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ICIS Presentations during APIC 2017 Committee Meetings
• Delicately Tweaking China Polyolefin Sector Sustainability to Trump US Export Surge• Survival of the fittest – Are the non-traditional olefins and polyolefins routes sustainable in
the low-oil, low-naphtha price environment? • The road ahead for Asia’s styrene and feedstocks• Asia vinyls market review and the revival of China as an export player• Gas or coal-to-olefins (CTO) – Will it ever work in the current low oil price environment? • Exploring the intertwining relationship between propylene oxide (PO) and polyether
polyols
Click on the bullet points below to access the presentation of your choice
Asia Petrochemical Industry Conference |19 May 2017 | Sapporo, Japan
www.icis.com 2
Delicately Tweaking China Polyolefin Sector Sustainability to Trump US Export Surge
Amber LiuSenior manager, ICIS
www.icis.com 3
Stay on top of developments across Asian polyolefins markets
Pricing information
- Polyethylene- Polypropylene
Request your free sample report >>
We produce reliable price assessments and analyses covering Asian polyolefins markets, including price histories and a 12-month rolling price forecast , enabling you to understand price drivers and settle your contract prices more confidently. Our pricing coverage includes:
- Propylene- Ethylene
Real-time news serviceBe the first to receive breaking chemicals news, including updates on plant capacities, output and shutdowns.
Real-time Supply and Demand Data for ChinaView real-time supply and demand data on China's chemicals, with real-time forecast updates on production, imports, consumption by demand segments as well as net balance.
• Identify your target market and maximise volumes and margins• Increase speed and accuracy of business decisions• Increase productivity and save time by eliminating the manual process
of collating and calculating for supply and demand information
Request a FREE demo
Request a free trial
Supply and demand data We give you an end-to-end perspective across the global petrochemical and refinery supply chain, enabling you to grasp the local or regional scenario in a global context. Data includes import and export volumes, consumption, plant capacities, production and product trade flows – from 1978 up to 2030.
Request a free demo
https://www.icis.com/contact/free-sample-price-report/?channel=chemicals&commodity=chemical&cmpid=ILC|CHEM|CHCCH-2017-GLOBAL-EVT_SGC_APIC_Postevent-pdflinks&sfid=701w00000019Ovshttps://www.icis.com/contact/enquire-about-china-live-supply-and-demand/?commodity=chemicals&channel=chemicals&cmpid=ILC|CHEM|CHCCH-2017-GLOBAL-EVT_SGC_APIC_Postevent-pdflinks&sfid=701w00000019Ovshttps://www.icis.com/contact/enquire-about-icis-global-supply-and-demand-service/?commodity=chemicals&channel=chemicals&cmpid=ILC|CHEM|CHCCH-2017-GLOBAL-EVT_SGC_APIC_Postevent-pdflinks&sfid=701w00000019Ovshttps://www.icis.com/contact/request-free-trial-icis-news/?commodity=chemicals&channel=chemicals&cmpid=ILC|CHEM|CHCCH-2017-GLOBAL-EVT_SGC_APIC_Postevent-pdflinks&sfid=701w00000019Ovs
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Cost changes competitiveness•Diversification of olefins processes differentiate the costs of polyolefins and change the domestic supply structure
Demand becomes a major driver•Industrial structure adjustment deepens and downstream sectors are on the way to segmentation
Global trade flow shifts•Expanding capacity breaks local supply-demand balance and import & export arbitrage attracts market focus
Hot topics in the polyolefins market•Challenges and opportunities brought by policies in the petrochemical industry, effects of the depreciation in the Chinese yuan on import & export and so on
www.icis.com 5Copyright © 2016 ICIS www.icis.com 5
OCT
Ethane steam cracking
PDH
CTO/MTO/MTP
Naphtha, light diesel, hydrogenated tail oil steam cracking
1
23
4
5
Feedstock diversification
Diversification of feedstock olefins differentiates the costs
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Polyolefin producers’ profits vary significantly
Diversification of olefins production processes leads to differentiation in producers‘ profits
Source: ICIS
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
2013 2014 2015 2016 2017E 2018F 2019F 2020F
CNY/tonne
Methanol-based
Propane-based
Coal-based
Naphtha-based
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Start-up of coal-based PP projects is delayed on worse margins
Note: Powdered PP capacity is not included
Source: ICIS
1.31.31.3
4.2
11.6
Crude oil
Coal
Propane
Methanol
Purchased propylene
Changes in feedstock diversification (2016 VS 2020)
Unit: million tonnes
Designed capacity=19.7
2016 2020
Designed capacity=25.4
Purchased
propylene5%
Methanol
7%
Propane
8%
Coal21%
Crude oil
59%
Purchased
propylene6%
Methanol
6%
Propane
7%
Coal34%
Crude oil
47%
1.51.61.8
8.5
12.0
Crude oil
Coal
Propane
Methanol
Purchased propylene
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Start-up of coal-based PE capacity is delayed on worse margins
Data Source: ICIS
Changes in feedstock diversification (2016 VS 2020)
Unit: million tonnes
Designed capacity=16.2
2016 2020
Designed capacity=20.6
0.1 0.7 2.4
13.0
Crude oil
Coal
Methanol
Purchased ethylene
Purchased
ethylene
1%
Methanol
4%Coal15%
Crude oil
80% 0.1 0.8
5.9
13.7
Crude oil
Coal
Methanol
Purchased ethylene
Purchased
ethylene
1%
Methanol
4%
Coal29%
Crude oil
66%
www.icis.com 9Copyright © 2016 ICIS www.icis.com 9
Cost changes competitiveness•Diversification of olefins processes differentiate the costs of polyolefins and change the domestic supply structure
Demand becomes a major driver•Industrial structure adjustment deepens and downstream sectors are on the way to segmentation
Global trade flow shifts•Expanding capacity breaks local supply-demand balance and import & export arbitrage attracts market focus
Hot topics in the polyolefins market•Challenges and opportunities brought by policies in the petrochemical industry, effects of the depreciation in the Chinese yuan on import & export and so on
www.icis.com 10Copyright © 2016 ICIS www.icis.com 10
Supply-demand of polyolefins in major regions
Production Demand
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
2010 2015 2016 2017E 2018F 2019F 2020F
tonnes
ASIA AND PACIFIC
NORTH EAST ASIA
MIDDLE EAST
AFRICA
FORMER USSR
EUROPE
SOUTH & CENTRAL AMERICANORTH AMERICA
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
2010 2015 2016 2017E2018F2019F2020F
tonnes
ASIA AND PACIFIC
NORTH EAST ASIA
MIDDLE EAST
AFRICA
FORMER USSR
EUROPE
SOUTH & CENTRAL AMERICANORTH AMERICA
Source: ICIS Supply and Demand Database
www.icis.com 11
New US crackers under construction, FID made
9 new crackers = 10.8m tonnes/yearThrough 2018/2019 = 9.3m tonnes/year
Data Source: ICIS
Company C2 capacity (kt/year) Downstream (kt/year) Location Start-Up
OxyChem/Mexichem 544 Feed existing VCM plant of 1,050 Ingleside, Texas Q1 2017 (done)
Dow Chemical 1,500ELITE PE (400), LDPE (350), EPDM (200), elastomers (320) Freeport, Texas Mid-2017 (mech complete Q1)
ExxonMobil Chemical 1,500 mLLDPE plus LLDPE (650 x2) at Mont Belvieu Baytown, Texas End 2017
Chevron Phillips Chemical 1,500 Bimodal HDPE (500), mLLDPE (500) at Sweeny Cedar Bayou, Texas Q4 2017, PE mid-2017
Formosa Plastics 1,250PE (525), LDPE (625.5), MEG (1,000), plus DEG, TEG, PEG Point Comfort, Texas H2 2018
Sasol 1,500LDPE (450), LLDPE (450), EO/EG (300), ethoxylates, detergent alcohols (300) Lake Charles, Louisiana
H2 2018LDPE early 2019, Others H2 2019
Westlake (Axiall)/Lotte 1,000MEG (700) by Lotte, feed into existing PVC for Westlake St Charles, Louisiana Q4 2018
Shintech 500 VCM (300), PVC (300), caustic soda (200) Plaquemine, Louisiana 2018
Shell 1,500 HDPE/LLDPE (550 x2), HDPE (500) Monaca, Pennsylvania Early 2020s
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Expansions of existing US crackers, plus 1 restart
