New Plants in U.S. Will Continue to Compete
© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Mexico Prices To Be Competitive
661
882
1102
1323
1543
1764
1984
2205
30
40
50
60
70
80
90
100
Jan-08 Oct-08 Jul-09 Apr-10 Jan-11 Oct-11 Jul-12 Apr-13
NAM LLDPE CHINA LLDPE (Spot) Mexico LLDPE WEP LLDPE
Cents Per Pound Dollars Per Metric Ton
© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
•Global Overview
•Mexico In The Global Context
•Short Term Forecast & Dynamics
Today’s Presentation
© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Polyethylene Current Situation: US
• Domestic Demand: -.05 %
through April
• Export demand – 12.5 %
through April
• April weakest demand month
of the year
• Prices poised to decline
• Buyers purchasing on as
needed basis only
• ExxonMobil has announced a
4 cent drop for May
• Further drops anticipated
2.0
2.2
2.4
2.6
2.8
3.0
3.2
3.4
Apr-11 Jul-11 Oct-11 Jan-12 Apr-12
Domestic Demand Exports
Million Pounds
© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
• Domestic sales down 2 percent in the first
quarter of this year compared to 2011
• Most contract prices for commodity grades
ended April up by approximately the increase
of the ethylene contract price of €30 to €40 per
metric ton = best margins of 2012
• An initial settlement was agreed upon for the
May ethylene contract price at €1,325 per
metric ton, a decrease of €20 per metric ton
compared to April.
• Polyethylene prices are decreasing well
beyond the ethylene decrease of €20 per
metric ton.
• June prices are forecast to go down strongly.
• Middle Eastern producers are likely to increase
supplies to Europe as a reaction to the
continuing weak demand for imports from
China.
28
PE: Europe
2011
(Q1)
2012
(Q1)
AAGR
11-12
Thousand Metric Tons
Production 2,937 2,841 0.2%
Blow Molding 376 341 -2.7%
Inj. Molding 424 384 -3.5%
Wire & Cable 88 81 -2.8%
Mono/Split 40 36 -3.7%
Film & Sheet 1,565 1,478 -1.3%
Pipe &
Conduit
290 263 -3.3%
Rotomolding 53 50 -2.2%
Coating 3 3 0.9%
Extrusion 111 103 -2.1%
Other 104 95 -3.1%
Dom. Demand 3,053 2,833 -2.1%
Imports 750 636 1.8%
Exports 599 614 4.0%
© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
• In 2012, the trade balance of
HDPE is likely to shift with the
start-up of Saudi Polymers’ HDPE
plants in Al-Jubail, Saudi Arabia
with a combined annual capacity
of 1.1 million metric tons.
• The output of these new plants is
expected to impact Europe as
shareholder Chevron Phillips
does not own polyethylene assets
in Europe.
• The first quarter price increases in
Europe, combined with continued
weakness in the Asian markets,
provide incentive for more imports
into Europe from the Middle East
29
WEP HDPE Integrated Margin
5.0
10.0
15.0
20.0
25.0
2006 2008 2010 2012 2014 2016
Cents Per Pound
© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
• Demand weakened in April and into May
• Market sentiment remains bearish and
trading activities are thin
• Sinopec and PetroChina continue
running at reduced rates due to weak
demand and negative margins
• PE inventories are very high at both
producer and converter: Inventory at the
ports is at 95% of capacity
• The agricultural peak season ended in a
disappointing fashion in mid April
• Supplies from the Middle East are ample
• Further price reductions appear likely
• Some converters are mixing in recycle
PE in order to lower production costs
• China’s Q1 PE imports reached 2.1
million metric tons, 6.5 percent higher
than Q1 2011, but about 8.7 percent
lower than Q1 2010.
30
Asia HDPE Non-Integrated Margin
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
2006 2008 2010 2012 2014 2016
Cents Per Pound
© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
• Polyethylene demand growing on global basis
• Low relative cost helping
• Industry globally oversupplied; demand growth and restrain in
investments will help improve supply and demand balance
• Light feedstock advantage will help Mexico and North America
• Trade to become challenging, as China increases self
sufficiency
• Mexico net importer of PE; situation to remain the same even
after Braskem Idesa starts up
• Mexican prices to remain competitive
• Global markets situation challenging in first half of 2012;
depressed market sentiment to prevail in future months
Conclusions