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Tecnon OrbiChem Marketing Seminar at APIC 2008The World Chemical Industry Focuses on Asia
Keiji Wakatsuki, Senior Consultant Singapore, May 27, 2008
Gillian Tweddle, Business Manager Synthetic Fibres & Polyester
China’s Relentless Integration Upstream from Textiles Reaches the Refinery Gate with Paraxylene
29 May 2008 2
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29 May 2008 3
CHINA’S RELENTLESS INTEGRATION UPSTREAM FROM TEXTILES REACHES THE REFINERY GATE WITH PARAXYLENE
• This presentation – structure:
Polyester
PTA
Paraxylene
Conclusions
World, Asia, China, India
Asia, China, India
Background on growth in polyester capacity as the basis for PTA demand
By how much and to what timescale has Chinese PTA capacity grown? Upstream or downstream driven?Effect of regional overcapacity on margins
PX growth in response to PTA demandPX overcapacityPTA producers move upstream?
Asia, China, India
29 May 2008 4
Polyester Value ChainCHINA’S UPSTREAM INTEGRATION
• Competitive advantage for China & India in fibres and textiles production has led to very high growth in demand for polyester and polyester plant capacity growth
• From 2003 onwards we have seen a corresponding demand increase in the intermediate PTA as feedstock– High growth in PTA capacity build in China and overcapacity– Trend of upstream integration by textile manufacturers and others
• Let’s consider the situation for PX feedstock, required exclusively for PTA production– Concerns that insufficient PX will be available appear unfounded– Trend of upstream integration founders as PX production needs to be
refinery linked– Implications for China & India
29 May 2008 5
Source: Tecnon OrbiChem
PolyesterWORLD POLYCONDENSATE CAPACITY (1,000 Metric Tons)
• World polycondensate capacity growth from 46,000 ktpa in 2003 to 63,000 ktpa in 2013, AAGR of 3.0%– Growth in China capacity from 15,200 ktpa to 26,600 ktpa in this period,
AAGR of 5.7%– China has dominated capacity growth 2003-2007– Estimated world consumption currently significantly lags capacity pushing down
operating rates and margins e,g fibre operating rates 60-70%
0
10,000
20,000
30,000
40,000
50,000
60,000
2003 2005 2007 2009 2011 2013
Thousand Metric Tons
N America
S America
W Europe
E Europe
ME & Africa
S & SE Asia
NE Asia
China
World Cap x 0.9
World Consumption
0
10,000
20,000
30,000
40,000
50,000
60,000
2003 2005 2007 2009 2011 2013
Thousand Metric Tons
N America
S America
W Europe
E Europe
ME & Africa
S & SE Asia
NE Asia
China
World Cap x 0.9
World Consumption
29 May 2008 6
Source: Tecnon OrbiChem
PolyesterCHINESE & INDIAN PTA BASEDPOLYCONDENSATE CAPACITY(1,000 Metric Tons)
0
10,000
20,000
30,000
40,000
50,000
60,000
2003 2008 2013
World
India
China
• India shows high growth rates but capacity is << than China– India AAGR is 9.7% for 2003-2007 and predicted 3.8% for 2003-2013– But curves do not necessarily capture new capacity after 2009 not yet planned
• High polyester growth rates demand high growth in PTA feedstock
29 May 2008 7
Source: Tecnon OrbiChem
PTAHISTORICAL ASIAN PTA CAPACITY EXPANSIONS2000-2008
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2000 2001 2002 2003 2004 2005 2006 2007 2008
1,000 Metric Tons
China
NE Asia
India
S & SE Asia
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2000 2001 2002 2003 2004 2005 2006 2007 2008
1,000 Metric Tons
China
NE Asia
India
S & SE Asia
• Asian PTA capacity has responded to high growth in polyester– Dramatic growth in capacity added each year in China– 2007 appears to be peak for China. Although planned capacity addition for
2010 at similar levels, projects likely to be delayed or cancelled. – India capacity addition higher than needed to meet polyester growth based on
current announced polyester projects
29 May 2008 8Source: Tecnon OrbiChem
PTACHINESE PTA IMPORT REQUIREMENT
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
1990 1995 2000 2005 2010 2015
Consumption
Imports
Capacity toProduce
Capacity toConsume
1,000 Metric Tons
• China continues to be a net importer of PTA– Even though Asia overall has net overcapacity– China imports predicted to remain above 5000 ktpa through 2013– Domestic production becomes a larger proportion of the market
29 May 2008 9
PTANEW PTA CAPACITY 2008-2013- CHINA(1,000 Metric Tons)
Company Location Capacity Start-up dateChange
Formosa Chemicals & Fibre Ningbo, China (Zhejiang) 600 Apr 2008Yisheng Dahua Petrochemical Dalian, China (Liaoning) 1400 Oct 2008Chongqing Pengwei Petrochemical Chongqing, China (Chiongqing) 700 End 2008
Jialong Petrochemical Fibre Shishi Quanzhou, China (Fujian) 600 Feb 2009Yizheng Chemical Fibre Co. Ltd Yizheng, China (Jiangsu) 1000 Q3 2009Hangbong (Jiangyin) Petrochemical Jiangyin, China (Jaingsu) 600 Oct 2009
Ningbo Mitsubishi Chemical Ningbo, China (Zhejiang) 1000 P 2010Xianglu Petrochemical Xiamen, China (Fujian) 1500 2010Jinan Zhenhao Chemical Fibre Materials Jinan, China (Shandong) 530 2010Mitsui Chemicals (Zhangjiagaing) LLC Zhangjiagang , China (Jiangsu) 600 P 2010Zhejiang Tongkun Group Tong Xiang, China (Zhejiang)
No projects identified - - 2011No projects identified - - 2012No projects identified - - 2013
* Yisheng Dahua will start up 500 ktons capacity in 2008, the remainder later.