Expansions about 1m tonnes/year + new crackers 9.3m = 10.3m, or 36% of existing US capacity by 2018/2019
Data Source: ICIS
Company Capacity (kt/year) Location Status/Start-Up
Dow Chemical 250 Plaquemine, Louisiana Started up Nov/Dec 2016
LyondellBasell 363 Corpus Christi, Texas Completed Jan 2017 but op issues. End Q2 expected
Westlake Chemical 32 Calvert City, Kentucky H1 2017
Indorama (restart) 370 Lake Charles, Louisiana End 2017
LyondellBasell 250 Channelview, Texas Evaluating for 2020s
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The 2nd wave? – visibility clearing
Data Source: ICIS
Company Capacity (kt/year) Downstream (kt/year) Location Start-up Status
Total/Borealis/NOVA 1,000
Borstar PE (625) + existing PE (400) Port Arthur, Texas End 2020 FID end 2017
Shell 1,500 HDPE/LLDPE (2x 550), HDPE (500)Monaca,
Pennsylvania Early 2020s Construction late 2017
SABIC/ExxonMobil 1,800 PE (2 units), MEG Corpus Christi, Texas ---
PTT GlobalChemicals 1,000
HDPE (700), MEG (500), EO (100)
Belmont County, Ohio 2021
Evaluating,FID Q4 2017
Formosa Plastics 1,200 LDPE, HDPE, EG Louisiana --- Evaluating
Odebrecht/Braskem 1,050 PE (3 units)
Wood County,West Virginia --- On hold
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M tonnes
1.7
0.7
3.9
1.2
2.7
6.5
0.3
Middle East 15.7
Europe4.0
Asia & Pacific2.1
North East Asia9.7
S&C America2.4
Former USSR0.2
Africa3.0
North America5.8
2.30.8
2.3
2.1
0.4
0.2
0.3
0.3
North America Exports 2020 vs 2015, ‘000 tonnes
Northeast Asia +1,280
Asia & Pacific +827
S&C America +402
Europe +269 Source: ICIS Supply and Demand Database
Global polyethylene trade flow (2015 vs 2020)
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Cost changes competitiveness•Diversification of olefins processes differentiate the costs of polyolefins and change the domestic supply structure
Demand becomes a major driver•Industrial structure adjustment deepens and downstream sectors are on the way to segmentation
Global trade flow shifts•Expanding capacity breaks local supply-demand balance and import & export arbitrage attracts market focus
Hot topics in the polyolefins market•Challenges and opportunities brought by policies in the petrochemical industry, effects of the depreciation in the Chinese yuan on import & export and so on
www.icis.com 16Copyright © 2016 ICIS www.icis.com 16
Above the threshold for five consecutive months
Feedstock and product replenishment
Stronger demand
PMI index increased, solid foundation for a stable economy
Source: National Bureau of Statistics of China
42
44
46
48
50
52
54
PMI 新订单指数 产成品库存指数 原材料库存指数Index of Inventory index of finished goods
Inventory index of raw material
www.icis.com 17Copyright © 2016 ICIS www.icis.com 17
Development in downstream sectors
PP PE
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2010 2015 2016 2017E2018F2019F2020F2025F
non-wovenpipeothersinjection moldingfibre productsplastic film
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2010 2015 2016 2017E 2018F 2019F 2020F 2025F
plastic filminjection moldingblow moldingpipeagricultural filmsothersdrawingwire & cablecoating
Data Source: ICIS
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Cost changes competitiveness•Diversification of olefins processes differentiate the costs of polyolefins and change the domestic supply structure
Demand becomes a major driver•Industrial structure adjustment deepens and downstream sectors are on the way to segmentation
Global trade flow shifts•Expanding capacity breaks local supply-demand balance and import & export arbitrage attracts market focus
Hot topics in the polyolefins market•Challenges and opportunities brought by policies in the petrochemical industry, effects of the depreciation in the Chinese yuan on import & export and so on
www.icis.com 19Copyright © 2016 ICIS www.icis.com 19
Establish 5-8 petrochemical and chemical demonstration bases
Upgrade ethylene feedstock and improve units’ competitiveness
Moderately develop MTO and PDH technologies, increase the proportion of non-oil based products in ethylene and propylene output
Further implement the Belt and Road Initiative, support domestic producers’ participation in the exploration and exploitation of overseas resources, especially the oil and gas resources, methanol, ethylene and derivatives based on shale gas in North America
China 13th five-year Petrochemical and Chemical Industry Development Plan
3.6
4.7
6.6
8.8
6.7
0
1
2
3
4
5
6
7
8
9
10
0
10
20
30
40
50
60
70
80
90
Ethylene Propylene PX Methanol MEG
CAGR, %Million tonnes
20152020CAGR
Source: China Ministry of Industry and Information
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Seven petrochemical bases, further development of refining-chemical integration projects
CNOOC and Shell, 10/1
ZRCC, 15/1.2
Unit: million tonnes
Refinery/Ethylene
Gaoqiao Petrochemical, 15/1
Fujian Gulei, 16/1.2Sinochem Quanzhou, 30/2
Mao-Zhan Integration, 10/8
Zhejiang Petrochemical, 40/2.8
Changxing Island
Caojing, Shanghai
Huizhou, Guangdong
Gulei, Fujian
Caofeidian
Ningbo, Zhejiang
Lianyungang, Jiangsu
Petrochemical base
Source: ICIS
Hengli Petrochemical, 20Sinopec, 12/1
Shenghong Petrochemical, 16
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Depreciation in the Chinese yuan
Increased export
Stimulate domestic demand
Effects of depreciation in the Chinese yuan on PP import & export
一美元折合人民币(期末数)(元)
Source: People’s Bank of China
Dollar-Yuan exchange rate
Source: China customs and ICIS
0
100
200
300
400
500
600
2010 2011 2012 2013 2014 2015 2016 2017E2018F2019F2020F
Unit: KT PP Export Trend
www.icis.com 22
Stay on top of developments across Asian polyolefins markets
Pricing information
- Polyethylene- Polypropylene
Request your free sample report >>
We produce reliable price assessments and analyses covering Asian polyolefins markets, including price histories and a 12-month rolling price forecast , enabling you to understand price drivers and settle your contract prices more confidently. Our pricing coverage includes:
- Propylene- Ethylene
Real-time news serviceBe the first to receive breaking chemicals news, including updates on plant capacities, output and shutdowns.
Real-time Supply and Demand Data for ChinaView real-time supply and demand data on China's chemicals, with real-time forecast updates on production, imports, consumption by demand segments as well as net balance.
• Identify your target market and maximise volumes and margins• Increase speed and accuracy of business decisions• Increase productivity and save time by eliminating the manual process
of collating and calculating for supply and demand information
Request a FREE demo
Request a free trial
Supply and demand data We give you an end-to-end perspective across the global petrochemical and refinery supply chain, enabling you to grasp the local or regional scenario in a global context. Data includes import and export volumes, consumption, plant capacities, production and product trade flows – from 1978 up to 2030.
Request a free demo
https://www.icis.com/contact/free-sample-price-report/?channel=chemicals&commodity=polyolefins&cmpid=ILC|CHEM|CHCCH-2017-GLOBAL-EVT_SGC_APIC_Postevent-pdflinks&sfid=701w00000019Ovshttps://www.icis.com/contact/enquire-about-china-live-supply-and-demand/?commodity=chemicals&channel=polyolefins&cmpid=ILC|CHEM|CHCCH-2017-GLOBAL-EVT_SGC_APIC_Postevent-pdflinks&sfid=701w00000019Ovshttps://www.icis.com/contact/request-free-trial-icis-news/?commodity=polyolefins&channel=chemicals&cmpid=ILC|CHEM|CHCCH-2017-GLOBAL-EVT_SGC_APIC_Postevent-pdflinks&sfid=701w00000019Ovshttps://www.icis.com/contact/enquire-about-icis-global-supply-and-demand-service/?commodity=polyolefins&channel=chemicals&cmpid=ILC|CHEM|CHCCH-2017-GLOBAL-EVT_SGC_APIC_Postevent-pdflinks&sfid=701w00000019Ovs
www.icis.com 23
Survival of the Fittest – are the non-traditional olefin/polyolefin routes sustainable in a low oil price environment?
