Bi Weekly Polymers Price Outlook and Strategy...LDPE Injection 106.15 100‐108.5 Negative INR 109 LLDPE ... 413.1 million barrels in the week ending 30th Jan 2015, from 406.7 million

Discuss with our expert Phone: +91‐40‐33 404040 E‐mail: [email protected] Internet: www.transgraph.com

Discuss with our expert Phone: +91‐40‐33404040 E‐mail: [email protected] Internet: www.transgraph.com

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` Price outlook for coming 3‐4 weeks

Details Current price Expected Range Expected direction Turnaround point

PP Injection 76.27 74‐80 Mixed INR 81

HDPE Injection 84.83 79‐88 Negative INR 91

LDPE Injection 106.15 100‐108.5 Negative INR 109

LLDPE Injection 81.76 76‐84 Negative INR 85

PET Bottle grade 89.65 91‐97 Negative INR 97

All prices except LDPE are producer prices basic rate in INR per Kg LDPE prices are inclusive of excise duty.

Procurement strategy – Review and update Indian polymers procurement

Product Procurement Month

Feb‐15 Mar‐15

PP Injection Price 30% in the range of INR 76.27‐74. Price remaining 70% of Feb’15 requirement around INR 74‐71.

Wait for pricing

HDPE Injection 30% of requirements completed at INR 84.83. Price remaining 70% of Feb’15 requirement around INR 82‐79.

Wait for pricing

LDPE Injection Price 30% in the range of INR 106.15. Price remaining 70% of Feb’15 requirement around INR 104‐101.

Wait for pricing

LLDPE Injection Price 30% in the range of INR 82. Price remaining 70% of Feb’15 requirement around INR 78‐75.

Wait for pricing

PET Bottle grade 30% of requirements completed at INR 89.65. remaining 70% of Feb’15 requirement around INR 86‐83

Wait for pricing

Global polymers procurement

Product Procurement Month

Feb‐15 Mar‐15

Asia (South Korea)

PP Injection Price 30% in the range of USD 1025 and remaining 70% of Feb’15 requirements around USD 980‐950.

Wait for pricing

Bi‐Weekly Polymers Price Outlook and StrategyDec i s ion enab l ing cash marke t ana ly s i s & pr i ce out look

Feb 06, 2015

Bi-Weekly Polymers Price Outlook and Strategy

HDPE Injection Price 30% in the range of USD 1140 and remaining 70% of Feb’15 requirements around USD 1100‐1070.

Wait for pricing

LDPE Injection Price 30% in the range of USD 1160 and remaining 70% of Feb’15 requirements around USD 1100‐1080.

Wait for pricing

LLDPE Injection Price 30% in the range of USD 1180 and remaining 70% of Feb’15 requirements around USD 1150‐1120.

Wait for pricing

PET Bottle grade Price 30% in the range of USD 940 and remaining 70% of Feb’15 requirements around USD 900‐880.

Wait for pricing

Middle East (Saudi Arabia)

PP Injection Price 30% in the range of USD 980 and remaining 70% of Feb’15 requirements around USD 930‐900.

Wait for pricing

HDPE Injection Price 30% in the range of USD 1120 and remaining 70% of Feb’15 requirements around USD 1080‐1050.

Wait for pricing

LDPE Lamination (Qatar)

Price 30% in the range of USD 1300 and remaining 70% of Feb’15 requirements around USD 1250‐1220.

Wait for pricing

LLDPE Injection Price 30% in the range of USD 1150 and remaining 70% of Feb’15 requirements around USD 1100‐1080.

Wait for pricing

Europe (Germany)

PP Injection Price 30% in the range of EUR 1130 and remaining 70% of Feb’15 requirements around EUR 1080‐1050.

Wait for pricing

HDPE Injection Price 30% in the range of EUR 1115 and remaining 70% of Feb’15 requirements around EUR 1090‐1070.

Wait for pricing

LDPE GP Price 30% in the range of EUR 1155 and remaining 70% of Feb’15 requirements around EUR 1100‐1080.

Wait for pricing

LLDPE Butene Price 30% in the range of EUR 1140 and remaining 70% of Feb’15 requirements around EUR 1100‐1080.

Wait for pricing

Procurement window for next month starts from 16th of current month till 15th of procurement month – Base Case

Feedstock Market analysis – Upstream (Crude oil and Naphtha)

Crude oil prices gained sharply during the past fortnight from the lowest levels recorded in the past five years. The positive price momentum in market is majorly supported by the declining oil rig counts, cutting of capital expenditure by oil majors and easing pressure on dollar index.


