Energy and commodity price benchmarking and market insights › pdf › presentation2014 › argus... · Styrolution Styrene Competitiveness Study Houston, TX Chuck Venezia Vice President,

London, Houston, Washington, New York, Portland, Calgary, Santiago, Bogota, Rio de Janeiro,

Singapore, Beijing, Tokyo, Sydney, Dubai, Moscow, Astana, Kiev, Porto and Johannesburg

illuminating the markets

Energy and commodity price benchmarking and market insights

Styrolution Styrene Competitiveness Study Houston, TX

Chuck Venezia Vice President, Petrochemicals ArgusDeWitt

December 17, 2013


• Styrene Supply and Demand Balances

• Styrene Price Trends and Margins ◦ Price Forecast Trends and Drivers

◦ Styrene Capacity Rationalization

◦ US Shale Gas/Oil Impacts on Ethylene and Energy Competitiveness

• North America Styrene Producers – Ranking Matrix

• Propylene Oxide Impact on Styrene ◦ POSM Competitiveness to EB/SM

◦ Production Cost Analysis for PO Technologies

• Conclusions

Agenda

Styrene Supply and Demand Balances


% Demand

Growth

‘13-’12 ‘14-’13 5-

yr

10-

yr

World 3.3 2.1 2.5 2.5

United

States

7.8 1.5 1.7 0.6

Europe -4.5 0.4 -1.2 -0.8

Middle East 5.9 3.5 3.4 3.3

China 5.3 4.7 4.3 4.1

Global Styrene Supply & Demand-Base Case

60%

65%

70%

75%

80%

85%

90%

95%

0

5000

10000

15000

20000

25000

30000

35000

40000

% O

epra

ting R

ate

(N

am

epla

te)

Capacit

y,

Dem

and k

T

Capacity Demand

Operating Rate 90% Op. Rate

Copyright © 2012 Argus Media Ltd. All rights reserved.


2016 2017 2018 2019 2020 2021 2022

Brazil 250 250 250 250 250 250

China 600 600 1400 1400 2000 2000 2000

Cumulative Speculative Capacity – Base Case



% Demand

Growth

‘13-’12 ‘14-’13 5-

yr

10-

yr

United

States

7.8 1.5 1.7 0.6

United States Styrene Supply & Demand

70%

75%

80%

85%

90%

95%

100%

0

1000

2000

3000

4000

5000

6000

% O

epra

ting R

ate

(N

am

epla

te)

Capacit

y,

Dem

and,

Net

Export

kT

Capacity Demand

Net Export (Import) Operating Rate

90% Op. Rate


• Export volumes grow, as USA becomes incremental supplier to the world

• Advantaged energy, logistics and later olefins will provide competitive edge for EB/SM units

• ORs approach 95% in 2015, then ease as new capacity started in other regions


% Demand

Growth

‘13-’12 ‘14-’13 5-

yr

10-

yr

Europe -4.5 0.4 -1.2 -0.8

Europe Styrene Supply & Demand

70%

75%

80%

85%

90%

95%

0

1000

2000

3000

4000

5000

6000

7000

% O

epra

ting R

ate

(N

am

epla

te)

Capacit

y,

Dem

and,

Net

Export

kT

Capacity Demand Net Export (Import)



• High energy costs and

less competitive

ethylene lead to

reduced operating

rates

• Imports increase, some

further rationalization

could occur


% Demand

Growth

‘12-’12 ‘13-’12 5-

yr

10-

yr

Brazil 13.3 -3.2 3.7 3.6

Brazil Styrene Supply & Demand

65%

70%

75%

80%

85%

90%

95%

100%

105%

110%

0

100

200

300

400

500

600

700

800

900

% O

epra

ting R

ate

(N

am

epla

te)

Capacit

y,

Dem

and,

Net

Export

kT

Capacity Demand Net Export (Import)