Dr Regan HartnellSenior ConsultantICIS Analytics & Consulting
www.icis.com 24
Stay on top of developments across Asian polyolefins markets
Pricing information
- Polyethylene- Polypropylene
Request your free sample report >>
We produce reliable price assessments and analyses covering Asian polyolefins markets, including price histories and a 12-month rolling price forecast , enabling you to understand price drivers and settle your contract prices more confidently. Our pricing coverage includes:
- Propylene- Ethylene
Real-time news serviceBe the first to receive breaking chemicals news, including updates on plant capacities, output and shutdowns.
Real-time Supply and Demand Data for ChinaView real-time supply and demand data on China's chemicals, with real-time forecast updates on production, imports, consumption by demand segments as well as net balance.
• Identify your target market and maximise volumes and margins• Increase speed and accuracy of business decisions• Increase productivity and save time by eliminating the manual process
of collating and calculating for supply and demand information
Request a FREE demo
Request a free trial
Supply and demand data We give you an end-to-end perspective across the global petrochemical and refinery supply chain, enabling you to grasp the local or regional scenario in a global context. Data includes import and export volumes, consumption, plant capacities, production and product trade flows – from 1978 up to 2030.
Request a free demo
https://www.icis.com/contact/free-sample-price-report/?channel=chemicals&commodity=polyolefins&cmpid=ILC|CHEM|CHCCH-2017-GLOBAL-EVT_SGC_APIC_Postevent-pdflinks&sfid=701w00000019Ovshttps://www.icis.com/contact/enquire-about-china-live-supply-and-demand/?commodity=chemicals&channel=polyolefins&cmpid=ILC|CHEM|CHCCH-2017-GLOBAL-EVT_SGC_APIC_Postevent-pdflinks&sfid=701w00000019Ovshttps://www.icis.com/contact/request-free-trial-icis-news/?commodity=polyolefins&channel=chemicals&cmpid=ILC|CHEM|CHCCH-2017-GLOBAL-EVT_SGC_APIC_Postevent-pdflinks&sfid=701w00000019Ovshttps://www.icis.com/contact/enquire-about-icis-global-supply-and-demand-service/?commodity=polyolefins&channel=chemicals&cmpid=ILC|CHEM|CHCCH-2017-GLOBAL-EVT_SGC_APIC_Postevent-pdflinks&sfid=701w00000019Ovs
www.icis.com 25www.icis.com 25
Events Shaping Future of Global Olefins & PolyolefinsTrends & Dynamics in Alternative Olefin Supplies; and how these
are impacted by changing Oil Price ScenariosSummary
Agenda
www.icis.com 26
Events Shaping Future of Global Olefins & Polyolefins
www.icis.com 27
Trends & Dynamics in Alternative Olefin Supplies
www.icis.com 28
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Changes in Global Feedstock SlatesEthane LPGs Naphthas Heavier Liquids++
Initially from a Naphtha supply point of view: it will remain more than sufficient to satisfy the rise in demand until early 2020s, after which more refining capacities are likely to be required
(120)(100)(80)(60)(40)(20)020406080100
(120)(100)
(80)(60)(40)(20)
020406080
100
IN M
ILLI
ON
TO
NN
ES
IN M
ILLI
ON
TO
NN
ES
Naphtha Supply/Demand BalancesNorth America South & Central AmericaEurope Former USSRAfrica Middle EastNortheast Asia South & Southeast Asia
Petrochemicals (both olefins & aromatics) will play a growing part in oil demand via naphtha feedstock, in comparison to naphtha for gasoline blending
13%
7%
47%
33%
15%
8%
38%
39%
www.icis.com 29
NGLs – primarily ethane, is changing the world of polyolefin manufacture…
A large amount of ethane remains “rejected”, waiting for the new demand. But once demand arrives, more production will be required and transport costs featured…
Propane availability suggests ample supply is available, but seasonal factors remain in place. Steam -crackers’ with feedstock flexibility will have a substantial competitive advantage
Developments in LPG price setting mechanisms, inline with naphtha cracking economics, could reward flexible crackers with seasonally cheaper, imported feedstocks
0
500
1000
1500
2000
2015 2016 2017 2018 2019 2020
US Ethane Balances under unchanged Supply (‘000 b/d)
To Ethylene Export by PipelineDeep Sea exports 2015 Production
Rejection
Source: ICIS Consulting & ICIS Pricing
www.icis.com 30
Steam cracking remains the key workhorse for petrochemical production, although non-traditional routes (CTO/MTO and PDH) capacities are expected to gain an important share
Source: ICIS Supply and Demand Database
2% 6% 10% 13%
0%10%20%30%40%50%60%70%80%90%
100%
2010 2015 2020 2025
Global Olefins Feedstock
Steam Cracking/Refinery Gas Non-Traditional Routes Others
Olefins feedstock via non-traditional routes is expected to make up 13% by 2025
How would this affect olefin prices?
www.icis.com 31
Close to 7m tonnes/year of ethylene capacity is expected to be via CTO/MTO by 2020
In the case of China, non-traditional routes (CTO/MTO and PDH) fill a considerable demand gap
Above 16m tonnes/year of propylene capacity is expected to be via PDH and CTO/MTO by 2020
Source: ICIS Supply and Demand Database
0
5
10
15
20
25
30
35
40
2015 2016 2017 2018 2019 2020
mill
ion
tonn
es
China Ethylene Capacity and Demand
Traditional Route CTO MTO Consumption
0
5
10
15
20
25
30
35
40
2015 2016 2017 2018 2019 2020
Mill
ion
tonn
es
China Propylene Capacity and Demand
Traditional Route PDH CTO MTO Consumption
www.icis.com 32
0%
5%
10%
15%
20%
0
5000
10000
15000
20000
25000
'000
tonn
es
Regional PDH Capacity DevelopmentsNorth America South & Central America EuropeFormer USSR Africa Middle EastNE Asia South & SE Asia PDH % of Global Propylene
Past few years saw the peak of PDH capacity addition, with more than 6 million tonnes/year of capacity added in 2014-16.1.1m expected in 2017.
PDH is fast growing as a more common propylene supply mechanism in order to balance the market
More than 60% of PDH capacity addition in the future will come from the US and NE Asia.
Source: ICIS Supply and Demand Database
2016-2021 PDH Capacity Addition by Region
North America20%
South & Central America
5%
Europe6%
Former USSR3%
Middle East15%
NE Asia45%
South & SE Asia6%
www.icis.com 33
Firm supply-demand fundamentals + Availability of imported NGLs (both planned & fortuitous) promote investments in on-purpose PDH-based propylene production especially in NE Asia
Source: ICIS Supply and Demand Database
0%
20%
40%
60%
80%
100%
NE Asian Propylene Capacity ShareSteam Cracking Refinery Gas PDH Metathesis/OCU Methanol-to-Olefins Coal-to-Olefins
-
1000
2000
3000
4000
5000
'000
Ton
nes
NE Asian Propylene Capacity Additions2015-2010 2020-2015 2025-2020
-
1000
2000
3000
4000
'000
Ton
nes
South & SE Asian Propylene Capacity Additions2015-2010 2020-2015 2025-2020
0%
20%
40%
60%
80%
100%
SE & South Asian Propylene Capacity ShareSteam Cracking Refinery Gas PDH Metathesis/OCU
www.icis.com 34
-12
-9
-6
-3
0
3
6
9
12
-90
-60
-30
0
30
60
90
Global Propane BalancesNorth America South & Central AmericaEurope Former USSRAfrica Middle EastNortheast Asia Asia & PacificBalance (right scale)
Source: ICIS Supply and Demand Database
-12.00
-9.00
-6.00
-3.00
0.00
3.00
6.00
9.00
12.00
-250
-200
-150
-100
-50
0
50
100
150
200
250
Global Propane Supply & Demand
Ex NGLs Ex Refinery
To Ethylene (SteamCracking) To Propylene (PDH)
To Other (energy) Balance (right scale)
Production
Consumption
Market Long
Market Tight
Propane will be increasingly available in International MarketsIncremental Supplies are primarily expected from NGLs developments in the US, Middle East and Russia
Petrochemicals will increasingly influence demand developments – pricing implications to aid LPG balances
Exporters
Importers
www.icis.com 35
Balances: Surplus Deficit
to Japan
to rest of S&SE Asia
to China
Global Propane: Key Trade Flows (2016)
*Volumes in Million tonne
US Propane will remain long: flows to international markets rapidly increasing
The US is by now the largest country exporter of Propane in the World. It was a net importer of LPG just a few years ago.
