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© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Polyester Value ChainChallenges Ahead
IndianOil Petrochemical Conclave
Sanjay Sharma,
Managing Director – Middle East & India
February 7, 2014
Dubai, UAE
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Global Chemicals Investment Focused In
Three Regions With Varying Strategies
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
• Global economic growth
expected to strengthen in 2014-
2015.
• The US expansion will gain
momentum with faster growth in
consumer and business
spending.
• Western Europe will gradually
recover, with northern countries
leading and southern countries
with heavy debt burdens lagging.
• Asia (excluding Japan) and sub-
Saharan Africa will achieve the
fastest growth.
Global real GDP growth expected to
strengthen in 2014-15
3
-4
-2
0
2
4
6
8
10
1990 1993 1996 1999 2002 2005 2008 2011 2014 2017
World Advanced countries Emerging markets
(Percent change)
(Percent change)
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
• Both structural and cyclical forces contributed to the emerging
markets slowdown.
• There was no decoupling of growth in emerging and advanced
economies.
• While macroeconomic management has been sound, there have
been too few structural reforms; the state still plays too large a role.
• As growth in the developed economies picks up, emerging markets
will have to compete harder for funds, although their exports will
strengthen.
• The pace of globalization has slowed.
• A return to the boom years of the 2000s is unlikely.
The new realities for emerging markets
4
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Presentation Outline
• Polyester Chain: Emergence of New
Industry Order
• Polyester Chain - Fibers and PET
• Chain Margins: Integration pays off
• Conclusions
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Polyester Value Chain…….
6
Ethylene GlycolEthylene Ethylene Oxide
Paraxylene
(PX)
Terephthalic Acid
(PTA)
Acetic Acid
Polyethylene
Terephthalate
Naphtha
Crude Oil
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
80 Percent of World Population needs more
Fiber……..
Central Europe
ChinaEast Europe
Indian Subcontinent
Middle EastNorth America
South America
Africa
South Korea
Southeast Asia
West Europe
CIS & Baltic States
Japan
0
5
10
15
20
25
30
0 5 10 15 20 25 30 35 40GDP per Capita - PPP, Thousand Dollars/person
World Average 12.4
2011 Per Capita Fiber Demand
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Relentless Capacity Expansion
0
2
4
6
8
10
12
14
16
18
20
PET PSF MEG PTA PX
Demand Growth (2012-2014) Capacity Growth (2012-2014)
Million Metric Tons
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Paraxylene – Entering a New Era, Prices
will decline, but avoid a collapse?
60
65
70
75
80
85
90
-4
0
4
8
12
16
20
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Asia Europe, Middle East, Africa
Americas Global Demand Growth
Excess Capacity Operating Rate
Million Metric Tons Operating Rate, %
Forecast
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Global MEG Capacity Growth
10
40
50
60
70
80
90
100
-2
0
2
4
6
8
10
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Asia Europe, Middle East, AfricaAmericas Global Demand GrowthExcess Capacity Operating Rate
Million Metric Tons Percent Operating
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
PTA: Emergence of a New Industry Order
60
65
70
75
80
85
90
95
100
105
0
10
20
30
40
50
60
70
80
90
100
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Nameplate Capacity Effective CapacityDemand Operating RateEffective Operating Rate
Million Metric Tons Operating Rate, %
Forecast
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Global PTA Capacity Growth
12
30
40
50
60
70
80
90
100
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
2007 2009 2011 2013 2015 2017
Americas Europe, Middle East, AfricaAsia Global Demand GrowthExcess Capacity Operating Rate
Million Metric Tons Operating Rate, Percent
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Presentation Outline
• Polyester Chain: Emergence of New
Industry Order
• Polyester Chain - Fibers and PET
• Chain Margins: Integration pays off
• Conclusions
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Total Fiber Demand Shows a Strong Co-
Relation with GDP
R² = 0.9911
40
50
60
70
80
90
100
38,000 42,000 46,000 50,000 54,000 58,000 62,000 66,000 70,000
GDP (Billion 2005 $)
Fiber, Million Metric Tons
2010
2012
Total Natural and Man-Made Fibers
2000
Fibers Growth = 1.6 X GDP Growth
Polyester Fibers Growth = 2.4 X GDP Multiple
20162014
2018
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Polyester & Cotton Dominate The Mix
Cotton30%
Polyester49%
Nylon5%
Olefin6%
Cellulosic5% Acrylic
2%
Other Synthetic Fibers
1%
Wool, Silk & Linen2%
2012 = 78.2 Million Metric Tons
Global Fibers
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Cotton Demand:
0
5
10
15
20
25
30
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Supply Demand
Million Metric Tons
Supply CAGR:
Demand CAGR:-2.8%-0.1% Supply CAGR:
Demand CAGR: 2.3%1.7%
Depends on Supply
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Polyester Accounts for Bulk of Growth in
Fiber Demand
-3
-2
-1
0
1
2
3
4
5
-4,000
-2,000
0
2,000
4,000
6,000
8,000
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Growth of Cotton Growth of Polyester
Growth of Other Fibers GDP Growth
Fibers, Million Metric Tons GDP Growth, %
Forecast
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Staggering Surplus in Capacity!
60
65
70
75
80
85
90
0
2
4
6
8
10
12
14
16
18
2009 2010 2011 2012 2013 2014
PSF PET POY
Excess Capacity, Million Metric Tons Operating Rate (%)
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
PET – Virtually Every Region has Surplus
Capacity!
2008 2013 2015
NAM
SAM
ISC
WEP
CEP
MDE
AFR
FSU
CHI
NEA
(Excl. CHI)
SEA
1.5
3.4
*Numbers are in million metric tons
0.2
0.6
0.8
-0.5
0.5
-0.6
0.9
-0.3
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Presentation Outline
• Polyester Chain: Emergence of New
Industry Order
• Polyester Chain - Fibers and PET
• Chain Margins: Integration pays off
• Conclusions
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
PET Resin Spreads in Terms of Polyester –
Integration Holds The Key
0
200
400
600
800
1,000
1,200
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Global Value Chain Spreads - in PET Equivalent
PX-Naphtha PTA-0.66*PX MEG-0.6*C2 PET - PTA/MEG
Forecast
Dollars Per Metric Ton
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Presentation Outline
• Polyester Chain: Emergence of New
Industry Order
• Polyester Chain - Fibers and PET
• Chain Margins: Integration pays off
• Conclusions
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
India’s growth recovery dilemma
23
• Limits policy space for monetary stimulus
• Delayed by pre-election policy inertia
• High borrowing costs and weak business sentiment
• Currency has stabilized, but risks not over
External
pressuresInvestment
slump
High inflation
Structural reforms
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
• Polyesters demand growth
remains on trend line
• Severe oversupply in the
polyester industry threatens to
restrict margins for producers
− Managing excess capacity is
necessary but challenging
• Difficult to commit further
investments due to lack of
margins
• Integration holds the key
Conclusion
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
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