Nexant Presentation_Preliminary.pdf

7/23/2019 Nexant Presentation_Preliminary.pdf

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May of 2011May of 2011

Ethylene, PE, Propylene, PP,

Styrene, PolystyreneMarket Review

Presented at ANIQ’s Convention, Puerto Vallarta, Mexico

Ethylene, PE, Propylene, PP,

Styrene, PolystyreneMarket Review

Presented at ANIQ’s Convention, Puerto Vallarta, Mexico

Raul Arias Alvarez

Senior Consultant and

Manager Latin America

Raul Arias Alvarez

Senior Consultant and

Manager Latin America



Market Review May of 2011

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About Economists and Consultants

“ An economist is an expert who will know tomorrowwhy the things he predicted yesterday didn't happen

today”

Laurence J. Peter, educator andauthor of The Peter Principle




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Economic recovery in the U.S. taking longer than

expected

Global GDP Outlook(percentage)

Global GDP Outlook(percentage)

-8%

-6%

-4%

-2%0%

2%

4%

6%

8%

10%

12%

14%

16%

1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030

World North America Western Europe Japan China

A n n u a l r e a l c h a n g e i n G D P

Scenario Actual

XL: 00235\09 .01.06.1\09\US\ Sec2

North American GDP Outlook(percentage)

North American GDP Outlook(percentage)

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

1995 2000 2005 2010 2015 2020 2025

R e a

l G D P G r o w t h , %

United States Canada MexicoPOPS2010_ER_FR_Sec_2

Actual Scenario

In late April, the U.S. Fed lowered its 2011 economic growth forecast from up

to 3.9% to 3.1 – 3.3%




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Shale gas, a game changer

0

1

2

3

4

5

6

7

8

2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029

Shale Gas

G a s P r o d u c t i o n - T C F p e r Y e a r

xls POPS2010 Supp I 00102.0010.3016 Sec 3

US Unconventional GrasProduction Forecast

US Unconventional GrasProduction Forecast

55%46%

62% 66% 68% 68%

27% 32%

18% 12% 11% 10%

0%

25%

50%

75%

100%

2000 2005 2010 2015 2020 2025

Ethane Propane Butanes Naphtha & Heavier

W e i g h t p e r c e n t

xls POPS2010 Supp I 00102.0010.3016 Sec 5

USGC Ethylene Feedstock Sources2000 - 2025

USGC Ethylene Feedstock Sources2000 - 2025

Shale gas production will impact petrochemicals in North America in many

ways. Among others, the use of ethane as feedstock will increase and ethylene

will improve its competitiveness over propylene




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S a u d i A . - E

S a u d i A . - P

W . C a n a d a - E

W .

E u r o p e - N

U S G C - N

S i n g a p o r e - N

S . K o r e a - N

U S G C - E

J a p a n - N

Net Raw Materials Utilities Fixed Costs

Regional HDPE Cash Cost of Pro duction, Integrated Ethylene, 2004

S a u d i A . - E

S a u d i A . - P


W . C a n a d a - E

S . K o r e a - N

W .

E u r o p e - N

U S G C - E

U S G C - N

J a p a n - N

Net RawMaterials Utilities Fixed Costs

Regional HDPE Cash Cost of Prod uction Forecast, Integrated Ethyl ene, 2010

S a u d i A . - E

S a u d i A . -

E / P

W .

C a n a d a - E

U S G C - E

S .

K o r e a - N


J a p a n - N

U S G C - N

W . E u r o p e - N

Net Raw Materials Utilities Fixed Costs

Regional HDPE Cash Cost of Pro duction , Integrated Ethylene, 2009

Prepared in 2004

Prepared in 2010

Shale gas ethane has resulted in and improvement of

competitiveness of derivatives – example HDPEHDPE Cash Cost of Production (integrated C2) 2004 and 2010/2010HDPE Cash Cost of Production (integrated C2) 2004 and 2010/2010

Prepared in2004

Prepared in2010 A B C D E F G H I

A: Saudi A. – E F: Singapore - N

B: Saudi A. – P G: S. Korea - N

C: W. Canada – E H: USGC - E

D: W. Europe – N I: Japan - N

E: USGC - N

A B F C G D H E I

A B C H G F I E D




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A new wave of investment about to begin?