US Exports are now flowing to Asia and Europe
The Middle East remains the largest region in terms of exports
Ample avails in international markets have promoted Asian PDH developments
China imports are now exceeding those of Japan
Source: ICIS Supply and Demand Database
20.2
North America
3.4 -9.8
Europe 3.1
-5.5South & Central America
5.4
5.0Africa
3.2
22.7
Middle East
3.1Former USSR
-4.5
South Korea
-8.9
Japan1.4
4.8
-11.6China
7.1
-3.4
India
-4.5
3.4
Rest of South & SE Asia
3.4
3.3
1.2
2.2
www.icis.com 36
Several CTO/MTO start-ups have been delayed with the current low oil environment
Source: ICIS Supply and Demand Database
Several planned start-ups have lapsed; expected delay about 1-2 yearsFurther out, development of methanol to olefins is expected to fizzle out, although
investments in coal to olefins will remain.
0
500
1000
1500
2000
2500
3000
3500
4000
'000
tonn
es
Current Estimated CTO/MTO Additions in China
Ethylene via CTO Ethylene via MTO
Propylene via CTO Propylene via MTO
0
500
1000
1500
2000
2500
3000
3500
4000
'000
tonn
es
Estimated CTO/MTO Additions in China
(as at mid-2015)
Ethylene via CTO Ethylene via MTO
Propylene via CTO Propylene via MTO
Ethylene
Propylene
Ethylene
Propylene
“ “
“ “
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With the fall in oil prices, the ethylene cost curve flattened dramatically, reducing the ingrained competitive advantage of ethane crackers in North America or the Middle East. From a C2 perspective, CTO loses it’s cost advantage in a lower oil scenario
www.icis.com 38
Although generally lower cost, CTO costs are highly leveraged to oil prices via a ‘round-about’ mechanism. MTO costs are higher, but less volatile.
Source: ICIS Supply and Demand Database
www.icis.com 39
Lower oil closes window for MTO projects “integrated” to US methanol -- ‘Poor Man’s LNG’
Chinese companies have plans to invest in methanol production in the US and ship to China, riding on the cheap natural gas
The advantage, however, has disappeared in the low oil environment
Assume ~$60/bbl Brent oil in 2020
Source: ICIS Consulting
US Shale revolution gave rise to wide availability of cheap natural gas
www.icis.com 40
Asian Cost Comparisons: Imported Ethane vs Traditional NaphthaThe ‘easy decision’ window on ethane imports from the US has closed
Risk appetite, any hedging opportunities & infrastructure will be important considerations
www.icis.com 41
Does US Ethylene derivative export-oriented projects still make sense?
Ethylene derivative exports still have a considerable buffer – though narrower – in a low oil environment.2020 – Assume ~$60/BBL
Brent Crude Oil & ~4$/MMBTU Henry Hub PriceLower ROI will lead to longer
CAPEX payback and will slow down future waves of ethylene derivative exports
Ethane feed
HDPE
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In Summary
www.icis.com 43
Will Non-Traditional Routes Continue?
Non-traditional routes (PDH/CTO/MTO) are not as attractive as an option in lower oil scenarios
Much lower Naphtha prices and fairly healthy co-product demand have helped to lower naphtha cracking costs while demands of polyolefins remain strong
However, non-traditional capacity additions have helped to satisfy supply –demand balances – and will be required in the future, especially for C3 chains.Current slimmer margins will make it more difficult to justify new non-traditional
route methanol-based investments, especially in market priced methanol-to-olefin projects.CTO & PDH investments will play a part of future olefin supply, as easier a
market balancing requirement or a ‘strategic’ development.
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Clive Ong Senior Editor Manager
Asia Petrochemical Industry Conference19 May 2017Royton Sapporo, Japan
APIC 2017 – The road ahead for Asia styrene & benzene feedstock
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Asia Pacific styrene trade flow
Key developments in the first half of 2017
Styrene reverse arbitrage
Comparison between styrene and styrenics resins
Asia benzene overview, impact on styrene market
Agenda
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Styrene Monomer (SM) 2017 Overview
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Styrene demand and trade flows for China
Demand: 10m tonnesImports 3.9m tonnes
Deep Sea Sources
Source: ICIS
www.icis.com 50www.icis.com 50
SM plant turnarounds in H1 2017
Source: ICIS
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Styrene Plant Maintenance and Outages H1 2017
Source: ICIS
Estimated Loss: 537,500 tonnes
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Styrene prices across the regions in Q1 2017
Source: ICIS
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Asia traders moving cargoes to the US
H2 Feb / H1 Marchloading
S Korea seeking vessels for exports
Estimated 25,000 tonnes
Source: ICIS
South Korea
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Styrene Inventories - East China Q1 2017
Source: ICIS
0
50,000
100,000
150,000
200,000
250,000
06-Jan-17 06-Feb-17 06-Mar-17 06-Apr-17
Tonnes
www.icis.com 55www.icis.com 55
China Bonded Tank Cargoes moving to Asia
Source: ICIS
China bonded tank cargoes seeking vessels H2 March30,000-40,000 tonnes
China
N E Asia
S E Asia
www.icis.com 56www.icis.com 56
SM Import vs Domestic Prices in China Q1 2017
Source: ICIS
11001150120012501300135014001450150015501600
06-Jan-17 20-Jan-17 03-Feb-17 17-Feb-17 03-Mar-17 17-Mar-17 31-Mar-17
Import Domestic
> $300/tonne fall> $200/tonne
$
www.icis.com 57www.icis.com 57
Overview of SM Margins
Source: ICIS
$
0
50
100
150
200
250
300
www.icis.com 58www.icis.com 58
Styrenic Resins Price Spread Q4 2016 – Q1 2017
Source: ICIS
$2000
$1130
$2200
$1300
www.icis.com 59www.icis.com 59
One-Year Resins to SM Price Spread Average
Source: ICIS
0
500
1000
1500
2000
2500
08-Apr-16 08-Jul-16 08-Oct-16 08-Jan-17
ABS EPS PS SM$
ABS - $392/tonne
EPS - $147/tonne
PS - $112/tonne
www.icis.com 60www.icis.com 60
Q1 2017 Resins to SM Price Spread Average
Source: ICIS
ABS - $545/tonne
EPS - $129/tonne
PS - $74/tonne
0
500
1000
1500
2000
2500
06-Jan-17 06-Feb-17 06-Mar-17
ABS EPS PS SM$
www.icis.com 61www.icis.com 61
Q4 2016 – Q1 2017 ABS vs Feedstock Prices
Source: ICIS
800
1300
1800
2300
2800
3300
07-Oct-16 07-Nov-16 07-Dec-16 07-Jan-17 07-Feb-17 07-Mar-17
ABS AN BD SM$
www.icis.com 62www.icis.com 62