2700kt *
1200kt
3630kt
29 May 2008 10
PTANEW PTA CAPACITY 2008-2013- INDIA(1,000 Metric Tons)
Company Location Capacity Start-up dateChange
Mitsubishi Chemical Haldia, India 800 April 2008
2011 Onwards:Indian Oil Corporation Panipat, India 170Indorama Mangalore, India -Mangalore Refinery & Petrochemicals Mangalore, India 1450Reliance Industries Jamnagar, India 700
• In contrast to China, India’s major PTA capacity expansions are set to take off from 2011 onwards. We can see:– India’s PTA projects based on use of PX from planned refinery projects– China PTA based mainly on upstream integration from polyester
29 May 2008 11Source: Tecnon OrbiChem
PTAASIAN SUPPLY & DEMAND 2003-2013
0
10,000
20,000
30,000
40,000
50,000
2003 2005 2007 2009 2011 2013
1,000 Metric Tons
S & SE Asia
NE Asia
China
Asia Consumption
Asia Cap x 0.9
0
10,000
20,000
30,000
40,000
50,000
2003 2005 2007 2009 2011 2013
1,000 Metric Tons
S & SE Asia
NE Asia
China
Asia Consumption
Asia Cap x 0.9
S & SE Asia
NE Asia
China
Asia Consumption
Asia Cap x 0.9
• PTA surplus capacity since 2007– Growth in China demand estimated ~14% AAGR 2008-2013– Surplus capacity predicted to peak in 2010– Projects likely delayed or cancelled, plants underrun capacity– PTA plant closures expected– PTA margins adversely affected
29 May 2008 12
Source: Tecnon OrbiChem
PTAMONTHLY PTA MARGINS
29 May 2008 13Source: Tecnon OrbiChem
ParaxyleneWORLD PARAXYLENE SUPPLY & DEMAND
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Thousand Metric Tons
Capacity to Produce PX
Estimated Actual PX Production Capability
Estimated PX consumption by PTA at Capacity
Estimated Downstream PX Pull
PTA capacity exceeds demand by equivalent5250 ktons PX by 2008
PTA capacity exceeds demand by equivalent5250 ktons PX by 2008
• A ‘PTA bubble’ now exists• But PX capacity sufficient to meet downstream needs
– And reaches overcapacity from 2009 onwards
29 May 2008 14
ParaxyleneASIAN SUPPLY & DEMAND 2003-2013
0
10,000
20,000
30,000
40,000
50,000
2003 2005 2007 2009 2011 2013
Thousand Metric Tons
Source: Tecnon OrbiChem
S & SE Asia
NE Asia
China
Asia Consumption
Asia Cap x 0.9
0
10,000
20,000
30,000
40,000
50,000
2003 2005 2007 2009 2011 2013
Thousand Metric Tons
Source: Tecnon OrbiChem
S & SE Asia
NE Asia
China
Asia Consumption
Asia Cap x 0.9
S & SE Asia
NE Asia
China
Asia Consumption
Asia Cap x 0.9
• Asian paraxylene supply from within the region has been tighter than world supply through to 2008– Regional consumption growth 2008-2013 is 8.5% AAGR, China higher– New capacity in Asia alone begins to ease situation from 2008– Further paraxylene available from Middle East expected to move to Asia
29 May 2008 15
ParaxyleneCHINESE PARAXYLENE IMPORT REQUIREMENT
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
22,000
1990 1995 2000 2005 2010 2015
Consumption
Imports
Capacity toProduce
Capacity toConsume
1,000 Metric Tons
Source: Tecnon OrbiChem
• China will continue to be a net importer of PX– Current capacity to produce < capacity to consume in PTA and DMT and also <
actual consumption in PTA– As world capacity excess builds, expect NE Asia (Japan, Korea, Taiwan) SE
Asia exports to attempt to maintain volumes as own PTA production fails to grow– Chinese PX operating rates expected to also be affected by world overcapacity
29 May 2008 16
ParaxyleneNEW PARAXYLENE CAPACITY 2008-2013 CHINA & INDIA(1,000 Metric Tons)
Company Location Capacity Start-up date
CHINA ChangeSinopec Jinling Petrochemical Nanjing, China (Jiangsu) 600 Q3 2008Fujian Refineries Fujian, China (Fujian) 700 Q3 2008CNOOC Huizhou Huizhou, China (Hainan) 850 Q4 2008Fujia Dahua Petrochemical Dalian, China (Liaoning) 450 Q4 2008