• No capacity added until

2017, operating rates

increase to meet

demand growth

• Imports forecasted to

reduce in later period


% Demand

Growth

‘13-’12 ‘14-’13 5-

yr

10-

yr

Middle East 5.9 3.5 2.3 3.4

Middle East Styrene Supply & Demand

65%

70%

75%

80%

85%

90%

95%

100%

105%

0

500

1000

1500

2000

2500

3000

3500

4000

% O

epra

ting R

ate

(N

am

epla

te)

Capacit

y,

Dem

and,

Net

Export

kT

Capacity Demand


90% Op. Rate


• Capacity additions in 2015 and 2016

• Feedstock constraints?

• Rates could be higher depending on Iran

• Possibility of new projects in 2d half of forecast


% Demand

Growth

‘13-’12 ‘14-’13 5-

yr

10-

yr

China 5.3 6.3 4.2 4.3

China Styrene Supply & Demand

65%

70%

75%

80%

85%

90%

95%

0

2000

4000

6000

8000

10000

12000

14000

% O

epra

ting R

ate

(N

am

epla

te)

Capacit

y,

Dem

and,

Net

Export

kT

Capacity Demand


90% Op. Rate


• Domestic product AAGI

is 6.4%/yr. through

2022 while demand

grows at only 4.3%/yr.

for same period.

• Rates constrained by

feedstock supplies and

availability of imports.


% Demand

Growth

‘13-’12 ‘14-’13 5-

yr

10-

yr

South Korea 4.1 -0.4 1.4 0.4

South Korea Styrene Supply & Demand

65%

70%

75%

80%

85%

90%

95%

100%

105%

0

500

1000

1500

2000

2500

3000

3500

4000

% O

epra

ting R

ate

(N

am

epla

te)

Capacit

y,

Dem

and,

Net

Export

kT

Capacity Demand


90% Op. Rate


• Better demand due to exports and restocking

• High energy cost affects competitiveness

• New capacity in 2014 (restart at SK) and in 2015 (Samsung Total)

• Rationalization?

illuminating the markets Copyright © 2013 Argus Media Ltd. All rights reserved.

Net Exports (Imports) (kT)

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

USA 1069 1247 1352 1470 1152 1050 1000 1050 1050 950 850

Brazil (279) (266) (296) (298) (320) (163) (108) (112) (111) (122) (126)

Europe (72) (295) (245) (217) (186) (188) (250) (313) (376) (438) (419)

ME 1671 1791 1854 1986 2077 2326 2294 2472 2444 2461 2536

China (3431) (3515) (3541) (3740) (3805) (4003) (3867) (4049) (3976) (3941) (3826)

Korea 372 423 515 432 641 523 522 520 516 607 471

Japan 1075 1113 941 987 794 754 715 744 773 802 832

India (408) (474) (536) (566) (296) (244) (244) (243) (241) (238) (233)

Thailand (15) (24) (44) (54) (58) (56) (62) (68) (75) (82) (84)

Other Asia 244 222 156 78 3 (72) 84 40 (5) (52) (101)

Styrene Global Trade Flows-Base Case

Central

Europe/ CIS W. Europe

77% Op Rate

Middle East

96% Op Rate

NE Asia

China 89% Op

Rate

SE Asia

S. America

Brazil 95% Op

Rate

N. America

US 89% Op

Rate

Styrene Price Trends and Margins


75

80

85

90

95

100

105

110

115

2010 2011 2012 2013 2015 2014 2015 2016 2017 2018 2019 2020 2021 2022

$/Bbl WTI Dubai Brent

Energy Forecast



0

2

4

6

8

10

12

14

16

18

20

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

$/MM BTU US Europe Middle East China Korea Japan India Brazil Thailand

Natural Gas Forecast



800

900

1000

1100

1200

1300

1400

1500

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

$/T US Europe Middle East China Korea Japan India Brazil Thailand

Benzene Forecast



800

900

1000

1100

1200

1300

1400

1500

1600

1700

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022


Ethylene Forecast



1100

1200

1300

1400

1500

1600

1700

1800

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022


Styrene Forecast



• North America

◦ 2008 Sterling Texas City,

TX (771 KTA)