Meanwhile, US crude oil inventories increased sharply for the fourth consecutive week renewing concerns in the market about surplus supply situation. Stocks increased by 6.33 million barrels to 413.1 million barrels in the week ending 30th Jan 2015, from 406.7 million barrels, record high levels since 1982.

Further, stocks at Cushing refinery hub also witnessed build in the last week by 2.5 million barrels, the overall stock count to 41.4 million barrels from 38.8 million barrels in the previous week. Inventories at Cushing are now about 1.1 million barrels higher compared to last year, adding to the concerns of supply glut.

Meanwhile, total product demand in US declined by 9% to 18.6 MBpd in the week ending 30th Jan 2015, from 20.5 MBpd, a week earlier, which is likely to fuel the concerns in the market. However, four weeks average demand is still about 2% higher compared to last year. This clearly distinguishes the current fall in raw material prices compared to 2008, where demand sharply retreated.

Weekly refinery input increased in the past week, though by a marginal 288 KBpd to 15.5 MBpd from 15.2 MBpd and refinery utilization also improving from 88% to 89.9%. Going ahead, US oil workers union strike at nine refineries from last Sunday to bring about the new national contract covering the workers in 63 refineries across the country is likely to affect the refinery activity and expected to result in further inventories build.

Oil rig count in US declined by 7% by the end of Jan 2015 to 1223 rigs from 1317 rigs, a week earlier. Total oil rigs have declined by 17.5% during the last month as the lower prices have impacted the capital expenditure of the oil companies. Although the rig count has seen decline production continues to surge due to the yield from shale formations and may take more time to show impact on the US production.

Global oil major BP decided to cut its capital expenditure to USD 20 billion significantly lower than earlier guidance of USD 24‐26 billion owing to sustained weakness in prices, which is likely to increase the optimism in the market about decline in surplus supply. However, planned reduction is mostly confined to upstream areas like exploration and marginal which is not likely to impact production significantly.

Russia’s oil production continues to be consistent despite the weakness in oil prices with oil output in January standing at 10.66 MBpd, although marginally lower than 10.67 MBpd from earlier month.

On the economic front, People’s Bank of China announced a cut in reserve requirement ratio (RRR) for Chinese banks by 0.5% point from February 5 to 19.5%, along with additional RRR cut of 0.5% for city commercial banks in order to boost the liquidity in the market. This is the first broad‐based RRR cut by the central bank since May 2012 and is expected to support crude prices in the short term on expectations of better demand amidst slowdown concerns.

Weakness in the USD dissipated in owing confidence in the market about underlying strength in US economy. Going ahead, investors will be looking forward to nonfarm payrolls data scheduled to release on 6th Feb’15, which is expected to reinforce the strength in US economy and result in gains in dollar.

Going ahead, crude oil prices are likely to trade in a mixed to bearish tone in coming weeks as the bearish sentiment due to lingering concerns of supply overhang and record high inventories in US are likely to offset by expectations of excess supply decline after falling count of oil rigs in January’15.

At the naphtha front, markets have been on a continuous decline from August 2014 to the mid January’15 with the buying sentiments waning in the wake of weak crude oil prices. Asia’s naphtha prices declined in line with global crude futures amid uncertainties in the global economy and an oversupply of the petrochemical feedstock (naphtha). Naphtha prices were down by 20% in January’15 compared to December’14.


Later, Asian naphtha prices have recovered from the lowest levels below USD 400 per ton amidst improving demand from the Asian markets ahead of Chinese lunar holidays and tighter supplies. Further, prices are buoyed by the lower naphtha inflows from US where refinery strikes are on‐going in which 9 US refineries and petrochemical plants.

At European front, supplies of naphtha remained tight amidst improving utilization from the petrochemical units in Europe and healthy demand from Asia and hence should support naphtha prices in the coming weeks.

At Indian front, naphtha demand declined during the current fiscal year amidst lower consumption from the fertilizer and power sectors. Exports too plummeted by 17% during Apr‐Dec’14 period due to falling global prices and on‐going supply glut throughout the world.

India’s Bharat Petroleum Corp Ltd (BPCL) exported 35,000 tons of naphtha from Mumbai at a higher rates amidst improving demand

Meanwhile, Indian government is likely to re impose customs duty on crude oil and its products in the upcoming Union Budget FY 2015‐16. A 2.5% customs duty on crude oil would essentially mean that customs duty on naphtha would be at 10% as there has to be a duty differential of at least 2.5% between crude oil and the petroleum products. Increase in duty could increase landed cost of the product which would eventually lead to higher naphtha prices and other downstream products.