• Dow announced plans to add propylene and ethylene capacity

(900KTA by 2018 and 2.3MMTA by 2015)

• Chevron Phillips Chemical may build ethane cracker on U.S.coast

• LyondellBasell Industries planning to increase ethylene

capacity by about 500KTA and may build ethane cracker orparticipate in joint project

• Westlake announced plans to expand ethylene capacity in

2012 (ca. 105KTA) and 2014• Braskem, giving consideration to ethylene and propylene

capacity in the U.S.




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PolyethylenePolyethylene




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The global view

• Economic recovery, evident in may parts of the world,

but gradual in the U.S.• 2010, spectacular year for ethylene capacity development

in the ME. Since ethane has become scarce, almost all new

plants, with E/P or E/B crackers

• ME ethylene project pipeline relative small for the next years

• Investment in PDH, large FCC units and metathesis have

boosted propylene capacity in the ME

• Installed propylene production capacity in Asia Pacific sur-

passed the combined capacity of Western Europe and USA




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beyond14,647 14,976

36,490

58,789

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2000 2010

NAFTA ROW

29% 20%18,543 19,623

41,705

67,174

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

2000 2010

NAFTA ROW

31% 23%

NAFTA has lost participation in global

PE demand and capacity

PE Demand(2000 – 2010, thousand tons)

PE Demand(2000 – 2010, thousand tons)

PE Capacity(2000 – 2010, thousand tons)

PE Capacity(2000 – 2010, thousand tons)

In 2010, NAFTA represented ca. 20% of global PE demand and 23%

of global capacity. The region had net imports of ca. 2.8 MMT

+3.7% aagr (Global)

+0.2% aagr

+3.7% aagr (Global)

+0.6% aagr




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Overall polyethylene demand in NAFTA,

below 2004 levels

NAFTA PE Demand by Country(percentage)

NAFTA PE Demand by Country(percentage)

NAFTA PE Demand by Product(percentage)

NAFTA PE Demand by Product(percentage)

After plummeting in 2008, PE demand has not reached the levels of

2004. The US account for ca. 81% of demand. HDPE represents ca.

42%, LLDPE ca. 29% and LDPE ca. 18% of PE demand.

-

2,000

4,000 6,000

8,000

10,000

12,000

14,000

16,000

18,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

USA Mexico Canada

-

2,000

4,000 6,000

8,000

10,000

12,000

14,000

16,000

18,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

HDPE LLDPE LDPE




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LDPE demand in NA has declined

NAFTA LDPE Demand by Country(thousand tons)

NAFTA LDPE Demand by Country(thousand tons)

NAFTA LDPE Demand by End Use 2010(percentage)

NAFTA LDPE Demand by End Use 2010(percentage)

LDPE Demand in NAFTA in 2010 was 15% below 2000 demand. 75% of

regional demand in the U.S. and 15% in Mexico (+3 points over 2000). Film

applications are the most relevant market.

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500

2000 2005 2010

USA Mexico Canada

54%

2%

10%

15%

10%

9%

Film Blow Moulding

Injection Moulding Extrusion Coating

Other Extrusion Others




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Regional LDPE capacity has also declinedNAFTA LDPE Capaci ty by Country

(thousand tons)

NAFTA LDPE Capaci ty by Country(thousand tons)

NAFTA LDPE Capacity Share 2010(percentage)

NAFTA LDPE Capacity Share 2010(percentage)

NAFTA LDPE production capacity in 2010 was more than 350KTA smaller

than in 2000. At the end of 2010, the top 4 companies accounted for close to

70% of installed capacity

CelaneseEVA

PerformancePolymers

4%

NOVAChemicals

3% PEMEX8%

ChevronPhillips

7%

Dow17%

DuPont10%

Equistar/LBI14%

ExxonMobil19%

Westlake18%

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1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

USA Mexico Canada




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LDPE demand in NAFTA wil l growth moderately and

U.S. capacity may consolidateNAFTA LDPE Demand 2010 -2025

(thousand tons)

NAFTA LDPE Demand 2010 -2025(thousand tons)

Regional aagr between 2010 and 2015 is forecasted at close to 2.5% .