◦ 2009 Dow Freeport, TX

(640 KTA)

Styrene Facility Closures

• Western Europe

◦ 2009 Total Carling, FR

(350 KTA)

◦ 2009 Styron Terneuzen,

NL (550 KTA)

◦ 2012 Ineos Styrenics Marl,

Germany (350 KTA)

• Asia

◦ May, 2015 Nihon Oxirane,

Japan (440 KTA)



0

200

400

600

800

1000

1200

1400

1600

1800

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

$/T Net Feedstocks VC FC Other Margin

United States Styrene Margin



0

200

400

600

800

1000

1200

1400

1600

1800

2000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022


Europe Styrene Margin



0

200

400

600

800

1000

1200

1400

1600

1800

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022


Middle East Styrene Margin



0

200

400

600

800

1000

1200

1400

1600

1800

2000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022


China Styrene Margin



0

200

400

600

800

1000

1200

1400

1600

1800

2000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022


Korea Styrene Margin



0

200

400

600

800

1000

1200

1400

1600

1800

2000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022


Thailand Styrene Margin



0

200

400

600

800

1000

1200

1400

1600

1800

2000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022


Japan Styrene Margin


Shale Oil/Gas Impact on Ethylene and Energy Competitiveness


EIA Projection for Lower 48 States Gas Production, TCF/Yr


• EIA, in their latest Annual

Energy Outlook, sees

lower 48 natural gas

production rising 44 %

between 2011 and 2040

• Shale/Tight Gas

production is responsible

for all of the growth,

offsetting the decline in

the conventional gas plays


Shale gas impact on US Natural gas and Ethane

• Natural gas deviates from crude oil

• Ethane discount increases as supply increases

• Current ethylene cash cost ≈ $300/mt

0

20

40

60

80

100

120

140

160

BO

E, $

/BB

L

Crude oil Natural gas Ethane Propane Butane


Low price entices U.S. towards ethane away from liquids

0%

10%

20%

30%

40%

50%

60%

70%

80%

Ethane Propane Butane Heavier

0

200

400

600

800

1000

1200

Ethane

Propane

MB

BL/

D

• Ethane’s share of ethylene

production approaching

70%, up from less than 50%

• At the expense of liquids

• Ethane usage currently at

1000 MBBL/D, Up From 800

MBBL/D

• Testing light feed cracking

capability


Ethane should be there…

• Ethane supply estimates vary widely

• Steam cracker demand could jump from 1 million bbl/day to >1.6 million

• Exports expected ◦ Ineos

◦ Others?

0

500

1000

1500

2000

2500

2013 20201

,00

0 b

bls

/day

SC Demand Overhang Low Case

Overhang Possible

Available for export, Inventory, rejection ,etc

US Ethane


US ethylene capacity lags growth until new builds

• Utilization rates currently average above 90% ◦ >95% effective

• Expansions only accommodate modest domestic demand growth in short term

• New builds 2016-18 ◦ Add >33%

• US requires export market to maintain rates 2017/18

• Derivatives announcements catching up…6-7 million kta

78%

80%

82%

84%

86%

88%

90%

92%

94%

0

5000

10000

15000

20000

25000

30000

35000

40000

KTA

Capacity Demand Op Rate

US Ethylene Supply/Demand


ROW ethylene expansions moderate near term

0

2000

4000

6000

8000

10000

2013 2014 2015 2016 2017/18

North America

0

2000

4000

6000

8000

10000

2013 2014 2015 2016 2017 2018

South America

0

2000

4000

6000

8000

10000

2013 2014 2015 2016 2017/18

Africa/Middle East

0

2000

4000

6000

8000

10000

2013 2014 2015 2016 2017 2018

South East Asia


0

2000

4000

6000

8000

10000

2013 2014 2015 2016 2017 2018

East Asia

-10000

-8000

-6000

-4000

-2000

02013 2014 2015 2016 2017

West Europe 0

2000

4000

6000

8000

10000

2013 2014 2015 2016 2017/18

East Europe

Ethylene Net Changes (kta)


