ELASTOMERS – TIRE AND CONSTRUCTIONS OPPORTUNITIES IN GCCSABIC

April 9, 2017

No. 1

TOPICS

Elastomers - Overview

Major applications of Elastomers in GCC

Tire industry in GCC

SABIC Elastomers for Tire and Construction Applications

SABIC Application Development Center (SPADC)

ELASTOMERS - OVERVIEW

No. 3

STABLE RATIO BETWEEN NATURAL AND SYNTHETIC RUBBER

**Source: IRSG

Natural Rubber – Natural Elastomer

from Rubber trees

Synthetic Rubber – Artificial Elastomer

from Petroleum byproducts

9850 10057 10098 9723 10403 11239 11658 12281 12115 12314

12700 12829 12285 1148813277

14091 14042 14199 14179 14460

0

5000

10000

15000

20000

25000

30000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

World Rubber Production**

Natural Rubber Synthetic Rubber

46%

54%

World Rubber Consumption – 2015**

Natural Rubber Synthetic Rubber

No. 4

ELASTOMER TYPES

General Purpose Rubber (GPR): Used in high volume

rubber goods such as Tires, belts, hoses, footwear.

Typically low cost with good mechanical properties at room

temperature

• Natural Rubber (NR)

• Styrene-Butadiene Rubber (SBR)

• Polybutadiene Rubber (BR)

• Butyl Rubber (IIR)

• Ethylene Propylene Rubber (EPR/EPDM)

Special Purpose Rubber (SPR): Used in applications

requiring specific properties such as high resistance to heat,

oil, solvents etc.

• Nitrile Rubber (NBR)

• Neoprene Rubber (CR)

• Hydrogenated Nitrile rubber (HNBR)

• Silicone Rubber (Q),

• Fluoroelastomer etc.

Emulsion SBR, 24%

Solution SBR,10%

Polybutadiene Rubber, 24%

Ethylene Propylene

Rubber, 9%

Butyl/Halobutyl Rubber, 8%

Poly Isoprene Rubber, 5%

Nitrile Rubber, 4%

Poly Chloroprene Rubber, 2%

Others,14%

Global Synthetic Rubber Capacities

19,863 KT

MAJOR APPLICATIONS OF ELASTOMERS IN GCC

No. 6

ELASTOMERS - KEY APPLICATIONS IN GCC

Building & Construction

Automotive Tires

Footwear & Sports

Tires70%

Building & Constructions

10%

Automotive10%

Industrial5%

Footwear & Sports 3%

Others2%

No. 7

ELASTOMERS IN AUTOMOTIVE APPLICATION

Brake parts

(EPDM, SBR

Tires (BR, SBR,

EPDM)

Coolant Hoses

Air Hoses

A/C Hose (EPDM)

Glass Run Channel

Windshield Wipers (EPDM)

Belts (EPDM, BR, SBR)

Avg. 25 – 27 kg of Rubber is used in

a passenger car including approx.

20Kg in tires

- -

Sunroof Seal (EPDM)

Bumpers (POE, EPDM) Body sealing

(EPDM)

Hood Seal

(EPDM)

No. 8

ELASTOMERS IN BUILDING & CONSTRUCTION

Window/Door seals

A/C Hoses

Toilet hoses

Pipe seals and gaskets

Kitchen utensils

Foam insulations

Wire & Cables

Furniture

Roof sheeting and membranes

Water pipes

Washing machine gaskets

Etc..

Industrial hoses and belts

Rubber sealing and gaskets

Sheeting and membranes

Insulations

Rubber linings

Rubber floorings

Rubber mounts and bushes

Rubber pads

Valves and stoppers

Rubber bearings

Conveyor belts

Rubber fenders and guards

Expansion joints

Rubber rollers

Rubber tracks

Rubber footwear

Speed breakers

Running tracks

No. 9

• Growth in Automotive industry – Largest segment for Elastomers consuming 70% of total production

• Infrastructure development projects – Mega projects worth US$2.0 billion under pipeline

• Environmental concerns and sustainability drive – Green buildings

• Higher population growth – Expected to reach 59.1 million by 2020 at a CAGR of 2.4%**