Going ahead, demand for naphtha from the petrochemical sector remained reasonably strong buoyed by continued high cracker run rates in the Asia‐Pacific region. Further, possibility of Chinese stocking activity before the lunar New Year in the end of January could lead to revival of demand sentiments thereby supporting prices on any fall in the coming weeks.

Petrochemical value chain price decline – Comparison of 2014‐15 and 2008

2014‐15

Commodity 30‐Jun‐14 5‐Feb‐15 Change (%) Commodity 30‐Jun‐14 5‐Feb‐15 Change (%)

USD‐INR 60.45 62.30 3.06% HDPE India 109.83 84.83 ‐22.76%

Brent Spot 111.08 51.74 ‐53.42% HDPE South Korea 1650 1140 ‐30.91%

Naphtha 990.00 494.50 ‐50.05% PP India 105.27 76.27 ‐27.55%

Ethylene 1450 880 ‐39.31% PP South Korea 1565 1025 ‐34.50%

Propylene 1300 785 ‐39.62% PET India 106.40 89.65 ‐15.74%

PTA 1015 590 ‐41.87% PET South Korea 1300 940 ‐27.69%

MEG 1020 790 ‐22.55% Polymer price decline only 50% of crude oil price decline while RM decline around 70%

2008

Commodity Jul‐08 Dec‐08 Change (%) Commodity Jul‐08 Dec‐08 Change (%)

USD‐INR 42.75 48.45 13.33% HDPE India 88.76 43.26 ‐51.26%

Brent Spot 143.60 34.08 ‐76.27% HDPE South Korea 1950 750 ‐61.54%

Naphtha 1254.50 244.00 ‐80.55% PP India 94.90 37.40 ‐60.59%

Ethylene 1660 420 ‐74.70% PP South Korea 2080 680 ‐67.31%

Propylene 1900 330 ‐82.63% PET India 83.40 55.80 ‐33.09%

PTA 1215 530 ‐56.38% PET South Korea 1540 870 ‐43.51%


MEG 1205 410 ‐65.98% Polymer price decline 70% of crude oil price decline while RM decline around 90%

Crude oil in USD/bbl, Naphtha, Ethylene, Propylene, PTA, MEG and South Korea prices in USD per ton Indian prices are for Injection grade (RIL basic rate) in INR per Kg

Market analytics – Polyethylene

Summary price outlook

Last Closing (HDPE) INR 84.83 per Kg as on Feb 05, 2014

Fundamental summary – Key price drivers

Increase in supply of ethylene with cracker restarts Lower demand for PE during New Year Holidays in China Recovery in upstream naphtha and crude prices Margins remain healthy in the PE market while fall in naphtha

prices amidst higher ethylene margins indicate that there is some room to fall in ethylene prices in the weeks ahead.

Technical Summary Price likely extend bearish trend towards INR 80‐79. On the higher side price can find resistance around INR 88

Price Outlook Summary Concisely, Price is likely to extend the bearish trend towards INR 79 upon holding below INR 88 in the coming 1‐2 months.

Fundamental analytics Feedstock (Ethylene) Scenario

Ethylene prices declined in Asian and European markets during the past fortnight amidst sluggish demand. Weaker downstream PE demand and pricing trends further contributed towards the bearish pricing undertone that had gripped the spot ethylene markets.

European ethylene prices have plummeted to the lowest levels since Dec’2009 amidst recent upstream crude oil and naphtha slump creating an oversupply. Going ahead, some of the plants would restart dung the mid‐February with a combining capacity of 750,000 tons per annum is likely to restrict any gains in ethylene prices.

Further, supply in US would also improve significantly in 2015 compared to 2014, with several cracker restarts including Formosa’s cracker and Chevron Philips Chemical at Texas coupled with the completion of expansion projects. Unplanned cracker outages left US with an average of 8‐12% of capacity loss during March‐November 2014.

Downstream industries may not resume production till early march, and several producers in China are expected to either cut their production or shutdown their operations during the lunar holidays which would lead to higher ethylene supplies and resulting in fall in prices.

Going ahead, any recovery in the upstream crude and ethane prices would support ethylene prices in the coming weeks. Further, rising supplies could restrict any price gain in ethylene in the near term.

Product (Polyethylene) Scenario

PE prices slumped to lowest levels since August 2010 at Asian markets during the past fortnight owing to the on‐going volatility in the upstream ethylene and energy prices. Due to bleak market outlook, demand for PE across regions has been limited as most of the buyers remain at sidelines amid volatile market.