Capacity addition in Mexico is expected to cause consolidation of non-

competitive capacity in the U.S.

NAFTA LDPE Capacity Forecast(thousand tons)

NAFTA LDPE Capacity Forecast(thousand tons)

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2010 2015 2020 2025

USA Mexico Canada

-

500

1,000

1,500

2,000 2,500

3,000

3,500

4,000

4,500

5,000

5,500

2010 2015 2020 2025

USA Mexico Canada




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NAFTA will remain a next exporter of LDPENAFTA LDPE Net Trade Forecast

(thousand tons)

NAFTA LDPE Net Trade Forecast(thousand tons)

NAFTA LDPE Supply-Demand Balance(percentage)

NAFTA LDPE Supply-Demand Balance(percentage)

Exports and some consolidation in the U.S. will help to maintain operating

rates at relatively sound levels

-400

-200

-

200

400

600

800

1,000

2010 2015 2020 2025

USA Mexico Canada Total

0%

20%

40%

60%

80%

100%

-500

500

1,500

2,500

3,500

4,500

5,500

2010 2015 2020 2025

A v e r a g e o p e r a t i n g r a t e

Spec. Capacity Firm Capacity

Consumption Operating Rate

T h o u

s a n d t o n s

-




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LLDPE demand in NA, on the way to recoveryNAFTA LLDPE Demand by Country

(thousand tons)

NAFTA LLDPE Demand by Country(thousand tons)

NAFTA LLDPE Demand by End Use 2010(percentage)

NAFTA LLDPE Demand by End Use 2010(percentage)

LLDPE demand, back to higher levels than in 2005. The U.S. account for

ca. 82% and Mexico for ca. 9% (increase of 3 points over 2000) of regional

consumption. Film, by far the most relevant market.

-

1,000

2,000

3,000 4,000

5,000

6,000

7,000

8,000

9,000

2000 2005 2010

USA Mexico Canada

74%

0.2%

10%

1% 6%

7%

2%

Film Blow Moulding Injection Moulding

Extrusion Coating Rotomoulding Other Extrusion

Others




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Since 2003, regional LLDPE capacity has experienced

only moderate increasesNAFTA LLDPE Capacity by Country

(thousand tons)

NAFTA LLDPE Capacity by Country(thousand tons)

NAFTA LLDPE Capaci ty Share 2010(percentage)

NAFTA LLDPE Capaci ty Share 2010(percentage)

NAFTA LLDPE annualized production capacity in 2010 was about 700KTA

higher than in 2003. The top three producers accounted for three quarters

of regional capacity

Dow40%

NOVAChemicals

16%

PEMEX4%

ChevronPhillips

3%

Equistar/LBI8%

ExxonMobil20%

FormosaPlastics

3%

Westlake6%

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1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

USA Canada Mexico




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LLDPE demand in NAFTA growth will be solid while

only small to moderate capacity additions expectedNAFTA LLDPE Demand 2010 -2025

(thousand tons)

NAFTA LLDPE Demand 2010 -2025(thousand tons)

Regional demand is forecasted to grow at an aagr of around 4.5% between

2010 and 2015. Capacity will grow at an average of less than 1%

NAFTA LLDPE Capacity Forecast(thousand tons)

NAFTA LLDPE Capacity Forecast(thousand tons)

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2010 2015 2020 2025

USA Mexico Canada

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2010 2015 2020 2025

USA Canada Mexico




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Medium to long term, the region as a whole may

become a net importer of LLDPENAFTA LLDPE Net Trade Forecast

(thousand tons)

NAFTA LLDPE Net Trade Forecast(thousand tons)

NAFTA LLDPE Supply-Demand Balance(percentage)

NAFTA LLDPE Supply-Demand Balance(percentage)

Regional demand growth will outpace capacity growth, resulting in

increasing imports in the U.S.

-2,500

-2,000

-1,500

-1,000

-500

-

500

1,000

1,500

2,000

2010 2015 2020 2025


0%

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60%

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100%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2010 2015 2020 2025




T h o u s a n d t o n s

-




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HDPE demand in NAFTA, starting to pick upNAFTA HDPE Demand by Country

(thousand tons)

NAFTA HDPE Demand by Country(thousand tons)

NAFTA HDPE Demand by End Use 2010(percentage)

NAFTA HDPE Demand by End Use 2010(percentage)

HDPE demand, at levels slightly above 2003. 82% of demand, in the U.S.