Q4 2016 – Q1 2017 ABS vs Feedstock Prices
Source: ICIS
150
200
250
300
350
400
450
500
550
07-Oct-16 07-Nov-16 07-Dec-16 07-Jan-17 07-Feb-17 07-Mar-17
Price Spread ($/tonne)
Q4 16 High - 496
Q1 17 Low - 208
Q4 Average - 328
Q1 Average - 331
$
www.icis.com 63
Benzene 2017 Overview
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SM – Benzene Spot Price Spread Q1 2017
Source: ICIS
$491/tonne$329/tonne
$514/tonne
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One-Year SM – Benzene Spot Price Spread
Source: ICIS
0200400600800
10001200140016001800
Benzene SM$
www.icis.com 66www.icis.com 66
SM – Benzene Price Spread 2007-2017
Source: ICIS
100
200
300
400
500
600
700
800
$
www.icis.com 67www.icis.com 67
SM – Benzene Price Spread Average 2007-2017
Source: ICIS
326307
282 296305
265
423
307
411 420435
0
50
100
150
200
250
300
350
400
450
500
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Q1
$
www.icis.com 68www.icis.com 68
China’s SM Demand Growth Slows
1997
China NE Asia Rest of World
2006
China NE Asia Rest of World
China 19%
NE Asia 24%
2015
China NE Asia Rest of World
NE Asia 21%
China 33%World Demand18m tonnes
World Demand25.5m tonnes
World Demand28.8m tonnes
China 4%
+ 39%
+ 12%
Source: Market & ICIS Consulting
www.icis.com 69www.icis.com 69
Benzene Expansions in 2017Company Location BZ (kta) Output (kt) Start-up period
Reliance Jamnagar, India 500 292 Apr-17Petro Rabigh II Rabigh, KSA 400 100 Q4 2017
Sadara Chemical Al Jubail, KSA 280 140 Q2 2017
Nghi Son Refinery & Petrochemical Complex Thanh Hoa, Vietnam 250 104 Jul-17
ONGC Petro-additions Limited’s (Opal) Dahej, India 150 138 mid Jan 2017KPIC (debottleneck) Onsan, Korea 80 40 Jun-17
Hanwha Total (debottleneck) Daesan, South Korea 70 29 Jul-17
S-oil (debottleneck) Onsan, Korea 20 13 mid-Apr 2017CNOOC Huizhou Huizhou, China 250 125 Jun-17
Petrochina Yunnan Yunnan, China 130 54 Jul-17Jinling Petrochemical China 100 17 Q4 2017
Jiujiang PC Jiujiang, China 70 18 2017Hainan Refinery Hainan, China 140 35 2017
Hongrun Shandong, China 200 117 May-17Jingbo Shandong, China 70 23 Aug-17Lihuayi Shandong, China 30 28 Jan-17
Kenli Petrochemical Shandong, China 24 6 2017Zhenghe Shandong, China 40 10 2017
Lijin Shandong, China 20 5 2017Jinchen PC Shandong, China 30 8 2017
Huaxin Shandong, China 40 10 2017Total in 2017 2894 856
Total in China 2017 1144 454
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Downstream Expansions in 2017
Product Company Location Capacity(kta)
est. benzene usage (factor* mths of
pdn)Start-up period
SM Jiujiang Petrochemical Jiangxi, China 80 32 Q2 2017SM Qingdao Hailan Qingdao, China 500 133 Q3 2017
SM Ningbo ZRCC Lyondell Chemical Co Ningbo, China 35 14 Q2 2017
SM Ningbo Keyuan Ningbo, China 100 40 Jun-17Phenol Petro Rabigh ll Rabigh, KSA 250 56 Q3 2017Phenol CNOOC Huizhou Huizhou, China 220 99 H2 2017CPL Taiyuan Yangmei Shanxi, China 200 47 2017CPL Shanxi Lubao Group Shanxi, China 100 23 2017CPL Luxi Chemical Shandong, China 200 93 Jun-17ADA Huafon Chongqing, China 180 11 end 2017ADA Taiyuan New Materials Taiyuan, China 140 61 May 2017
MDI Sadara Chemicals Saudi Arabia, Al Jubail 400 67 Q3 2017
MDI Kumho Mitsui Chemicals Inc (KMCI) Yeosu, South Korea 100 6 end 2017
Total in 2017 2505 682Total in China 2017 554
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Benzene Expansions after 2017
Company Location BZ (kta) Timing Type 2018 2019 2020
Rabigh No 2 Rabigh, Saudi Arabia 400 2018 Ref/TDP/PX 400 400 400
Saudi Aramco Ras Tanura, Saudi Arabia 425 2018 Pygas 425 425 425
Zhongjin No 2 Ningbo, China 500 2018 PX 500 500 500
Sinochem Quanzhou PC Fujian, China 200 2018 Refinery 200 200 200
Ningxia Baota Ningxia, China 200 2018 PX 200 200 200
Sinopec Hainan No 2 Hainan, China 140 2019 PX 240 240
JG Summit Batangas, Philippines 150 BTX 2019 Pygas 150 150
Saudi Aramco Jazan, Saudi Arabia 200 2019 Pygas 200 200
Brunei Hengyi Pulau Muara Besar, Brunei 500 2020 Cracker 500
RAPID (Petronas) Johor, Malaysia 180 2020 Pygas 180
Zhongke (Guangdong) Refinery PC Zhanjiang, China 360 2020 Refinery 360
www.icis.com 72www.icis.com 72
New SM plants 2017-2019
Source: ICIS
2017 - 715,000 tonnes2018 - 260,000 tonnes2019 - 2,650,000 tonnes
www.icis.com 73www.icis.com 73
715,
000
260,
000
2,65
0,00
0
2,89
4,00
0
1,72
5,00
0
3,35
5,00
0
2017 2018 2019
SM BZ(Tonnes)
SM and Benzene Expansions 2017-2019
www.icis.com 74www.icis.com 74
-
50,000
100,000
150,000
200,000
250,000Ja
n-14
Feb-
14M
ar-1
4A
pr-1
4M
ay-1
4Ju
n-14
Jul-1
4A
ug-1
4Se
p-14
Oct
-14
Nov
-14
Dec
-14
Jan-
15Fe
b-15
Mar
-15
Apr
-15
May
-15
Jun-
15Ju
l-15
Aug
-15
Sep-
15O
ct-1
5N
ov-1
5D
ec-1
5Ja
n-16
Feb-
16M
ar-1
6A
pr-1
6M
ay-1
6Ju
n-16
Jul-1
6A
ug-1
6Se
p-16
Oct
-16
Nov
-16
Dec
-16
Jan-
17Fe
b-17
Mar
-17
Apr
-17
Tonn
es
China shore tank inventories
E China (Jiangsu) BZ (crude-based only)
20,765
140,340
73,538
*Jiangsu ports include Lishide, Litian, Chengli, Hengyang, Haiqi, Jiantao, Qianhong, Huaxi; exclude Ningbo
China Benzene 2014-2017 shore tank inventories
www.icis.com 75www.icis.com 75
Benzene Prices Korea vs US & Arbitrage Opportunities
www.icis.com 76www.icis.com 76
SM tight supply and trade flow in H1 2017 to normalise in H2
Styrene market may hit bottom if Q3 styrenics season strengthens
Benzene market seen under pressure as new capacities come on stream
Asia-US arbitrage availability remains key although uncertain
Chinese benzene demand and inventories
Summary
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Asia Vinyls Market Review & the Revival of China as an Export Player
Markets EditorAsia Petrochemical Industry Conference19 May 2017Royton Sapporo, Japan
Kite Chong
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Stay on top of developments across Asian PVC markets
Pricing information We produce reliable price assessments and analyses covering Asian PVC markets, including price histories, enabling you to understand price drivers and settle your contract prices more confidently. Our pricing coverage includes:
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Supply and demand data We give you an end-to-end perspective across the global petrochemical and refinery supply chain, enabling you to grasp the local or regional scenario in a global context. Data includes import and export volumes, consumption, plant capacities, production and product trade flows – from 1978 up to 2030.
