Information | Analytics | Expertise APRIL 2014 GLOBAL PP OUTLOOK ME Gas, U.S. Shale, China Coal But what about Europe? Remko Koster, Director Polyolefins [email protected] © 2014 IHS / ALL RIGHTS RESERVED IHS Chemical Power & Utilities Transportation Governmen t Healthcare Electronics & Telecom Energy Oil & Gas Military & Security Consumer & Retail Chemicals Auto motiv e Construction Financial Agriculture Metals & Mining Shipping © 2014 IHS Aerospace & Defense Cross-disciplinary content and expertise in your end-markets for the most complete, integrated chemical industry information available. Content • Economy and Energy update • Feedstock by region • Ethylene and Propylene • Global Polypropylene outlook © 2014 IHS 3 Economy and Energy update 4 Global GDP increasing in 2014 Percent, % 5,0 (Constant 2005 U.S. Dollars) Forecast 4,0 3,0 2,0 1,0 0,0 -1,0 -2,0 -3,0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 Source: IHS Global Insight © 2014 IHS Economy and Energy update Asia-Pacific and Sub-Saharan Africa will achieve the fastest growth in real GDP Annual percent change 8 6 4 2 0 -2 NAFTA Other Americas Western Emerging Mideast-N. SubEurope Europe Africa Saharan Africa 2012 © 2014 IHS 2013 2014 2015 Japan Other AsiaPacific 2016-20 5 Economy and Energy update Oil prices restrained by rising North American production • Supply growth should be more than sufficient to meet rising global demand, putting downward pressure on prices in 2014–15. • IHS CERA projects US liquids production will increase from 7.5 million barrels per day (mbd) in 2013 to 8.5 mbd in 2014 and 9.0 mbd in 2015. • The Russia-Ukraine dispute could have a chilling effect on foreign investment in Russia’s oil and gas industries. • Middle East and North Africa politics look increasingly unsettled. • Global spare capacity will remain relatively tight with little cushion to absorb supply disruptions. © 2014 IHS 6 Economy and Energy update Oil Price Forecast Moving Down in 2014/15 US$ / BBL 120 100 80 60 40 20 0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 WTI Brent Dubai © 2014 IHS Feedstock by Region From Oil/Gas to Polypropylene FCC Propylene REFORMER Refinery PP Raffinate Benzene Toluene Xylene BTX Extraction Naphtha Methane/Hydrogen Gas Oil Butadiene Mixed Butylenes Ethane Fuel Oil Propane Ethylene Butane Crude Oil Unit Condensate Propylene Ethylene Natural Gas Gas Processing Unit © 2014 IHS PE Steam Reformer SynGas Coal PP Coal Gasification Methanol Synthesis MTO / MTP Feedstock by Region Conventional And Unconventional Landscape © 2014 IHS 9 Feedstock by Region U.S. Shale Gas Plays © 2014 IHS 10 Feedstock by Region U.S. Steam Cracker Go Light Million Metric Tons 35 Ethane Portion 75% 30 70% 25 65% 20 60% 15 55% 10 50% 5 45% 0 40% 08 © 2014 IHS 09 10 Ethane 11 12 13 14 Propane Others 15 16 17 Ethane Portion 18 11 Feedstock by Region U.S. & West Europe Integrated Polyethylene Cash Margins Dollars per Metric Ton 1000 900 800 700 600 500 400 300 200 100 0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 US Ethane to PE Chain Margin W. Europe Naphtha to PE Chain Margin © 2014 IHS 12 Feedstock by Region Shale Gas in Europe or Ethane Imports ? Shale gas in Europe is progressing very slowly • Significant plays in England, Poland, Germany, France • Resistance in France and Germany • Composition of the gas is largely unknown • May only compensate for