Mexico accounts for 11% (3% more than in 2000). Top two end-use markets

are blow molded and injected parts.

-

1,500

3,000

4,500

6,000

7,500

9,000

10,500

12,000

2000 2005 2010

USA Mexico Canada

19%

32%

24%

14%

2%8%

1%

Film Blow Moulding Injection Moulding

Pipe and Conduit Rotomoulding Other Extrusion

Others




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Regional HDPE capacity, which had remained flat has

seen some consolidationNAFTA HDPE Capacity by Country

(thousand tons)

NAFTA HDPE Capacity by Country(thousand tons)

NAFTA HDPE Capacity Share 2010(percentage)

NAFTA HDPE Capacity Share 2010(percentage)

NAFTA HDPE annualized production capacity estimated more than 80KTA

under 2000. The three top producers account for around 55% of annualized

capacity

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

USA Canada Mexico

Dow9%

Imperial Oil5%

NOVAChemicals

5%

PEMEX2%

ChevronPhillips

21%

Equistar/LBI18%

ExxonMobil16%

Formosa

Plastics8%

INEOS11%

Ticona0.3%

Total Petro-chemicals

5%




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HDPE demand in NAFTA will remain firm mid term while

capacity additions only in MexicoNAFTA HDPE Demand 2010 -2025

(thousand tons)

NAFTA HDPE Demand 2010 -2025(thousand tons)

Demand growth between 2010 and 2015, at an average annual rate of close

to 4 percent. The most relevant capacity addition, in Mexico by Braskem

Idesa.

NAFTA HDPE Capacity Forecast(thousand tons)

NAFTA HDPE Capacity Forecast(thousand tons)

-

1,500

3,000

4,500

6,000

7,500

9,000

10,500

12,000

2010 2015 2020 2025

USA Mexico Canada

-

2,000

4,000

6,000

8,000

10,000

12,000

2010 2015 2020 2025

USA Canada Mexico




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The U.S. may become a net importer of HDPENAFTA HDPE Net Trade Forecast

(thousand tons)

NAFTA HDPE Net Trade Forecast(thousand tons)

NAFTA HDPE Supply-Demand Balance(percentage)

NAFTA HDPE Supply-Demand Balance(percentage)

Long term, the region will be a net importer of HDPE. Only significant

capacity addition, in Mexico by Braskem Idesa

-2,000

-1,500

-1,000

-500

-

500

1,000

1,500

2,000

2010 2015 2020 2025


0%

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100%

0

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6,000

8,000

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2010 2015 2020 2025

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o p e r a t i n g r a t e



T h

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-




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NAFTA’s global share of PP demand and capacity has

declinedPP Demand

(2000 – 2010, thousand tons)

PP Demand(2000 – 2010, thousand tons)

PP Capacity(2000 – 2010, thousand tons)

PP Capacity(2000 – 2010, thousand tons)

In 2010, NAFTA represented ca. 15% of global PP demand and ca.

15% of global capacity. The region had net exports of ca. 330 KT

7,016 7,468

23,849

41,396

-

10,000

20,000

30,000

40,000

50,000

60,000

2000 2010

NAFTA ROW

23% 15% 8,204 8,772

27,325

51,072

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2000 2010

NAFTA ROW

23% 15%

+4.7% aagr (Global)

+0.6% aagr

+5.4% aagr (Global)

+0.7% aagr




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PP demand in North America showing signs of

recoveryNAFTA PP Demand by Country

(thousand tons)

NAFTA PP Demand by Country(thousand tons)

NAFTA PP Demand by End Use 2010(percentage)

NAFTA PP Demand by End Use 2010(percentage)

In 2009, PP demand the lowest in more than a decade. Recovery has started.

The U.S. represents 82% of demand and Mexico 13% (5% more than in 2000).