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https://www.icis.com/contact/free-sample-price-report/?channel=chemicals&commodity=polyvinyl-chloride&cmpid=ILC|CHEM|CHCCH-2017-GLOBAL-EVT_SGC_APIC_Postevent-pdflinks&sfid=701w00000019Ovshttps://www.icis.com/contact/request-free-trial-icis-news/?commodity=polyvinyl-chloride&channel=chemicals&cmpid=ILC|CHEM|CHCCH-2017-GLOBAL-EVT_SGC_APIC_Postevent-pdflinks&sfid=701w00000019Ovshttps://www.icis.com/contact/enquire-about-icis-global-supply-and-demand-service/?commodity=polyvinyl-chloride&channel=chemicals&cmpid=ILC|CHEM|CHCCH-2017-GLOBAL-EVT_SGC_APIC_Postevent-pdflinks&sfid=701w00000019Ovs
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Asia Pacific Export Overview
Key export destinations for NE Asia producers
China production and trade trends
Carbide- and Ethylene-based PVC price interactions
Key issues in China and market outlook
Impact of China’s export revival on India
Agenda
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Asia PVC Overview for 2016
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Global Trade Flow Overview
Northeast Asia
Southeast Asia
Australia
India
USA
Latin America
North America
Middle East
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NE Asia PVC Exports: China overtakes Taiwan to take back the lead
Source: Cheminfo, METI, KITA, Taiwan Bureau of Foreign Trade
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ChinaPVC exports 2016: 1,050,100 tonnes
Source: Cheminfo
CountryVolume
(‘000 tonnes)
2016 2015
India 239 158
Malaysia 147 111
Russia 106 66
Thailand 89 53
Vietnam 64 46
Kazakhstan 51 50
Others 354 290
Exports increase by 35.6% YOY
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Taiwan PVC exports 2016: 933,359 tonnes
Country
Volume(‘000 tonnes)
2016 2015
India 347 349
China 184 200
Australia 81 14
Bangladesh 86 47
Vietnam 63 34
Others 172 203
Exports increase by 10.21% YOY
Source: Taiwan Bureau of Foreign Trade
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Japan PVC exports 2016: 611,750 tonnes
CountryVolume
(‘000 tonnes)2016 2015
India 264 201China 123 172Vietnam 86 78Hong Kong 34 39Thailand 20 23Others 83 85
Source: Japan Customs
Export rose 2.4% YOY
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South Korea PVC exports 2016: 535,525 tonnes
CountryVolume
(‘000 tonnes)2016 2015
India 309 323China 43 46Turkey 27 23Iran 17 11Malaysia 17 16Others 122 171
Exports fell 9.2% YOY
Source: Korea International Trade Association
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India still the biggest market for NE Asia
Taiwan Japan
South KoreaSource: METI, KITA, Taiwan Bureau of Foreign Trade, Cheminfo
39% 43%
58%23%
China
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A Closer Look at China
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Carbide-based PVC: Coal price changes (coal, coke, electricity, calcium carbide), transportation cost
Ethylene-based PVC: Oil/petrochemicals price changes (oil, ethylene, EDC, VCM)
PVC prices have a high correlation with upstream energy prices, such as coal and oil
Carbide-based PVC export prices track domestic prices
Ethylene-based PVC prices track international spot prices
Factors Affecting China’s PVC production
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Why Carbide-based? – China’s Coal AdvantageConsumption by fuel type (Total 3.01bn oil equivalent)
Source: BP Statistical Review of World Energy 2016
Coal Reserves: 115bn tonnes3rd largest in the world12.8% of global total
Oil Reserves: 18.5bn bbls1.1% of global total
Natural Gas: 3.8tr m3
2.0% of global total
Coal
Oil
Natural Gas
HydroRenewables Nuclear
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China’s PVC production by geographical areas
North China:7.2 million tonnes
Northwest China:6.7 million tonnes
East China:5.3 million tonnes
Top 3 areas: (82% of total production)North ChinaNorthwest ChinaEast China
Top 5 provinces:Inner MongoliaXinjiang ShandongTianjin Shaanxi
Inner MongoliaXinjiang
Shaanxi
Shandong
Tianjin
Source: ICIS
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Chinese Production and Demand 2012-2015
Source: ICIS
(‘000 tonne) Operating rates
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PVC Import/Export Monthly Comparison in 2016
Source: CheminfoImport Export
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China’s Import/Export Comparison 2011-2016(‘000 tonnes)
Source: Cheminfo
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China’s PVC Import Comparison 2015-2016
Source: Cheminfo
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China’s PVC Export Comparison 2015-2016
Source: Cheminfo
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Carbide-based vs Ethylene-based Export Prices Since 2015 Increase in coal prices and transportation costsUS$/tonne US$/tonne
Source: ICIS Dashboard
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Export trends heavily influenced by PVC price spread
Source: Cheminfo, ICIS Dashboard
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Stricter environmental inspections from July to September, carbide-based PVC producers’ operating rates declined dramatically
Coal prices surged: Government policy restricting coal mines to only 276 working days in 2016
Transportation cost increased: Government restricted and fined vehicles overloading, leading to increases in transportation cost
Reasons behind carbide-based PVC price surge in 2016
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Gross overcapacityConsistently low operation rates
Environmental inspections Older, smaller plants that are highly inefficient
“Inferiority” of carbide-based PVC vs ethylene-based PVCMercury-based catalyst Smaller number of applications
Key issues faced by the market today
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Solving overcapacity, reduce environment footprint
Increasing exports through One Belt and One Road (OBOR) initiative
Increasing domestic consumption, government construction projects
Urbanisation of China, e.g. Xiongan New Development Area, will likely see booming
demand for construction materials, including PVC
What’s Ahead for China’s PVC?
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India: The Key PVC Import Destination
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Snapshot of India’s imports 2012-2016
Source: Department of Commerce, Government of IndiaFinancial Year (April to End March)
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Impact of ADD on Import Origins
Before ADD After ADD ADD introduced in 2014
Source: Department of Commerce, Government of India
www.icis.com 106www.icis.com 106
PVC demand in the Chinese market: Stable to soft
Cash flow issues affecting downstream demandEnvironmental checks on
downstream plants
Affected selling indications to India and other regions
Premium still exists between China and India
Recent price trends USD/tonne
Source: ICIS
www.icis.com 107www.icis.com 107
Consumption in India estimated to grow, projected to cross 4m tonnes by 2020
Domestic capacity accounted for half of the demand in 2016, no expansion plans for
now
India will continue to be a major net importer
The Way Forward For India
www.icis.com 108www.icis.com 108
China PVC exports will continue to rise
Exports from other northeast Asia producers capped, no plans for expansion
India a growing net importer of PVC
Rapid consumption growth, stagnant production
Carbide and Ethylene based PVC prices key to trade flows
Summary
www.icis.com 109
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Gas or Coal to Chemicals – will it ever work in a low oil price environment?
Balasubramaniam RamaniSenior ConsultantICIS Analytics & Consulting
www.icis.com 111
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www.icis.com 112www.icis.com 112
Olefin sources as building blocks for PetrochemicalsOlefin supply from Non-traditional routes and resultant impactImpact of Low Oil Price and Shale Gas BoomSummary
Agenda
www.icis.com 113
Olefin sources as building blocks for Petrochemicals
www.icis.com 114
Steam cracking remains the key workhorse for petrochemical production, although non-traditional routes (CTO/MTO and PDH) capacities are expected to gain an important share
Source: ICIS Supply and Demand Database
2% 6% 10% 13%
0%10%20%30%40%50%60%70%80%90%
100%
2010 2015 2020 2025
Global Olefins Feedstock
Steam Cracking/Refinery Gas Non-Traditional Routes Others
Olefins feedstock via non-traditional routes are expected to make up 13% by 2025
How is this likely to affect pricing of olefin as well as derivatives?
Steam cracking remains the key workhorse
Non-traditional sources include CTO, MTO, PDH (Discussed in next section)
Source: ICIS Supply and Demand Database
www.icis.com 115
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Changes in Global Feedstock SlatesEthane LPGs Naphthas Heavier Liquids++
Initially from a Naphtha supply point of view: it will remain more than sufficient to satisfy the rise in demand until early 2020s, after which more refining capacities are likely to be required
(120)(100)(80)(60)(40)(20)020406080100
(120)(100)
(80)(60)(40)(20)
020406080
100
IN M
ILLI
ON
TO
NN
ES
IN M
ILLI
ON
TO
NN
ES
Naphtha Supply/Demand BalancesNorth America South & Central AmericaEurope Former USSRAfrica Middle EastNortheast Asia South & Southeast Asia
Petrochemicals (both olefins & aromatics) will play a growing part in oil demand via naphtha feedstock, in comparison to naphtha for gasoline blending
13%
7%
47%
33%
15%
8%
38%
39%
www.icis.com 116
North America has the largest upcoming capacity for Steam Cracking between 2016 & 2021, followed by Middle East.