• High rate of Urbanization – 89% lives in urban areas$$

• Higher GDP per capita - $60,348 in 2015**

• Improved standard of living associated with the rise in income levels

• High growth in tourists – Expected to reach 69.5 million in 2020 at a CAGR of 5.7%***

KEY DRIVERS OF ELASTOMER INDUSTRY IN GCC

* Source: ** Source: IMF 2016, *** Source: GCC Hospitality Industry Report-2016, $$ Source: World bank

7.1 7.8 8.4 9 9.7 10.3

2.62.8

3.13.2

3.33.3

0

2

4

6

8

10

12

14

16

2010 2011 2012 2013 2014 2015E

Total vehicles in use in GCC

Passenger Cars Commercial vehicles

10.3 10.8 11.9

13.2

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

2015E 2016E 2018F 2020F

Forecast of Passenger Cars in use in GCC

TIRE INDUSTRY IN GCC

No. 11

TIRE INDUSTRY IN GCC

22.624.4

26.428.5

30.8

0

5

10

15

20

25

30

35

2016 2017 2018 2019 2020

KSA - Future Demand$$

0

500

1000

1500

2000

2500

3000

3500

4000

2011 2012 2013 2014 2015

1604 1843 1789 1776 1683

1348

1495 1382 1521 1500

146

172159

173 178216

195200 163 164207

195201 199

16654

6050 50

46

Total Tire Imports to GCC***

Saudi Arabia UAE Qatar Kuwait Oman Bahrain

• Total tire sales in GCC expected to grow 9% to reach $3.6 billion in value by 2021**

• Total GCC Tire market estimated to be around 36 million units per year in 2015

• KSA remains the largest tire market having around 50% share followed by UAE

• As per Persistence Market Research, total KSA Tire market expected to reach US$ 2,123 Million in revenues in 2016

• UAE Tire market expected to grow at a CAGR of over 5% through 2021

• Four-wheel and Luxury segment remains strong and anticipated to grow steadily at 10%

• High rate of Tire replacement in GCC – Average 1.5 years

** Source: Frost & Sullivan ***International Trade Statistics, $$ Source: Saudi Industrial Development Fund report

Mill

ion

s

Mill

ion

s

No. 12

MEGA TRENDS IN THE TIRE INDUSTRY

• Reducing fuel consumption – Rolling resistance of the tire estimated to contribute to 4% of the global fuel

consumption*. Reducing 5% of tire rolling resistance saves approximate 1% of fuel

• Green house gas emission – Fuel consumption of fleets make up 5% of all green house gas emission in Europe

and quarter of all CO2 emissions.

• Tire recycling – In US, Europe and Japan approximately 90% of end-of-life tires are recycled for energy recovery*

and other beneficial uses such as Crumb Rubber, Rubber mats etc.

• Tire Labelling – KSA already introduced Tire labelling in line with EU system.

• Changing automotive landscape – Automated cars, Technology advancements etc.

• Sustainable raw materials – Bio rubber, Chemicals etc.

*Source: UN Transportation estimates & Goodyear Dunlop Rolling resistance data, **Source: World Business Council of sustainable development tire projects

Fuel

Saving

SafetyHigher

Mileage

No. 13

MATERIALS USED IN TIRE INDUSTRY

• Natural Rubber (NR)

• Styrene Butadiene Rubber (SBR)

• Poly Butadiene Rubber (BR)

• Butyl Rubber/Halogenated Butyl Rubber

• Carbon black

Side wall

(NR/BR)

Steel Belts

(NR/BR)

Inner Liner

(HB) Bead Filler

(NR/BR)

Chaffer

(NR/BR)

Shoulder

(NR/SBR/BR)

Body plies

(NR/BR)

Bead Wire

Tread

(NR/BR/SBR)

