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Confidential. © 2018 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited.Confidential. © 2018 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited
Remko Koster, Director, Olefins and Elastomers, IHS Markit
Remko.Koster@IHSMarkit.com
SYNTHETIC RUBBER FEEDSTOCKS -
(ALWAYS) MORE CHANGES TO COME
• 2018 WDK, Frankfurt, October 23, 2018
•
Confidential. © 2018 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited.
Synthetic rubber prices have been volatile…
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SB Rubber Butadiene Styrene
SB Rubber and Feedstocks Price Volatility
Source: IHS Markit © 2018 IHS Markit
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Confidential. © 2018 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited.
… but margins have not been healthy
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Typical Operating Cost
SBR to BDE Price Spread
Source: IHS Markit © 2018 IHS Markit
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Confidential. © 2018 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited
Agenda
• Petrochemical Fundamentals
• Energy
• Feedstocks for Petrochemicals
• Feedstocks
• Ethylene
• Butadiene
• Styrene
• Carbon Black
• Prices and Conclusions
Confidential. © 2018 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited
Petrochemical Fundamentals
Confidential. © 2018 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited.
Ethylene production central in petrochemical industry
Natural Gas
Syn gasCoal MTO/MTP
Ethylene
Propylene
MTO
CTO
Naphtha
Gas Oil Propylene
Pygas
Benzene
Toluene/Xylene
Heavy Aromatics
C5/C6 Non Aromatics
Crude C4
Butadiene
Mixed
Butylenes
Fuel oil
Crude oil Methane/Hydrogen
Gas extraction
plant
NGL fractionator
Refinery
Ethylene
Ethylene
unit
Propane
Butanes
Ethane
Confidential. © 2018 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited.
Brent crude oil prices compared to US natural gas
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Ratio Crude Oil Pipeline Gas TX US
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Brent Crude Oil vs. US Natural Gas
Source: IHS Markit © 2018 IHS Markit
Confidential. © 2018 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited.
Brent crude oil prices compared to European cracker feedstocks
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Crude Oil Naphtha/Brent Propane/Brent Butane/Brent
Steam Cracker Feedstocks
Oil
, D
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Fe
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, R
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Oil
© 2018 IHS MarkitSource: IHS
Confidential. © 2018 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited
Ethylene
Confidential. © 2018 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited.
World ethylene supply and demand profiles for 2018
Ethane40%
Propane8%
Butane5%
Naphtha41%
Gasoil3%MTO
1%
CTO1%
OTC0%
Other1%
Production = 160.5 million metric tons
© 2018 IHS MarkitSource: IHS Markit
HDPE29%
LDPE14%
LLDPE19%
Ethylene Oxide15%
Vinyls9%
Styrenics5%
Alpha Olefins3%VAM
1%
Other5%
Demand = 161.1 million metric tons
End-Uses of Ethylene
© 2018 IHS MarkitSource: IHS Markit
Sources of Ethylene
Confidential. © 2018 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited.
Ethylene capacity growth focused in Asia and US
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World Asia North America Middle East West Europe
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Re
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Ethylene Regional Capacity
© 2018 IHS MarkitSource: IHS Markit
Confidential. © 2018 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited.
Ethylene operating rates heading for a dip post-2021 (not now !)
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Demand Capacity Operating Rate
World: Ethylene Supply & Demand
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World: Ethylene Demand
© 2018 IHS MarkitSource: IHS Markit
Confidential. © 2018 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited.
World ethylene supply growth dominated by ethane, but more naphtha later
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World Ethylene Supply Growth
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© 2018 IHS MarkitSource: IHS Markit
Confidential. © 2018 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited
Butadiene
Confidential. © 2018 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited.
Butadiene Driven by Automotive Trends
• The vast majority of synthetic rubber is consumed in
the automotive market
• Other key end use markets:– Plastic modification
– Coated Paper
– Adhesives
• Only tires are big enough to influence balance
ABS Resins13%
Adiponitrile4%
Polychloroprene Rubber
1%
Nitrile Rubber8%
Polybutadiene29%
S.B. Latex9% SBR (emulsion & solution)
26%
Other10%
World: 2017 Butadiene Demand
Source: IHS Markit
Demand = 11.4 Million Metric Tons
© 2018 IHS Markit
Confidential. © 2018 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited.