Availability of imports from Asia and the Middle East is expected to be strong at lower prices as most producers in China are keen to reduce inventories at this time ahead of New Year holidays.

At domestic front, PE prices remained unchanged by RIL for the month of February’2015 on the back of growing expectation of demand recovery ahead of summer season.

Indian PE demand was higher by 5% during the Apr‐Dec’14 period amidst healthy demand from film packaging, molded products (FMCG, Pharma and Food Packaging) and paper/woven sacks lamination packaging sector. While the demand has got affected by weaker construction activities during winter season at the domestic front. Going ahead, we expect the demand for PE would continue in the packaging sector during winter season and hence would be favorable for prices.

Haldia Petrochemicals Ltd has resumed commercial operations on 4th, February’15 which remained closed for more than seven months as the fresh funds are being pumped to the project by the institutional financial lenders. Earlier the plant has been shutdown since 7th July, 2014 due to technical issues and unavailability of working capital.

Going ahead, we expect with the new capacity additions which have already come on to the stream, higher PE supplies would be seen which would weigh on Asian PE prices. Shutdown of operations by the producers in China could also support the weakness in polyethylene prices in the coming weeks. We expect demand may recover post New Year holidays and would also restrict the price fall in the coming months.

Plant Updates (Ethylene and Polyethylene)

Formosa Petrochemical Corp (FPC) is likely to curtail run rates at three naphtha crackers in January 2015. The run rates at the plant would be reduced to 90% of production capacity levels. The intended run rates have been attributed to falling olefin margins. The company operates three naphtha crackers in Mailiao, Taiwan with ethylene capacity of 2.93 million tons and propylene capacity of 1.465 million tons.

Royal Dutch Shell has restarted its ethylene cracker in Singapore during the past week after an expansion from 800,000 tons to 960,000 tons per year capacity, following a 3‐month maintenance turnaround.

Pucheng Clean Energy Chemical (PCEC) plans commenced its new polyethylene (PE) plant (capacity 300 KTPA), in Shanxi province in China, on 16th, December, 2014.

A JV plant between Shaanxi Yanchang and Zhongmei Yulin has shut down one of the two PE lines (capacity 600 KTPA) in the mid December’14 owing to technical issues. It remains unclear when the company plans to restart operation at the line. Meanwhile, the company managed to operate second line on availability of feedstock ethylene.

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Polyethylene chain margins

Naphtha (USD/ton) HDPE (USD/ton) Ethylene (USD/ton)

Ethylene on RHS, HDPE and Naphtha on LHS


Total Petrochem located at Belgium with 70,000 tons of HDPE capacity has shut its operations permanently from the end 2014 amidst weaker margins due to increasing cheap imports.

Lyondel basell located at France with 320,000 tons of LDPE capacity was also shut from the end 2014 owing to production issues.

HPL, located at West Bengal, India is scheduled to restart by the end of January’15. The plant has the production capacity of 700 KTPA of ethylene, 330 KTPA of HDPE and 370 KTPA of LLDPE.

Indian ethylene and PE supply‐demand balance

Ethylene PE 2013‐14 2014‐15 2013‐14 2014‐15

Capacity 4.16 5.64 3.745 3.965 Production 3.99 5.17 2.912 3.124 Imports 0.05 0.03 1.056 1.270 Exports 0.00 0.00 0.141 0.105 Apparent Consumption 4.04 5.19 3.827 4.289 Capacity utilization (%) 95.86% 91.63% 77.76% 78.79% Source: CPMAI, All units in million tons

Technical analysis – HDPE Injection, India

HDPE Injection prices have extended the bear market and closed at INR 84.83 in the last session. Price has surpassed the Fib’s clustered support region of INR 88 indicating that price likely to continue towards the next support level of INR 79‐80 region, hence price left a spike on higher side while breaking the support region of INR 88, giving some possibility of pullback action towards INR 88 levels. Staying below INR 91 the bearish impact still intact.

After the end of 6 years bull market, price traded at INR 115.83 for couple of months and after sharply declining without a single higher price revision which indicating panic sentiment in price trend. Hence any relief bounce is restricted to INR 91 levels.

The panic selling in price is not even resting at the clustered support region and the angle of fall could compare with 2008 bear market. ( price corrected more than 61.8% of 2008 bear market already and equal length of correction can’t be ruled out which comes around INR 72‐70)

On the lower side, INR 80‐79 region could act as immediate support followed by INR 70. On the higher side, Price likely to find immediate resistance around INR 88 followed by INR 91.