Injected parts account for ca. 55% of end uses. Fibres follow with around 21%

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1,500

3,000

4,500

6,000

7,500

9,000

10,500

12,000

2000 2005 2010

USA Mexico Canada

11%

21%

2%55%

0.3% 11%

0.4%

Film Fibre Blow Moulding

Inject ion Moulding Extrus ion Coating Other Extrusion

Others




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Regional PP capacity has declined since 2007NAFTA PP Capacity by Country

(thousand tons)

NAFTA PP Capacity by Country(thousand tons)

NAFTA PP Capacity Share 2010(percentage)

NAFTA PP Capacity Share 2010(percentage)

NAFTA PP production capacity fell around 580KTA between 2007 and

2007. The top four producers account for around 50% of capacity

Indelpro8%

Braskem America*

8%Sunoco*

3%

ConocoPhillips4%Dow

6%

ExxonMobil14%

Flint HillsResources

5%

FormosaPlastics

8%

INEOS9%

LyondellBas

ell14%

PhillipsSumika

4%

Pinnacle5%


12%

* Acqui sition of Sunoc o by Braskem

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

USA Mexico Canada




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PP demand in NAFTA will have sustained growth and

some capacity expansions may comeNAFTA PP Demand 2010 -2025

(thousand tons)

NAFTA PP Demand 2010 -2025(thousand tons)

Between 2010 and 2015, PP demand forecasted to grow at an annual

average of around 4%. Capacity additions are possible but have not been

annouced

NAFTA PP Capacity Forecast(thousand tons)

NAFTA PP Capacity Forecast(thousand tons)

-

1,500

3,000

4,500

6,000

7,500

9,000

10,500

12,000

2010 2015 2020 2025

USA Mexico Canada

-

2,000

4,000

6,000

8,000

10,000

12,000

2010 2015 2020 2025

USA Mexico Canada




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The region as a whole, set to become a

net importer of PPNAFTA PP Net Trade Forecast

(thousand tons)

NAFTA PP Net Trade Forecast(thousand tons)

NAFTA PP Supply -Demand Balance(percentage)

NAFTA PP Supply -Demand Balance(percentage)

Canada and Mexico will remain net exporters while the U.S. may transition

mid to long term. Regional demand will exceed firm capacity by 2014

-1,500

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-500

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1,500

2010 2015 2020 2025


0%

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60%

80%

100%

0

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4,000

6,000

8,000

10,000

12,000

14,000

2010 2015 2020 2025

A v e r a g e




T h

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-




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NAFTA’s global share of PS demand and capacity has

declinedPS Demand

(2000 – 2010, thousand tons)

PS Demand(2000 – 2010, thousand tons)

PS Capacity(2000 – 2010, thousand tons)

PS Capacity(2000 – 2010, thousand tons)

In 2010, NAFTA represented ca. 21% of global PS demand and ca.

19% of global capacity. The region had net exports of ca. 84 KT

2,748 2,100

7,487.31 8,112.57

-

2,000

4,000

6,000

8,000

10,000

12,000

2000 2010

NAFTA ROW

27% 21% 3,465 2,809

9,457 11,701

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2000 2010

NAFTA ROW

27% 19%

+1.2% aagr (Global)

-2.1% aagr

-0% aagr (Global)

+-2.7% aagr






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Regional PS capacity has fallen since 2004NAFTA PS Capaci ty by Country

(thousand tons)

NAFTA PS Capaci ty by Country(thousand tons)

NAFTA PS Capacity Share 2010(percentage)

NAFTA PS Capacity Share 2010(percentage)

Total Petrochemicals, Ineos Nova and Americas Styrenics, highest capacity

share by 2010. In 2011, the byout of Nova by Ineos from Ineos Nova and the

creation of Styrolution will create a new competitive landscape

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

USA Mexico Canada

AmericanPolymers

1%

AmericanPolystyrene

1%

AmericasStyrenics

22%

BASF6%

DartContainer

2%Dow3%

INEOSNOVA26%

Rank Group1%

Resirene5%

SABICInnovative

Plastics2%

Styron Corp4%


27%




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PS demand in NAFTA will remain basically flat.

Moderate capacity additions, possible mid termNAFTA PS Demand 2010 -2025

(thousand tons)

NAFTA PS Demand 2010 -2025(thousand tons)

Only Mexico expected to show modest demand growth. No capacity

additions have been announced.