Stronger supply/demand fundamentals in near term

…assuming demand recovery


Global Ethylene Capacity/Demand, kta

70%

75%

80%

85%

90%

0

50000

100000

150000

200000

250000

2010 2011 2012 2013 2014 2015 2016 2017 2018

China MTO

NEA

SEA

AME

SA

NA

EE

WE

Demand

OP. Rate

◦ Americas: Moderate growth offsets US expansions; Mexico 2015

◦ AME: Capacity growth slows but watch Iran

◦ Europe: WE rationalization; EE: Russia, Kazakhstan

◦ NEA: China cracker build slows but 8 mil kta MTO/CTO (+75%); Japan rationalization

◦ SEA: India; Malaysia, Indonesia later


Stronger supply/demand fundamentals in near term

…assuming demand recovery



70%

75%

80%

85%

90%

0

50000

100000

150000

200000

250000

2010 2011 2012 2013 2014 2015 2016 2017 2018

China MTO

NEA

SEA

AME

SA

NA

EE

WE

Demand

OP. Rate

◦ Americas: Moderate growth offsets US expansions; Mexico 2015

◦ AME: Capacity growth slows but watch Iran

◦ Europe: WE rationalization; EE: Russia, Kazakhstan

◦ NEA: China cracker build slows but 8 mil kta MTO/CTO; Japan rationalization

◦ SEA: India; Malaysia, Indonesia later


US builds and ROW plans suggest long market in

2017/18



70%

75%

80%

85%

90%

0

50000

100000

150000

200000

250000

2010 2011 2012 2013 2014 2015 2016 2017 2018

China MTO

NEA

SEA

AME

SA

NA

EE

WE

Demand

OP. Rate

◦ NA: US New builds impact felt 2017/2018

◦ SA: Brazil, Peru, Ecuador, Venezuela, Trinidad being considered

◦ AME: Multiple projects being discussed

◦ Europe: A couple projects to watch in EE

◦ Asia: Malaysia and Indonesia; more MTO/CTO in China

PO Technologies


2013 World Styrene Capacities Total (kT)


Region EB/SM

Capacity

POSM

Capacity

Capacity

Total

% POSM

Capacity

North America

4697 1270 5967 21.3%

South America 540 0 540 0%

Europe 3355 2100 5455 38.5%

Middle East/ Africa 2975 0 2975 0%

NE Asia 13008 2145 15153 14.2%

SE Asia 1400 1150 2550 45.1%

World Total 25975 6665 32640 20.4%


• More than 65% of PO production goes into polyether polyols, which are used for production of PU foams ◦ About 40% goes into flexible foams, with the balance being

rigid foams and PU elastomers

• Propylene glycol consumes about 20% of PO production ◦ Antifreeze for deicing runways and aircraft

• Polyethers are another 5% of demand

• PO is also used to produce ◦ Glycerine

◦ Solvents

◦ Surfactants

Market Factors Driving PO Demand


Propylene Oxide Production by Technology


10%

11%

26%

2%

51%

2013 World PO Capacity By Technology 9.1 MM Tons

HPPO

POTBA

POSM

PO Direct

CHPO


PO/TBA Capacity Growth Forecast 2022


2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Huntsman US Port Neches, TX TBA Dehydro 680 680 680 680 680 680 680 680 680 680 680 680 680 680 680 680

Lyondell US Channelview, TX TBA Dehydro 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200

LyondellBasell France Fos-sur-mer TBA Dehydro 610 610 610 610 610 610 610 610 610 610 610 610 610 610 610 610