the loss of gas from conventional fields There will be no repeat of the shale gas boom in the US Ethane imports from the US into Europe an alternative • Ineos imports ethane into Rafnes (Norway) from 2015 onwards • In spite of transport costs, advantaged position for Norway cracker • Ineos aims for a repeat in Grangemouth UK • Coastal competitors Borealis / Versalis / Total studying Ethane imports a differentiator giving some sites an advantage © 2014 IHS 13 Feedstock by Region High Oil Benefits Middle East Ethylene Production Dollars Per Metric Ton 1750 HDPE production costs advantage ME over WE producer 1500 1250 1000 750 500 250 0 Jan 12 © 2014 IHS Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15 14 Feedstock by Region CTO in China: An Innovation On Old Ideas Sulfur Recovery H2+CO Gasification Methanol Synthesis Removal Coal © 2014 IHS MTO Ethylene MTP Propylene Feedstock by Region Chinese CTO Is Very Cost Competitive 2012 LLDPE GLOBAL CASH COSTS BY SITE Integrated, Total Cash Cost Basis (Ethylene: Light Olefins Production Basis) 1st Quartile 2nd Quartile 4th Quartile 3rd Quartile NEA Avg. WEP Avg. SEA Avg. NAM Avg. MDE Avg. 10 20 30 40 Cumulative Capacity(Million Metric Tons) 50 60 Total Cash Cost Xinjiang CTO Inner Mongolia CTO Shandong CTO Shanghai CTO MDE Avg. NAM Avg. SEA Avg. NEA Avg. WEP Avg. © 2014 IHS Ethylene and Propylene Ethylene Capacity Growth World Capacity, Million Metric Tons 210 Regional Capacity, Million Metric Tons 80 70 180 60 150 50 120 40 90 30 60 20 30 10 0 0 08 09 10 11 12 13 14 World North America West Europe © 2014 IHS 15 16 17 Middle East 18 Asia 17 Ethylene and Propylene Propylene Capacity Additions North America 2013 2018 South America West & Central Europe CIS & Baltic States Middle East & Africa Indian Subcontinent Northeast Asia Southeast Asia 0 10 20 30 40 Capacity, Million Metric Tons © 2014 IHS 50 60 Ethylene and Propylene Global Propylene Supply Development Production, Million Metric Tons 120 Technology Share, Percent 30 100 25 80 20 60 15 40 10 20 5 0 0 08 © 2014 IHS 09 10 11 12 Steam cracker Alternate Technologies 13 14 15 16 17 18 Refineries Alternate Technologies Share Ethylene and Propylene Alternate Propylene Technologies Global Capacity, Million Metric Tons 40 35 30 25 20 15 10 5 0 08 09 Dehydro © 2014 IHS 10 11 Metathesis 12 13 HS FCC 14 15 Others 16 17 18 Coal to Olefins Ethylene and Propylene World Propylene – PG/CG Cost Curve 2018 $/Metric Ton 1800 SEA Avg MDE PDH MDE Avg NAM Avg SAM AvgNEA Avg China PDH WEP Avg US PDH 0 0 20 40 60 80 100 Cumulative Production - Million Metric Tons Demand © 2014 IHS US Price W Europe Price NE Asia Price 120 2018 Polypropylene PP World’s Largest Polymer PET 8% PVC 17% ABS 3% PC 2% HDPE 17% LLDPE 11% EPS 3% PS 5% PP 25% LDPE 9% 2013 World Polymer Demand = 222 Million Metric Tons © 2014 IHS Polypropylene PP Domestic Demand %AAGR 2013 - 2018 Average Annual Growth Rate, % 10 8 6 4 2 0 Polypropylene © 2014 IHS Polypropylene PP Demand 2013 vs. 2018 2013 2% 5% 2018 4% 5% Demand Change + 15 MMT +26.8% 14% 10% 12% 10% 5% 5% 12% 14% 9% 33% 9% 36% 7% 8% Total Global Demand = 70.8 MMT Total Global Demand = 55.8 MMT North America South America West Europe Southeast Asia Northeast Asia China Africa/Middle East Indian Sub. Other © 2014 IHS Polypropylene New PP Plants in China Hohhot Refining (150kt) Jiutai Energy (IM) (300kt) Shaanxi Yanchang (250kt) Datang