NAFTA PS Capacity Forecast(thousand tons)

NAFTA PS Capacity Forecast(thousand tons)

-

500

1,000

1,500

2,000

2,500

2010 2015 2020 2025

USA Mexico Canada

-

500

1,000

1,500

2,000

2,500

3,000

2010 2015 2020 2025

USA Mexico Canada




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PS demand decline will force producers to

seek exportsNAFTA PS Net Trade Forecast

(thousand tons)

NAFTA PS Net Trade Forecast(thousand tons)

NAFTA PS Supply-Demand Balance(percentage)

NAFTA PS Supply-Demand Balance(percentage)

Demand will fall slightly or remain flat in the best case. Further capacity

consolidation is expected short and mid term

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50

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-1,500

-500

500

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2010 2015 2020 2025

A v e r a g e


Spec. Capacity Firm CapacityConsumption Operating Rate


-




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Feedstocks ReviewFeedstocks Review

Th th l i d t i N th A i h




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The ethylene industry in North America has

experienced ups and downs over the years

NAFTA Ethylene Demand by Country(thousand tons)

NAFTA Ethylene Demand by Country(thousand tons)

NAFTA Ethylene End Uses 2010(percentage)

NAFTA Ethylene End Uses 2010(percentage)

Ethylene demand is showing recovery. The U.S. represents 81% of the total and

Mexico 4%. Polyethylene represents around 80% of ethylene concumption

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Mexico Canada USA

Firm Capacity Operating Rate

T h

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VAM1%

EDC13%

HDPE28%

Styrene5%

LDPE12%

LLDPE20%

EthyleneOxide11%

Others10%

Th i ti ll l ti l bi b f th l




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There is sti ll a relatively big number of ethylene

producers in the region

NAFTA Ethylene Capacity Share 2010(percentage)

NAFTA Ethylene Capacity Share 2010(percentage)

BASF FINA3% Chevron

Phillips10%

Dow14%

DuPont2%

Eastman2%Equistar/LBI

13%

ExxonMobil12%

Flint HillsResources

2%

FormosaPlastics

5%

Other 3%

INEOS5%

NOVAChemicals

8%

NOVAChemicals/Dow

4%

Pemex4%

Shell7%

Westlake4%

WilliamsOlefins

2%




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The outlook of ethylene may be about to change

NAFTA Ethylene SD Forecast(thousand tons)

NAFTA Ethylene SD Forecast(thousand tons)

NAFTA Ethylene Net Trade Forecast(percentage)

NAFTA Ethylene Net Trade Forecast(percentage)

Improved competitiveness of North American ethane (due to shale gas

production) has resulted in announcements of new capacity

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2010 2015 2020 2025

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2010 2015 2020 2025


The histor of prop lene has been more stable than




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The history of propylene has been more stable than

that of ethylene

NAFTA Propylene Demand by Country(thousand tons)

NAFTA Propylene Demand by Country(thousand tons)

NAFTA Propy lene End Uses 2010(percentage)

NAFTA Propy lene End Uses 2010(percentage)

In 2010, propylene demand exceeded the levels of 2002. Polypropylene is by far

the most important use of propylene

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0

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Mexico Canada USA


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Acrylonitrile11%

Acrylic acid6%

Isopropanol0.4%

PropyleneOxide12%

PP58%

Cumene3%

Others10%

No propylene producer has more than 9% of capactiy




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No propylene producer has more than 9% of capactiy

share in the region

NAFTA Propylene Capaci ty Share 2010(percentage)

NAFTA Propylene Capaci ty Share 2010(percentage)

BASF FINA5%

Baton RougePropylene

4%BP5%

ChevronPhillips7%

Others11%

ConocoPhillips2%

Dow9%Enterprise

5%

Enterprise/ Atofina

8%

Equistar/LBI8%

ExxonMobil8%

FormosaPlastics

4%

Gulf Liquids2%

INEOS2%

Marathon3%

NOVAChemicals

2%

Pemex4%

Shell5%

Sunoco2%

Valero2%




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The region will remain a small net exporter of propylene

NAFTA Propylene SD Forecast(thousand tons)

NAFTA Propylene SD Forecast(thousand tons)

NAFTA Propyelene Net Trade Forecast(percentage)

NAFTA Propyelene Net Trade Forecast(percentage)

Propylene demand will grow at an aagr of around 2% between 2010 and

2015.