100%
Ethane LPG Naphtha
43% 57%
Ethane LPG Naphtha
16% 7%
77%
Ethane LPG Naphtha
66%
15% 19%
Ethane LPG Naphtha
100%
Ethane LPG Naphtha
58%25% 17%
Ethane LPG Naphtha
12% 12%
76%
Ethane LPG Naphtha
CrackerPX plantNew Crackers Feedstock Slate
North America
Middle East
CIS
India
*Size of bubble denotes total cracker capacity additions in 2016-2021
Africa
China(10,970)
(1,960)
(4,890)
(2,820)
(3,140)
(1,200)
(2,800)SE Asia
Ethane Crackers due to Shale Gas boom
www.icis.com 117
Upcoming Global Steam Crackers (2016-2021)2016 2017 2018 2019 2020 2021
NO
RTH
AMER
ICA
United States Chevron PhillipsChemical1500ktpa (E)Dow Chemical1500ktpa (E)Exxonmobil Chemical1500ktpa (E)Indorama Ventures375ktpa (E)Ingleside Ethylene545ktpa (E)
Shintech500ktpa (E)
Sasol1500ktpa (E)
LACC – Lotte/Axiall1000ktpa (E)
Shell Chemicals1500ktpa (E)
Mexico Braskem Idesa1050ktpa (E)
AFRI
CA Egypt Egypt Ethydco460ktpa (E)Tahrir Petrochemicals1500ktpa (N)
MID
DLE
EAST
Iran Kavian Petrochemical1000ktpa (E)
Gachsaran Petrochem1100ktpa (E)Ilam Petrochemical490ktpa (E/L)
Oman ORPIC800ktpa (N)
Saudi Arabia Sadara Chemical1500ktpa (E/N)
CIS
Kazakhstan Kazakhstan PC Industries850ktpa (E)
Russia Zapsibneftekhim1500ktpa (L)
Turkmenistan Turkmenneftegaz390ktpa (L)
Uzbekistan UZ-KOR Gas Chemical400ktpa (L)
E – Ethane; L – LPG; N – Naphtha
www.icis.com 118
Upcoming Global Steam Crackers (2016-2021)E – Ethane; L – LPG; N – Naphtha
2016 2017 2018 2019 2020 2021
NE
Asia China CNOOC and Shell PC
1200ktpa (N)
S &
SE
Asia
India BCPL220ktpa (E)GAIL400ktpa (E)OPaL1100ktpa (E/N)
Reliance1100ktpa (E/L)
Malaysia PETRONAS Chemicals Group1200ktpa (N)
Thailand PTTGC500ktpa (N)
Vietnam Long Son Petrochemical1100ktpa (N)
www.icis.com 119Source: ICIS Supply and Demand Database
US Ethane Balances may get tighter, although ethane will not be short…
Brazil
India
UKNorway
Canada Sweden
USA Ethane Exports(Million Metric Tonnes)
2015 2018 2020
Brazil - -0.2 -0.2
Canada -1.5 -1.7 -1.8
India - -1.2 -1.6
Sweden - -0.6 -0.6
UK 0.0 -0.8 -1.1
Total USA Exports 1.5 4.5 5.3
www.icis.com 120
NGLs – primarily ethane, is changing the world of polyolefin manufacture…
Ethane price is influenced by growth of USA shale production - A large amount of ethane remains “rejected”, waiting for the new demand. But once demand arrives, more production will be required and transport costs featured…
Propane availability suggests ample supply is available, but seasonal factors remain in place. Steam-crackers’ with feedstock flexibility will have a substantial competitive advantage
Developments in LPG price setting mechanisms, inline with naphtha cracking economics, could reward flexible crackers with seasonally cheaper, imported feedstocks
0
500
1000
1500
2000
2015 2016 2017 2018 2019 2020
US Ethane Balances under unchanged Supply (‘000 b/d)
To Ethylene Export by PipelineDeep Sea exports 2015 Production
Rejection
Source: ICIS Consulting & ICIS Pricing
Low Crude oil prices
www.icis.com 121
Asian Pricing for Propane, Naphtha and fuel oil.
0
5
10
15
20
25
30
35
$/M
Mbt
u
Fuel oil vs. Propane vs. Naphtha (Converted to energy equivalence)
Propane Naphtha Fuel Value
Source: ICIS Consulting & ICIS Pricing
www.icis.com 122
Olefin supply from Non-traditional routes and resultant impact
www.icis.com 123
Close to 7m tonnes/year of ethylene capacity is expected to be via CTO/MTO by 2020
In the case of China, non-traditional routes (CTO/MTO and PDH) fill a considerable demand gap
Above 16m tonnes/year of propylene capacity is expected to be via PDH and CTO/MTO by 2020
Source: ICIS Supply and Demand Database
0
5
10
15
20
25
30
35
40
2015 2016 2017 2018 2019 2020
mill
ion
tonn
es
China Ethylene Capacity and Demand
Traditional Route CTO MTO Consumption
0
5
10
15
20
25
30
35
40
2015 2016 2017 2018 2019 2020
Mill
ion
tonn
es
China Propylene Capacity and Demand
Traditional Route PDH CTO MTO Consumption
www.icis.com 124
Several CTO/MTO start-ups have been delayed with the current low oil environment
Source: ICIS Supply and Demand Database
Several planned start-ups have lapsed; expected delay about 1-2 yearsFurther out, development of methanol to olefins is expected to fizzle out, although
investments in coal to olefins will remain.
0
500
1000
1500
2000
2500
3000
3500
4000
'000
tonn
es
Current Estimated CTO/MTO Additions in China
Ethylene via CTO Ethylene via MTO
Propylene via CTO Propylene via MTO
0
500
1000
1500
2000
2500
3000
3500
4000
'000
tonn
es
Estimated CTO/MTO Additions in China
(as at mid-2015)
Ethylene via CTO Ethylene via MTO
Propylene via CTO Propylene via MTO
Ethylene
Propylene
Ethylene
Propylene
“ “
“ “
www.icis.com 125
0%
5%
10%
15%
20%
0
5000
10000
15000
20000
25000
'000
tonn
es
Regional PDH Capacity DevelopmentsNorth America South & Central America EuropeFormer USSR Africa Middle EastNE Asia South & SE Asia PDH % of Global Propylene
Past few years saw the peak of PDH capacity addition, with more than 6 million tonnes/year of capacity added in 2014-16.1.1m expected in 2017.
PDH is fast growing as a more common propylene supply mechanism in order to balance the market
More than 60% of PDH capacity addition in the future will come from the US and NE Asia.
Source: ICIS Supply and Demand Database
2016-2021 PDH Capacity Addition by Region
North America20%
South & Central America
5%
Europe6%
Former USSR3%
Middle East15%
NE Asia45%
South & SE Asia6%
www.icis.com 126
Firm supply-demand fundamentals + Availability of imported NGLs (both planned & fortuitous) promote investments in on-purpose PDH-based propylene production especially in NE Asia
Source: ICIS Supply and Demand Database
0%
20%
40%
60%
80%
100%
NE Asian Propylene Capacity ShareSteam Cracking Refinery Gas PDH Metathesis/OCU Methanol-to-Olefins Coal-to-Olefins
-
1000
2000
3000
4000
5000
'000
Ton
nes
NE Asian Propylene Capacity Additions2015-2010 2020-2015 2025-2020
-
1000
2000
3000
4000
'000
Ton
nes
South & SE Asian Propylene Capacity Additions2015-2010 2020-2015 2025-2020
0%
20%
40%
60%
80%
100%
SE & South Asian Propylene Capacity ShareSteam Cracking Refinery Gas PDH Metathesis/OCU
www.icis.com 127
Impact of Low Oil Price and Shale Gas Boom
www.icis.com 128Copyright © 2016 ICIS
With the fall in oil prices, the ethylene cost curve flattened dramatically, reducing the ingrained competitive advantage of ethane crackers in North America or the Middle East. From a C2 perspective, CTO loses it’s cost advantage in a lower oil scenario
www.icis.com 129
Asian Cost Comparisons: Imported Ethane vs Traditional NaphthaThe ‘easy decision’ window on ethane imports from the US has closed
Risk appetite, any hedging opportunities & infrastructure will be important considerations
www.icis.com 130
Although generally lower cost, CTO costs are highly leveraged to oil prices via a ‘round-about’ mechanism. MTO costs are higher, but less volatile.