Concisely, Price is likely to extend the bearish trend towards INR 79 upon holding below INR 88 in the coming 1‐2 months. Market analytics – Polypropylene


Last Closing INR 76.27 per Kg as on Jan 15, 2015


Recovery in crude and propylene prices Rising supplies and weaker demand for propylene amidst

shutdown of PP plants Lower polypropylene prices amid recovery in naphtha and

propylene prices indicate rise in PP prices will be possible in the coming weeks

Technical Summary The bearish trend can hold the support of INR 74 region. INR 78‐80 region could act as resistance.

Price Outlook Summary Concisely, Price is likely to consolidate in the range of INR 74‐78 in the coming 2‐5 weeks, any close below INR 74 could extend the bear trend towards INR 65 levels.

Fundamental analytics Feedstock (Propylene) Scenario

Despite bearish upstream energy values, propylene prices in Asia firmed during the past fortnight. Prices climbed sharply on the back of strong buying action witnessed in key markets like China ahead of the Lunar New Year holidays in February’15.

Meanwhile, following a maintenance shutdown by 3 PP plants in Asian and Middle East region with a combined capacity of 1.3 million tons per annum during February’15 and March’15 should lead to increase in supply of propylene which will limit the gains in propylene in the coming weeks.

Further, weak demand for PP and the falling prices, some of the PP producers are forced to reduce their operating rates which in turn affect the demand for propylene feedstock. Hence rising supplies of propylene could support the weakness in the near term.

At US front, propylene prices surged amidst tight supply due to several announced refinery turnarounds as low energy values have weakened margins on gasoline production.

Going ahead, increasing supply of propylene and decline in demand coupled with capacity shutdowns of PP plants during the New Year holidays is likely to weigh on propylene prices in the coming weeks.

Product (Polypropylene) Scenario

Asian polypropylene prices declined in the past fortnight owing to the sharp fall in crude and naphtha prices and weak buying trends across regions.

At domestic front, RIL rolls over PP prices for the month of Feburayr’15 at INR 76.27/Kg for PP injection molding. While it has reduced offers of BOPP homo polymer by INR 3/Kg with effective from 01st February, 2015.

The sharp decline in upstream energy prices have also had a bearish impact on the polymer film prices over the past month with Indian film producers revising their prices down by around 3‐4% during February month.


Indian PP demand rose by 5.3% Y/Y during Apr‐Dec’14 period with improving demand from raffia packaging, non‐woven, multi‐filament, automotive and appliances sector. Further, auto sales during Apr‐Dec’14 remained higher after the Government cut the excise duty rebate on auto sector(in 2014, auto sales have increased by 10.5% Y/Y).

Going ahead, abolition of excise duty rebate on auto and consumer durable goods sector could limit the demand in the medium term.

Several plants in Middle East and Asia have announced maintenance shutdowns which could lead to a capacity loss of nearly 1 million tons in the month of February’15 and hence resulting in tightness of PP supplies.

At European front, PP market continued to witness weakness in PP prices and sellers were offering the polymer at higher discounts to speed up their sales. Meanwhile, buyers are reluctant to buy PP at several locations including Italy, Belgium and North West Europe anticipating that the prices would correct further during February amidst lower demand.

Going ahead, expectation of recovery in demand ahead of Chinese lunar holidays and gains in upstream propylene prices coupled with the PP plant shutdown would be supportive for PP prices in the near term. At the domestic front, recovery in propylene prices and tightness in PP supply would limit the weakness in PP prices.

Plant Updates (Propylene and Polypropylene)

Hyosung Corp, South Korea has shut its propane dehydrogenation (PDH) plant, located in Ulsan, South Korea, for maintenance turnaround on January 6, 2015. The plant will remain shut for around 25 days. The plant has a propylene production capacity of 200,000 tons per year.

Taekwang Industrial Corp has shut its propane dehydrogenation (PDH) plant, located in Ulsan, South Korea, for maintenance turnaround during mid January’15. The plant will remain shut for around one month. The plant has a propylene production capacity of 250,000 tons per year.

JX Nippon Oil and Energy has shut its olefins conversion unit (OCU) owing to weak economic fundamentals. The unit was shut on January 6, 2015. A restart date for the unit could not be ascertained. Located in Kawasaki, Japan, the unit has a propylene production capacity of 140,000 tons per year.

Shell Chemicals shut its cracker for a maintenance turnaround during end‐October’14, located in Pulau Bukom, Singapore. The cracker has a propylene production capacity of 450,000 tons per year. The cracker is expected to remain shut for around three months.