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Styrene demand in NAFTA has fallen dramatically

NAFTA Styrene Demand by Country(thousand tons)

NAFTA Styrene Demand by Country(thousand tons)

NAFTA Styrene End Uses 2010(percentage)

NAFTA Styrene End Uses 2010(percentage)

2010 styrene demand in the region fell by around 1.4 MMT between 2000 and

2010. Polystyrene, the most important end-use has suffered from inter-polymer

competition

0%

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A v e r a g

e o p e r a t i n g r a t e

Canada Mexico USA



-

ABS7%

PS (Solid)55%SB Rubber

4.8%

EPS11%

Others16%

UPR6%

The numbers of producers is relatively small and top




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The numbers of producers is relatively small and top

players are similar in size

NAFTA Styrene Capaci ty Share 2010(percentage)


AmericasStyrenics

16%

Cos-Mar 20%

INEOSNOVA29%

LyondellBasell21%

Pemex2%

Shell8%

Westlake4%




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The outlook for styrene demand is not very promising

NAFTA Styrene SD Forecast(thousand tons)

NAFTA Styrene SD Forecast(thousand tons)

NAFTA Styrene Net Trade Forecast(percentage)

NAFTA Styrene Net Trade Forecast(percentage)

Styrene remand in the region will remain basically flat. The U.S. and

Canada will continue as net exporters, as will the region as a whole

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2010 2015 2020 2025





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2010 2015 2020 2025





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Butadiene, struggling to bonce back

NAFTA Butadiene Demand by Country(thousand tons)

NAFTA Butadiene Demand by Country(thousand tons)

NAFTA Butadiene End Uses 2010(percentage)

NAFTA Butadiene End Uses 2010(percentage)

Butadiene demand in 2010 was still more than 500KT below 2000 levels. The top

two end uses (rubber), account for 60% of consumption

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100%

0

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T

h o u s a n d t o n s

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ABS4%

ButadieneRubber

30%

SB Rubber 30%

Others10%

SB Latex13%

HMDA13%

A relatively small number of producers with one




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A relatively small number of producers, with one

dominant player and four tier-two companies



Equistar/LBI15%

Exxon

Mobil12%

INEOS3%

Lanxess4%

Sabina15%

Shell16%

TexasPetro-

chemicals35%




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Flat demand and some consolidation in BD’s future

NAFTA Butadiene SD Forecast(thousand tons)

NAFTA Butadiene SD Forecast(thousand tons)

NAFTA Butadiene Net Trade Forecast(percentage)

NAFTA Butadiene Net Trade Forecast(percentage)

Despite expected consolidation, overcapacity will continue. However, the

region as a whole will remain a net importer.

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A few additinal words onfeedstocks

A few additinal words onfeedstocks

Are we currently really experiencing a




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Are we currently really experiencing a

high crude oil scenario?

A high crude scenario “ from the book”

• Declines in production from existing fields require the

development of high cost supply sources

• Relatively low level of spare OPEC capacity is available

• Steady demand growth is maintained for refined products as

crude remains the most cost effective energy resource, andefficiency gains fail to curtail demand growth

• Limited success in the development of alternative fuels

• Oil producers restrict access to reserves, limiting the develop-

ment of lower cost supplies. Political instability remains a con-

cern on security of supply. Policy changes have in the meanwhile

negligible impact on the use of oil

Ethylene prices in the United States will fall to set the




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y e e p ces e U ed S a es a o se e

floor to regional prices

Global Ethylene PricesGlobal Ethylene Prices

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1800

1990 1995 2000 2005 2010 2015 2020 2025

C o n s t a n t 2 0 1 0 $ p e r t o n

United States Western Europe South East Asia

Ethylene derivative producers inthe United States wi ll experience aconsiderable cost advantage,similar to that seen in the early1990’s

Asian pr ices are more volati le asthe base price represents materialtraded in spot m arkets. Prices wil lpeak close to European prices andfall close to US prices in the trough.