Source: ICIS Supply and Demand Database
www.icis.com 131
Lower oil closes window for MTO projects “integrated” to US methanol -- ‘Poor Man’s LNG’
Chinese companies have plans to invest in methanol production in the US and ship to China, riding on the cheap natural gas
The advantage, however, has disappeared in the low oil environment
Assume ~$60/bbl Brent oil in 2020
Source: ICIS Consulting
US Shale revolution gave rise to wide availability of cheap natural gas
www.icis.com 132
In Summary
www.icis.com 133
In Summary – the Impact of Low Oil
Non-traditional routes (PDH/CTO/MTO) are not as attractive as an option in lower oil scenarios
Much lower Naphtha prices and fairly healthy co-product demand have helped to lower naphtha cracking costs while demands of polyolefins remain strong
However, non-traditional capacity additions have helped to satisfy supply –demand balances – and will be required in the future, especially for C3 chains.Current slimmer margins will make it more difficult to justify new non-traditional
route methanol-based investments, especially in market priced methanol-to-olefin projects.CTO & PDH investments will play a part of future olefin supply, as easier a
market balancing requirement or a ‘strategic’ development.
www.icis.com 134
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www.icis.com 135
Exploring the intertwining relationship between PO and polyether polyols
Matthew ChongMarkets Editor
Asia Petrochemical Industry Conference19 May 2017Royton Sapporo, Japan
www.icis.com 136
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www.icis.com 137www.icis.com 137
Sadara updatesPropylene oxide (PO) and polyether polyols
Consumption by applicationPrice trend analysisSupply-demand analysisChanging share in PO technology production processesPO plant expansionsTrade flow analysis
Agenda
www.icis.com 138www.icis.com 138
Sadara’s PU Chain Facilities
400kt/year of propylene from
mixed-feed cracker
PO Cap: 390kt/year
Polyether PolyolsCap: 400kt/year
MDICap: 400kt/year
TDICap: 200kt/year
Propylene Glycol (PG)
Cap: 70kt/year
Unsaturated Polyester Resin
(UPR)
PU foam for furniture, mattresses, automotive seats; applications in refrigerators, insulation, construction; pre-polymer for applications in shoe soles, adhesives,
thermoplastic polyurethane (TPU) resins, spandex, synthetic leather
OR
Started up on 28 Aug 2016
Expected start-up date: May/June 2017
Toluenediamine (TDA)Cap: 153kt/year
Dinitrotoluene (DNT)Cap: 250kt/year
AnilineCap: 316kt/year
Mononitrobenzene (MNB)Cap: 416kt/year
TolueneCap: 134kt/year
BenzeneCap: 280kt/year
+ imported benzene
+ imported toluene
Expected start-up date: Q3 2017
Sources: Sadara, industry
www.icis.com 139www.icis.com 139
PO-Polyols Consumption by Application
Source: ICIS Supply-Demand Database
POLYETHER POLYOLS64%
PROPYLENE GLYCOLS17%
GLYCOL ETHERS6%
1-4 BUTANEDIOL1%
MISCELLANEOUS12%
PO Consumption by Application, 2016
FLEX/SEMIFLEX FOAM48%
RIGID FOAM33%
OTHER PU RESINS19%
Polyols Consumption by Application, 2016
www.icis.com 140www.icis.com 140
Asia Propylene-PO-Polyols Price Trend Analysis May 2007 – May 2017
www.icis.com 141www.icis.com 141
Asia Propylene-PO-Polyols Price Trend Analysis May 2016 – May 2017
Wide propylene-PO spread
Downtrend in propylene prices since March
Market anomaly – China PO prices jumped 45%, polyols surged 55% in one month
Narrow PO-polyols spread
www.icis.com 142www.icis.com 142
Global PO Supply-Demand Analysis
Source: ICIS Supply-Demand Database
• Capacity growth projected to rise faster than consumption growth in coming years.
• Plant operating rates on a declining trend since 2015 due to new capacity additions.
70
75
80
85
90
95
100
7,000
8,000
9,000
10,000
11,000
12,000
13,000
2011 2012 2013 2014 2015 2016F 2017F 2018F 2019F 2020F
%
'000
tonn
es
Consumption Capacity Plant Utilisation Rates ( % )
www.icis.com 143www.icis.com 143
Global PO Production Process
Source: ICIS Supply-Demand Database
Chlorination41%
Hydrogen Peroxide (HPPO)9%
PO/TBA or PO/MBTE14%
PO/SM32%
Cumene4%
2012
Chlorination40%
Hydrogen Peroxide (HPPO)
15%
PO/TBA or PO/MBTE
15%
PO/SM26%
Cumene4%
2016
Chlorination37%
Hydrogen Peroxide (HPPO)
18%
PO/TBA or PO/MBTE16%
PO/SM25%
Cumene4%
2020
• Environmental regulations in China result in declining share of chlorination route
• HPPO route gaining popularity for new capacity expansions• Proprietary technologies (e.g. Sumitomo Chemical’s cumene route)
that are difficult to replicate creating barriers of entry for small players
www.icis.com 144www.icis.com 144
Thailand
Singapore
Saudi Arabia
India
China
South Korea
Japan
36
390
490490
200
3,612
4,728
6,438
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2012 2016 2020
Asia Pacific PO Capacity
200 200
590
0
100
200
300
400
500
600
700
2012 2016 2020
Middle East PO Capacity
Source: ICIS Supply-Demand Database
390390
1,815310 571
390
490
36200
www.icis.com 145www.icis.com 145
Saudi Arabia
India
China
South Korea
Japan
Thailand
Singapore
Taiwan77
144
6
94
278
0
50
100
150
200
250
300
2012 2016 2020
Middle East PO Consumption
3,308
4,2815,028
55
44
44
0
1,000
2,000
3,000
4,000
5,000
6,000
2012 2016 2020
Asia Pacific PO Consumption
Key Asian PO Consuming Countries Rest of Asia Pacific
Source: ICIS Supply-Demand Database
474
77
www.icis.com 146www.icis.com 146
China PO Expansion
Company Location Capacity (‘000 tonnes)
Production process
Target onstreamdate
Status Comment
CNOOC and Shell Petrochemicals Co (CSPC)
Huizhou, Guangdong, China 320 PO/SM 2018 Planned Expansion
Shandong SanyueChemical
Wudi, Shandong, China 80 Chlorination H2 2017
Completed
New unit; has another two 80kta units which are running
Blue Planet Eco New Materials
Changzhou, Jiangsu, China 400 Unknown 2018
Construction underway New unit
Nanjing Hong Bao Li GroupNanjing, Jiangsu, China 120
Unknown (to be developed in-house)
End-2017or later
Construction underway New unit
Jinling Huntsman New Materials
Nanjing, Jiangsu, China 240 PO/MTBE
June/July 2017
Construction underway New unit
Jiangsu Yida Chemical Taixing, Jiangsu, China 150 + 220 Unknown2018 or later Planned New unit
Sources: ICIS, market
www.icis.com 147www.icis.com 147
Global ex-China PO Expansion
Company Location Capacity (‘000 tonnes)
Production process
Target onstreamdate
Status Comment
Sadara Chemical Al Jubail, Saudi Arabia 390 HPPOEnd-May 2017
Construction underway New unit
SKC Chemicals Group Ulsan, South Korea 300 HPPO Cancelled New unit
S-Oil Ulsan, South Korea 300 Cumene Q2 2018Construction underway New unit
PTTGC Rayong, Thailand 200 Cumene 2019 Planned
New unit; collaboration with Toyota Tsusho and Sanyo Chemical Industries
LyondellBasell US Gulf Coast, USA 450 PO/TBA 2019 Planned New unit
Sources: ICIS, market
www.icis.com 148www.icis.com 148
Global Polyether Polyols Supply-Demand Analysis
Source: ICIS Supply-Demand Database
60
62
64
66
68
70
72
74
76
78
80
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
12,000
13,000
2011 2012 2013 2014 2015 2016F 2017F 2018F 2019F 2020F
%
'000
tonn
es
Consumption Capacity Plant Utilisation Rates ( % )
• Market oversupply as capacity far outstrips consumption
• Plant operating rates on a downtrend since 2014
• Capacity growth to reach a plateau by 2020
www.icis.com 149www.icis.com 149
China
Japan406
406
410
579
7474
South Korea
Taiwan
Thailand
Singapore
Indonesia
Saudi Arabia
India
4,494
6,607
8,14727
32
32
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
2012 2016 2020
Asia Pacific Polyols Capacity
Key Asian Polyols Producing Countries Rest of Asia Pacific
400
0
50
100
150
200