Haldia Petrochemical is scheduled to restart its petrochemical complex (propylene capacity of 330 KTPA) by the end of January, 2015. The complex has been closed since first week of July 2014 owing to technical problems in a gas compressor at its naphtha cracker.

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Polypropylene chain margins

Propylene (USD/ton) PP (USD/ton) Naphtha (USD/ton)

Naphtha on RHS, PP and Propylene on LHS


Guangxi Beihai Petrochemical located at China with 200 KTPA of PP capacities is running at lower operating rate (70%).

Indian propylene and PP supply‐demand balance

Propylene PP 2013‐14 2014‐15 2013‐14 2014‐15

Capacity 4.42 4.82 4.92 4.98 Production 4.15 4.51 4.21 4.60 Imports 0.00 0.00 0.39 0.30 Exports 0.01 0.01 0.82 1.08 Apparent Consumption 4.14 4.50 3.84 4.12 Capacity utilization (%) 93.96% 93.63% 85.65% 92.37%

Source: CPMAI, All units in million tons Technical analysis – PP Injection, India

Polypropylene Injection prices have unchanged from almost one month of time period after made a low of INR 76.27.

Price consolidating from last one month which is generally consider as continuation formation for the existing trend, hence the Fib’s clustered support region of INR 74 could provide support immediately but due to heavy selling pressure breaching of INR 74 can’t be ruled out.

Price witnessed a sharp decline from the start of Nov’14 at the high of INR 106.77 which corrected 50% of the last 6 years bull market.

The recent sharp decline momentum in price is larger than the any corrective moves in the last 6 year bull market which indicating that the fall could be primary correction and we can expect 61.8% of the bull market which comes around INR 65 levels.

On the lower side, INR 74 region could act as strong support, any early close below INR 74 could leads towards INR 66 levels.

On the higher side, price likely to find resistance around INR 80. Concisely, Price is likely to consolidate in the range of INR 74‐78 in the coming 2‐5 weeks, any close below INR 74 could extend the bear trend towards INR 65 levels.


Market analytics – Polyethylene Terephthalate (PET)


Last Closing INR 89.65 per Kg as on Feb 05, 2015


Ample availability of PTA Production cuts and MEG plant shutdowns Falling PTA margins amid recovering crude and naphtha prices

indicate we might witness rise in PTA prices in the coming weeks ahead.

Technical Summary On the lower side price could find support around USD 83.5 followed by INR 80.

On the higher side price can find resistance around INR 92‐94.

Price Outlook Summary Concisely, Price is likely to trade lower towards INR 83.50 honoring resistance of INR 94 in the coming few weeks.

Fundamental analytics Feedstock (PTA. MEG and PX) Scenario

PTA prices in Asia declined to below USD 600 per ton lowest level since April 2009 during the past fortnight owing to weaker upstream PX values coupled with the crippled buying sentiments across Asian region in the view of curtailed demand from China.

Decline in upstream PX values amid plentiful of product availability and sluggish downstream polyester demand trends together pressured PTA prices lower in the Asia‐pacific region.

Looking ahead, Asian PTA market is continued to be oversupplied during 2015. Nearly 13.1 million tons of PTA is expected to add this year. New capacity additions in China and India would lead to import lower volumes during 2015.

Oversupply caused by new capacities coupled with cautious buying from PTA producers, resulted in significantly weaker deltas. PTA markets continued to remain oversupplied. Demand was weak initially during the quarter, but improved subsequently with demand from polyester sector aided by better downstream margins. Along with shutdowns and controlled Chinese production, margin decline was contained at 6% Q/Q in OND 2014.

MEG prices increased to USD 790 per ton during the past fortnight due to supply tightness in the region. Several MEG plants have operating at lower rates in China and some of the plants are announcing plant shutdowns anticipating lower demand ahead of New Year holidays. Demand is expected to improve post Festive season in polyester fiber which would restrict price fall in the Asian market.

Earlier, MEG markets were largely guided by the upstream markets and co‐feedstock PTA demand patterns. Prices declined 15% on a Q‐o‐Q basis in OND 2014. Chinese port inventories declined towards the end of the quarter, which helped stem the price drop. As a result, MEG margins improved 8% on a Q‐o‐Q basis.

Going ahead, gains in MEG prices would continue due to improving demand from the end sector ahead of summer season and marginal tightness amidst lower operating rates. Recovery in upstream crude prices during winter season might limit weakness in PTA and MEG prices.