Adjustment per iod of high crude oil pr ices




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Propylene prices forecasted to converge at high levels

Global Propylene PricesGlobal Propylene Prices

Competition of propylenederivatives in export m arkets hasmaintained a close tie betweenpropylene contract prices acrossthe Atlantic

The lower cost of shipping

propylene gives closerconvergence than ethylene. Themagnitude of the trans-Atlanticprice spread has rarely beenmore than $50 per ton

Propylene prices in the United

States will rise relative to Europe,exerting upwards pressure onprices in Europe and Asia

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C o n s t a n

t 2 0 1 0 $ p e r t o n

United States Western Europe South East Asia


Tight propylene markets will sustain propylene prices




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g p py p py p

above ethylene prices in the United States

0.4

0.5

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1.0

1.1

1.2

1.3

1.4

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1990 1995 2000 2005 2010 2015 2020 2025

P / E R a t i o

P r i c e c e n t s p e r p o u n d

Propylene Ethylene P/E RatioXL: 00235\09.01.06.1\10\US\Sec5

Actual Forecast

USGC Propy lene Price Relative to Ethy leneUSGC Propy lene Price Relative to Ethy lene





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Global Butadiene Prices(medium crude oil)

Global Butadiene Prices(medium crude oil)

Butadiene prices are expected to remain high

Butadiene is primarily sourced

from the mixed C4s stream insteam crackers as a co-productof ethylene production

The United States has historicallybeen short of m ixed C4s due tothe prevalence of l ight gas

feedstocks processed in crackers Due to the structural deficit,

mixed C4s in the United Statesare frequently valued at importparity from Western Europe,rather than any of the valuation

mechanisms associated withprocessing excess C4s withoutproducing butadiene .


Intensification of inter-polymer competition will




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US Polymer Prices(medium crude oil)

US Polymer Prices(medium crude oil)

y

maintain prices of all polymers in a narrow band

Polystyrene wil l continue to

define the upper limit tocommodi ty polyolefin prices andPVC wi ll set the floor

Polypropylene prices are set torise relative to polyethylene,reflecting the increase in the

value of the respectivemonomers

Polypropylene prices willstrengthen c lose to parity w ithLDPE to set the ceiling topolyolefin prices

Polypropylene had defined thefloor to polyolefin prices formuch of the last two decades

0

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1990 1995 2000 2005 2010 2015 2020 2025

Polystyrene LDPE LLDPE HDPE PP PVC

XL: 00235\09.01.06.1\10\US\Sec9

Actual Forecast

C u r r e n t U S C e n t s p e r P o u n d


Polyolefns profitability will fall




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below historic averages

(30)

(20)

(10)

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1990 1995 2000 2005 2010 2015 2020 2025

P e r c e n t

LDPE LLDPE HDPE (IM) PPXL: 0023 5\09.01.06.1\10\US\Sec6

Forecast Actual

US Leader Polyolefin Plant ROI(percent ROI)

US Leader Polyolefin Plant ROI(percent ROI)

Profitability for all polyolefins willfall below historic averages asproducers experience higherfeedstock cost pressure and thethreat of erosion of key exportmarkets by feedstock advantagedproducers in the Middle East

Polyethylene profitability wi llcontinue to follow an eight yearcycle, with the next peak forecastin 2015

Propylene wi ll command a largershare of the margin in the

propylene value chain andpolypropylene prices wi llincreasingly settle at a modeststeady margin over cash costs Adjustment per iod of high crude oil pr ices




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One closing word

THANK YOU FOR YOUR ATTENTION

[email protected]

• NOTE: For additional details on this information, please contact Nexant’sstaff or refer to the following periodical reports from the ChemSystems

series:

• Popyolefins Planning Service (POPS)

• Petroleum and Petrochemical Economics

www.chemsystems.com www.nexant.com



May of 2011May of 2011

Raúl Arias Álvarez

Senior Consultant and Manager Latin America

Raúl Arias Álvarez

Senior Consultant and Manager Latin America

PolyolefinsMarket Review PolyolefinsMarket Review

Documents

Nexant Presentation_Preliminary.pdf