Sinopec Shanghai Petrochemical Jinshan, China (Shanghai) 600 Q3 2009PetroChina Urumchi Petrochemical Urumqi, China (Xinjiang) 930 Q3 2009
Ningbo Zhongjin Petrochemical Ningbo, China (Zhejiang) 700 2010Dragon Group China (Fujian) 800 Q2 2010Sinopec Maoming Petrochemical Maoming, China (Guangdong) 800 2010Sinopec Tianjing Petrochemical Tianjing, China 800 2010
No projects identified 2011-2013
INDIAMangalore Refinery & Petrochemicals Mangalore, India 920 End 2010Indian Oil Corporation Paradip, India 1200 End 2011Reliance Industries Jamnagar, India 2600 After 2012
2600kt
1530kt
3100kt
4720kt
29 May 2008 17
ParaxyleneNEW PARAXYLENE CAPACITY 2008-2010ASIA & MIDDLE EAST(1,000 Metric Tons)
Company Location Capacity Start-up dateChange
Japan Energy Kashima, Japan 420 January 2008Thai Paraxylene Sri Racha, Thailand 110 e Early 2008PTT Aromatics Map Ta Phut, Thailand 616 Q3 2008Sinopec Jinling Petrochemical Nanjing, China (Jiangsu) 600 Q3 2008Fujian Refineries Fujian, China (Fujian) 700 Q3 2008CNOOC Huizhou Huizhou, China (Hainan) 850 Q4 2008Fujia Dahua Petrochemical Dalian, China (Liaoning) 450 Q4 2008
Kuwait Aromatics Co. Shuaibah, Kuwait 770 Q2 2009Samsung Total Petrochemical Daesan, South Korea 270 e Mid 2009PetroChina Urumchi Petrochemical Urumqi, China (Xinjiang) 930 Q3 2009Sinopec Shanghai Petrochemical Jinshan, China (Shanghai) 600 Q3 2009Aromatics Oman Sohar, Oman 874 Q4 2009
Ningbo Zhongjin Petrochemical Ningbo, China (Zhejiang) 700 2010Dragon Group China (Fujian) 800 Q2 2010Hyundai Oilbank Seosan, South Korea 840 Q3 2010Mangalore Refinery & Petrochemicals Mangalore, India 920 End 2010Sinopec Maoming Petrochemical Maoming, China (Guangdong) 800 2010Sinopec Tianjing Petrochemical Tianjing, China 800 2010
3746kt
3444kt
4860kt
29 May 2008 18
ParaxyleneNEW PARAXYLENE CAPACITY 2008-2010CHINA
• China upstream or downstream integration?– Little interest in upstream integration to PX remains
• For 2008 projects by Sinopec Jinling, Fujian Refineries, CNOOC and Fujia Dahua are all linked to upstream refineries/refinery projects
• In 2009 and 2010 only Dragon’s controversial PX project and Ningbo Zhongjin could be considered to be downstream driven
• Margins over naphtha, though challenged too in recent months are more attractive than margins over mixed xylenes
29 May 2008 19
Source: Tecnon OrbiChem
Polyester Value Chain CHINA CAPACITY ON-LINE CURVES2000-2010
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
5,500
6,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
1,000 Metric Tons
PX World
PX China
PTA China
PolyesterCapacity peaks move
Polyester - PTA - PX
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
5,500
6,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
1,000 Metric Tons
PX World
PX China
PTA China
PolyesterCapacity peaks move
Polyester - PTA - PX
• Taking China as dominant in the world picture:– It is clear that there has been upstream integration by textile producers
• This has been straightforward to achieve with PTA licence technology readily available for purchase
• But PTA capacity addition has vastly exceeded demand– PX capacity has responded to PTA capacity growth but with a delay
• There has been ‘’short term tightness’’ for world PX in 2005 through 2007 but that is now set to change as PX is forecast to move to overcapacity
• PX capacity has not in general been added by upstream integration due to competitive PX technology being an integrated part of refinery operations
29 May 2008 20
Refinery:ReformateMX
Paraxylene PTA Polyester
Overcapacity &Poor Margins Move Upstream
Solution:Upstream Integration
Upstream IntegrationBlocked
Refiners Integrate/Partner Downstream
Polyester Value Chain ConclusionsOVERVIEW
29 May 2008 21
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