Product (PET) Scenario


Southeast Asian PET prices declined sharply to USD 940 per ton lowest levels since April 2009 amidst weaker energy prices coupled with the improving availability of PET in the region following new capacity additions.

At domestic front, RIL revised down PET prices by INR 4/Kg from 1st, February, 2015 due to dull buying trends and falling upstream energy prices.

The sharp decline in upstream energy prices have also had a bearish impact on the polymer film prices over the past month with Indian film producers revising their prices down by around 3% during the month of January.

Domestic demand for polyester remained stable with marginal growth rate at 3% Y/Y in FY’14. Polyester Yarn markets witnessed price drops reflecting the feedstock trends, but lower prices supported a revival in demand. Inventory levels remained low across the chain which helped producer margins. Despite a 14% decline in prices Q/Q, margins increased 60% with falling intermediate feedstock prices.

Going ahead, demand for PET bottles is expected to increase in the coming weeks ahead of summer season which would be supporting PET prices in the end of February and March. While, lower demand during China festive season could limit price gains in the near term.

Plant Updates – Plants cutting back operating rates

Oriental Union Chemical Corp located at Taiwan a Mono ethylene glycol (MEG) plant with 250,000 tons per year has announced to shut its plant since early January’15 for a month.

Polychem is planning to shut its MEG plant located at Indonesia with 120,000 tons of capacity in the first half of February month for a maintenance turnaround. The plant is likely to shut for 1 month.

Jiaxing Petrochemical has shut a purified terephthalic acid (PTA) plant owing to technical issues on January 6, 2015. The exact restart schedule for the same could not be ascertained. Located at Jiaxing in Zhejiang province of China, the plant has a production capacity of 1.5 million tons per year.

Mitsubhishi Chemicals has shut its PTA plant due to mechanical issues on 20th, January, 2015. The restart schedule could not be ascertained. Plant has a production capacity of 685,000 tons per year and located at Ningbo, China.

Polyplex has started its new polyethylene terephthalate (PET) plant at the end‐January 2015. Located at Corlu in Turkey, the plant has a production capacity of 210,000 tons per year.

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PET chain margins

Naphtha (USD/ton) PET (USD/ton)

PTA and MEG on RHS, Naphtha and PET on LHS


Some of the plants in Asia that are reported to be operating a lower rates are as below:

Plant Location Country Product Capacity (KTPA)

Operating rate

Drop in rates

Nippon Shokubai Chitori Japan MEG 165 70% 15‐20% Sinopec Shanghai Petrochemical Shanghai China MEG 220 80% 15‐20% Oriental Union Chemical Corp Lin Yuan Taiwan MEG 300 70% 15‐20% Shandong Hualu‐Hengsheng Chemical Shandong China MEG 50 80% 15‐20% Sinopec Zhenhai Refining & Chemical Zhenhai China MEG 650 75% 15‐20%

PTMEG Ulsan South Korea MEG 30 80% 10‐15%

Hengli Petrochemical Dalian China PTA 2200 85% 10‐15% Indian PET and RM supply‐demand balance

PTA MEG PET

2013‐14 2014‐15 2013‐14 2014‐15 2013‐14 2014‐15

Capacity 4.530 5.678 1.300 1.300 1.662 1.662

Production 3.450 4.182 1.040 1.138 1.498 1.611

Imports 0.942 0.250 0.864 0.876 0.020 0.020

Exports 0.003 0.000 0.064 0.065 0.860 0.706

Apparent Consumption 4.389 4.432 1.840 1.950 0.791 0.865

Capacity utilization (%) 76.16% 73.65% 80.00% 87.54% 90.13% 96.93%

Source: CPMAI, All units in million tons Technical analysis

PET Bottle Prices have continued the bearish trend and closed at INR 89.65 in the last session. After minor halt Price has surpassed the stronger support region of INR 92 levels which indicating further bearish trend to continue towards INR 81 levels and any corrective bounce is restricted to INR 92‐94 levels.


Price has surpassed the multiyear low of INR 93 levels and corrected larger amount than 2008 bear market resumed the bearish trend after 3 months consolidation around INR 110.40 and in the last month price surpassed the multi month low of INR 100.90 which indicating further down trend to continue towards INR 80.

On the downside, price likely to find immediate support around INR 83.50 followed by INR 80. On the higher side, 92‐94 regions could act resistance.