Forecast crude C4 production increases depend on B/E assumptions
(Tons Per 100 Tons Ethylene Produced)
Ethane Propane Butane Naphtha Gas Oil
Butadiene 2.5 7.2 8.7 16.5 18.7
Isobutylene 0.0 0.4 0.5 10.0 8.0
Butene-1 0.4 2.5 2.3 4.8 7.5
Butene-2 0.2 1.5 0.8 3.6 4.0
Butanes 0.5 0.2 10.3 1.8 1.3
Total Crude C4 3.6 11.8 22.6 36.7 39.5
Crude C4, % BD 69% 61% 38% 45% 47%
Raffinate 1 1.1 4.6 13.9 20.2 20.8
Raffinate 2 1.1 4.2 13.4 10.2 12.8
Confidential. © 2018 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited.
Will there be enough Crude C4?
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CC4 BD eSBR sSBR PBR ABS
Average Annual Growth Rates 2017 - 2027
Source: IHS Markit © 2018 IHS Markit
Perc
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Confidential. © 2018 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited.
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NAM Asia Others
Source: IHS Markit © 2018 IHS Markit
EU28 Butadiene Exports by Destination
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Butadiene Market Tight in Europe due to BD exports
Confidential. © 2018 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited.
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Regional Butadiene Net Trade
Source: IHS Markit © 2018 IHS Markit
Millio
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World butadiene net trade by region
Confidential. © 2018 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited
Styrene
Confidential. © 2018 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited.
Ethylbenzene
Styrene production routes
PO/SM SBR
PS
ABS/SAN
EPS
Others
UPE
SBL
Propylene Oxide
StyreneEthylene
Benzene
Propylene
Confidential. © 2018 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited.
European styrene at the mercy of global disruptions
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West European styrene margins West European capacity outages Global Outages
West European styrene outages and margin
Source: IHS Markit © 2017 IHS Markit
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Confidential. © 2018 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited.
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North America South America West Europe CIS & Baltic States Middle East
Northeast Asia Southeast Asia Hypothetical Demand Growth
Styrene Monomer: Expansions/Closures
Source: IHS Markit © 2018 IHS Markit
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Large new capacity additions are scheduled to startup in 2020
Confidential. © 2018 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited.
The good times for styrene won’t last forever
• Global growth will remain slow
• New capacity is coming en masse (timing is the
key)
• Trade will diminish amid China’s growing self-
sufficiency
• New trade routes will be established
• Profitability is lower going forward
Confidential. © 2018 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited.
Carbon Black – Availability Problematic in Asia
NAM13%
SAM4%
WEP5%
CEP9%
ME/AF4%
ISC6%
NEA56%
SEA3%
Global Carbon Black Capacity by Region
© 2018 IHS MarkitSource: IHS Markit
Decant oil71%
Ethylene tar
21%
Coal tar8%
Global Carbon Black Production by Feedstock
© 2018 IHS MarkitSource: IHS Markit
• Environmental closures in China and declining feedstocks in Europe and US
• In Asia, many new plants will be constructed
Confidential. © 2018 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited
Price Forecast
Confidential. © 2018 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited.
Rubber feedstock prices less volatile in forecast… but ?
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2007 2009 2011 2013 2015 2017 2019 2021 2023
Brent Ethylene Butadiene Styrene
Select Commodity Price Trends
Source: IHS Markit © 2018 IHS Markit
Ind
ex
,2
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7=
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0%
Confidential. © 2018 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited.
Conclusions
• Ethylene market dynamics in the US and China drive the world.
> Ethylene in good supply generally
> Coproduct yields trend higher eventually
• Butadiene supply should improve in Asia and North America
> Trade becomes a smaller market factor
• Good times for styrene cannot continue forever
> Currently experiencing longest period of positive margins in memory
> Capacity additions and trade action will eventually hurt market
Confidential. © 2018 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited.
Forecast risk
Short term
> Unplanned events
> Base energy volatility
> Cracker feedslate changes
> Asia market speculation
Longer term fundamentals
> Crude oil and natural gas price dynamics
> Mobility evolution
> Plastic waste measures
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