Int'l Power (500kt) Daqing Refinery (300kt) Shenhua Xinjiang (450kt) Yili Meidianhua (300kt) CPI/Total JV (400kt) Ningxia Yongda PC (120kt) Fushun PC (300kt) Zhongtian Hechuang (700kt) Baofeng Energy (300kt) Hebei Haiwei (300kt) Shenhua Ningmei (500kt) Shanxi Coking Corp. (300kt) Yankuang Guohong Chem. (300kt) Ningxia Refinery (100kt) Qingdao Ref&Chem (350kt) Qinghai Salt (160kt) Shandong Shenda (200kt) Yulin Energy & Chemical Co. (600kt) China Coal Crop. Yuheng (300kt) 2012 2013 2014 2015 2016 2017 © 2014 IHS Luoyang PC (140kt) Sinopec /Wanbei JV (300kt) Shanghai PC (200kt) Shenhua Xiwan (380kt) Ningbo Heyuan Chemical (300kt) Fujian ZhongJiang PC (350kt) PuCheng Clean Energy (400kt) Sichuan PC (450kt) Huating Coal Group (200kt) Yangzijang 400 KT SINOPEC Wuhan (400kt) Fujian Zhongjing PC (350kt) Maoming PC (200kt) Guangzhou PC (200kt) CNOOC & Shell PC (700kt) SINOPEC Zhijin (300kt) Sinopec BeiHai PC (200kt) Sinopec-KPC PC JV (745kt) Sinopec Hainan R&C (400kt) Polypropylene PP Expansions in Middle East and Africa Company Related to Saudi Polymers CPC Borouge Borealis Country Capacity (kt) Timing Saudi Arabia 400 Q1 2013 UAE 960 Q3 2014 Total Polypropylene Net Capacity Increase 1360 Middle East Tsunami becomes a Ripple © 2014 IHS Polypropylene Europe: Capacity Expansions in the East Company Location Capacity (kta) Timing Omsk Kauchuk Omsk, RU 180 Q1 2013 Tobolsk-Polymer (Sibur) Tobolsk, RU 500 Q3 2013 Uz-Kor Gas Uzbekistan 100 Q3 2015 KPI Kazakhstan 400 2016/2017 Rosneft Angarsk, Russia 250 2016/2017 ZapSibNeftekhim (Sibur) Tobolsk, RU 500 2019+ NZNK Nizhnekamsk, RU 400 2019+ FEPCO Nakhodka 600 2019+ WE and CE: closures needed (estimated to 400 kta) ? SABIC Gelsenkirchen 200 kta PP2.3/2.4 by 2015 © 2014 IHS Polypropylene Global PP Domestic Demand Million Metric Tons 90 80 70 60 50 40 30 20 10 0 Operating Rate, Percent 88 87 86 85 84 83 82 81 80 79 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 North America South America West Europe Central Europe & CIS Middle East & Africa Indian Subcontinent Asia Total Capacity Operating Rate © 2014 IHS Polypropylene All PP Global Net Trade Net trade, Million Metric Tons 10 Exports 8 6 4 2 0 -2 -4 -6 -8 Imports -10 08 09 10 Asia (ex China) © 2014 IHS 11 China 12 13 Europe & CIS 14 15 N.America 16 17 Middle East 18 Other Polypropylene PP Price and Margin Contract Price, Euros Per Metric Ton 1800 Margin, Euros Per Metric Ton 100 1600 50 1400 0 1200 -50 1000 -100 800 -150 600 Jan 09 -200 Jan 10 Jan 11 WEP Margin © 2014 IHS Jan 12 Jan 13 Jan 14 WEP PP Contract 30 Conclusions Propylene supply gap filled • China Coal-To-Olefins • US PDH Units PP remains a preferred polymer with strong global demand • China leads the charge in new capacity • China and India growing demand share Shifts in global trade present challenges and opportunities • Middle East redirects exports on lower China imports • North America stays “local” • WE and NEA producers under pressure © 2014 IHS 31 So what about Europe? Aging asset base – last cracker built in 1994 Ethane imports from NAM may give some PE producers some cost advantage Shale gas development in Europe: too little too late Increasing import duties for GCC producers 1st Jan 2014 Improving economy in Europe in 2014 Long Term – Gradual Decline Short Term – Improvement for PP producers © 2014 IHS 32
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