Concisely, Price is likely to trade lower towards INR 83.50 honoring resistance of INR 94 in the coming few weeks. Facts and figures

Raw Material Prices

Market 5‐Feb‐15 22‐Jan‐15 Change % change

Crude oil, Brent, USD/bbl 57.75 47.99 5.22 11.3%

Crude oil, WTI, USD/bbl 51.61 46.39 5.22 11.3%

Naphtha, C+F, Far East, USD/Ton 494.50 432.50 62.00 14.3%

Ethylene, CFR India, USD/Ton 880.00 920.00 ‐40.00 ‐4.3%

Ethylene, FOB Korea, USD/Ton 830.00 880.00 ‐50.00 ‐5.7%

Propylene, CFR India, USD/Ton 785.00 700.00 85.00 12.1%

Propylene, FOB Korea, USD/Ton 780.00 745.00 35.00 4.7%

PTA, CNF India, USD/Ton 590.00 600.00 ‐10.00 ‐1.7%

MEG, CNF India, USD/Ton 790.00 735.00 55.00 7.5%

Resin and film prices (India)

Polymer Grade 5‐Feb‐15 22‐Jan‐15 Change % change

HDPE

Injection 84.83 90.83 ‐6.00 ‐6.61%

Blow Molding 82.29 88.29 ‐6.00 ‐6.80%

Film 83.46 89.46 ‐6.00 ‐6.71%

LDPE

Injection 106.15 106.15 0.00 0.00%

Milk Pouch 106.94 106.94 0.00 0.00%

General 101.75 101.75 0.00 0.00%

LLDPE

Injection 81.76 87.76 ‐6.00 ‐6.84%

Film 80.26 86.26 ‐6.00 ‐6.96%

Extrusion Coating 83.24 89.24 ‐6.00 ‐6.72%

PP

Injection 76.27 76.27 0.00 0.00%

Random Copolymer 81.89 81.89 0.00 0.00%

BOPP Homo polymer 81.10 84.10 ‐3.00 ‐3.57%

Block Copolymer 79.36 79.36 0.00 0.00%

PET Bottle 89.65 93.65 ‐4.00 ‐4.27%


BOPP film* 12 micron 160.00 165.00 ‐5.00 ‐3.03%

BOPET film* 12 micron 136.00 140.00 ‐4.00 ‐2.86%

HDPE, LLDPE, PP and PET prices are RIL basic prices in INR/Kg LDPE prices are Indian producer basic prices in INR/Kg (inclusive of excise duty) BOPP and BOPET film prices are monthly producer basic prices in INR per Kg (Exclusive of VAT)

International Resin prices

Grade Market 5‐Feb‐15 22‐Jan‐15 Change % Change

HDPE, Injection South Korea 1140 1230 ‐90.00 ‐7.32%

HDPE, Injection Saudi Arabia 1120 1210 ‐90.00 ‐7.44%

HDPE, Injection Germany 1115 1165 ‐50.00 ‐4.29%

LDPE, Injection South Korea 1160 1280 ‐120.00 ‐9.38%

LDPE, Lamination Qatar 1300 1400 ‐100.00 ‐7.14%

LDPE, GP Germany 1155 1210 ‐55.00 ‐4.55%

LLDPE, Injection South Korea 1180 1270 ‐90.00 ‐7.09%

LLDPE, Injection Saudi Arabia 1150 1240 ‐90.00 ‐7.26%

LLDPE, Butene Germany 1140 1180 ‐40.00 ‐3.39%

PP, Injection South Korea 1025 1125 ‐100.00 ‐8.89%

PP, Injection Saudi Arabia 980 1080 ‐100.00 ‐9.26%

PP, Injection Germany 1130 1180 ‐50.00 ‐4.24%

PET, Bottle South Korea 940 1010 ‐70.00 ‐6.93%

All prices are in CIF India in USD/Ton; Germany prices are in Euro/Ton

Indian Parity calculations

Spreads and landed cost differentials

Market 5‐Feb‐15 22‐Jan‐15 Change % change

Naphtha‐Crude oil differential 139.36 81.76 57.60 70.45%

Ethylene margin 385.50 507.50 ‐122.00 ‐24.04%

Propylene margin 290.50 267.50 23.00 8.60%

PTA margin 95.50 162.50 ‐67.00 ‐41.23%

MEG margin 295.50 292.50 3.00 1.03%

HDPE Import parity 5.78 5.47 0.31

NA LDPE Import parity 26.39 17.19 9.20

LLDPE Import parity ‐1.02 ‐1.12 0.10

PP Import parity 6.17 ‐1.48 7.65

PET Import parity 24.35 23.54 0.81

Import Parity – (Domestic –Landed cost differential) are in INR/Kg Margin is product compared to Naphtha and are in USD/T


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