LyondellBasell The Netherlands Botlek TBA Dehydro 400 400 400 400 400 400 400 400 400 400 400 400 400 400 400

Yantai Wanhua China Yantai, Shandong TBA Dehydro 120 770 770 770 770 770 770 770 770 770

Sinopec Jinling

Company/Huntsman China Nanjing, Jiangsu TBA Dehydro 120 860 860 860 860 860 860 860 860

Sinopec/Lyondell China Ningbo, Zhejiang TBA Dehydro 600 600 600 600 600 600

2,490 2,890 2,890 2,890 2,890 2,890 3,010 3,780 4,520 4,520 5,120 5,120 5,120 5,120 5,120 5,120

PO/TBA based MTBE/ETBE Capacity


POSM and POTBA Yield Ratios


Ratios

POSM 2.2 lb Styrene/lb PO

0.68 lb Ethylene / lb PO

1.8 lb Benzene / lb PO

190 Fixed + Variable Costs $/MT

TBA 2.5 lb MTBE / lb PO

2.2 lb isobutane/lb PO

1.0 lb Methanol / lb PO

295 Fixed + Variable Costs $/MT

200 Other ByProducts (Acetone, Dilute Propylene)

Relative Contributions for SM vs TBA to PO Economics


• Styrene margins will remain strong through 2015

• Styrene Price Trends and Margins

Conclusions



• Styrene Price Trends and Margins ◦ Price Forecast Trends and Drivers


◦ US Shale Gas/Oil Impacts on Ethylene and Energy Competitiveness

• North America Styrene Producers – Ranking Matrix

• Propylene Oxide Impact on Styrene ◦ POSM Competitiveness to EB/SM


• Conclusions

Conclusions



• Styrene Price Trends and Margins

◦ Price Forecast Trends and Drivers


◦ US Shale Gas/Oil Impacts on Ethylene and Energy

Competitiveness

• Propylene Oxide Impact on Styrene

◦ POSM Competitiveness to EB/SM


• Conclusions

Conclusions

London

Houston

Washington

New York

Portland

Calgary

Santiago

Bogota

Rio de Janeiro

Singapore

Beijing

Tokyo

Sydney

Dubai

Moscow

Astana

Kiev

Porto

Johannesburg


Petroleum

LPG/NGL

Petrochemicals

Power

Natural gas/LNG

Coal

Bioenergy

Emissions

Transportation

Fertilizers


Any questions?

Chuck Venezia VP Petrochemicals Argus DeWitt [email protected]

Copyright notice

Copyright © 2013 Argus Media Ltd. All rights reserved. All intellectual property rights in this presentation and the information herein are the exclusive property of Argus and and/or its licensors and may only be used under licence

from Argus. Without limiting the foregoing, by reading this presentation you agree that you will not copy or reproduce any part of its contents (including, but not limited to, single prices or any other individual items of data) in any

form or for any purpose whatsoever without the prior written consent of Argus.

Trademark notice

ARGUS, ARGUS MEDIA, the ARGUS logo, DeWitt, FMB, FUNDALYTICS, ARGUS publication titles and ARGUS index names are trademarks of Argus Media Limited. Visit www.argusmedia.com/trademarks for more information.

Disclaimer

All data and other information presented (the “Data”) are provided on an “as is” basis. Argus makes no warranties, express or implied, as to the accuracy, adequacy, timeliness, or completeness of the Data or fitness for any

particular purpose. Argus shall not be liable for any loss or damage arising from any party’s reliance on the Data and disclaims any and all liability related to or arising out of use of the Data to the full extent permissible by law.

Andy Nicholson VP Petrochemicals Argus DeWitt [email protected]

Documents

Energy and commodity price benchmarking and market insights › pdf › presentation2014 › argus... · Styrolution Styrene Competitiveness Study Houston, TX Chuck Venezia Vice President,