Natural Rubber

32%

Synthetic Rubber

14%

Fillers24%

Steel15%

Textile1%

Chemicals10%

Oil4%

Truck/Bus Tires

Natural Rubber

18%

Synthetic Rubber

25%Fillers28%

Steel11%

Textile5%

Chemicals6%

Oil7%

Passenger Car Tire

No. 14

MAJOR CHALLENGES FACING THE GCC TIRE INDUSTRY

• Lack of OEM’s – Typically 40% of the tire production goes to OEM segment

• Brand loyalty - Consumer preference for the Original Equipment brand

• Economy of Scale - Competitiveness

• Skilled manpower

• Government policies and regulations

• Changes in mobility preferences: UBER, shared Taxi, Public transport

SABIC ELASTOMERS FOR TIRE & CONSTRUCTION APPLICATIONS

No. 16

SABIC SYNTHETIC RUBBER PROJECT - OVERVIEW

• Investment: $3.4bn Synthetic Rubber & Carbon Black Complex

• Products: BR, S-SBR EPDM, POE, Carbon Black and other rubbers

• Capacity: 360,000 t.p.a

• Partners: SABIC and ExxonMobil 50:50 Joint Venture

• Location: Strategically located at Al-Jubail, Saudi Arabia

• Start-up: In Q1-2016

• Commercial production: Q2-2016

Product availability:

• BR, EPDM and POE grades are available from

Kemya plant for commercial sale

First Synthetic Rubber plant in GCC partnered with world’s leading technologies, to address growing needs of

high performance Elastomers in GCC and around the world

No. 17

KEY FEATURES OF POLYBUTADIENE RUBBER (BR)

High Cis 1,4 content (Up to 97%)

High average Molecular weight – Better physical properties

High Abrasion resistance, high Resilience and low Rolling resistance

Broad Molecular Weight Distribution – Better processibility

Medium to high branching – Better mixing and processibility

Better filler incorporation and higher mix quality

Lower mixing time – Low energy consumption

No. 18

SABIC POLYBUTADIENE GRADES GRADES

SABIC

GradesCis Content

Mooney Viscosity (ML

1+4, 100°C)Volatile Matter Ash Content Appearance Key features

SABIC® BR 5510 Up to 97% 55 +/- 5 0.5% Max. 0.25% Max.Off-white to light

amber

Highly linear,

High Mooney

SABIC® BR 4610 Up to 97% 46 +/- 5 0.5% Max. 0.25% Max.

Off-white to light

amberHighly linear,

Low Mooney

SABIC® BR 4010 Up to 97% 40 +/- 5 0.5% Max. 0.25% Max. Light AmberBranched, Low

Mooney

Technology from Goodyear Chemicals, USA

No. 19

The SABIC BR grades are applicable for most of the applications

Tire72%

Plastic Modification15%

Shoe Sole3%

Conveyor belts3%

Sporting Goods2%

Industrial Goods

5%

BR-Consumption

POLYBUTADIENE RUBBER - MARKET SEGMENTS

Tread

(Up to 40 phr)

Shoulder Strip

(30 – 60 phr)

Sid wall

(40 – 60 phr)

Rim Strip

(40 - 60 phr)

Carcass -1 (Up to 20 phr.)

Carcass – 2 (Up to 20 phr.)

Bead Apex

(Up to 25 phr)Bead wire

Chaffer

Inner Liner

No. 20

SABIC EPDM – COMPOSITION AND TECHNOLOGY

(- CH2- CH2- ) (- CH - CH2- )

I

CH3

Ethylene 40 - 80%

(Crystallinity)

Propylene 20 - 60%

(Elastomeric Properties)

(- R - )

II

CH

I

CH3

Diene 0 - 12%

(Cross linking)

Random Distribution

• Ter polymer of Ethylene, Propylene and a Diene

• Technology : ExxonMobil Chemicals, USA

• Metallocene catalyst system

• Solution polymerization method

• Five selected grades to fit majority of the applications

No. 21

KEY FEATURES OF SABIC EPDM AND COMPOUND

Excellent weather and ozone resistance

Very good physical properties

Very good compression set

High purity and better quality finished products

Wide range of service temperature

Faster cure rate and higher cure state

High filler / plasticizer acceptance

No. 22

SABIC EPDM - GRADES AND APPLICATIONS

SABIC GradesMooney Viscosity ML

(1+4, 125°C)

ENB content

(wt%)

Ethylene

Content (wt%)Typical Applications

SABIC®

EPDM 657 60 5 73

-General purpose hose (up to 125°C)

-Auto weather seals and profiles

-Automotive and industrial belts

-Wire and cable insulations

-Gaskets and seals

SABIC®

EPDM 626 67 2.8 69

-Roof sheeting

-Flexible pond liners and Geo-membranes

SABIC®

EPDM 756 72 5 69

-Auto weather seal profiles

-Auto coolant hoses,

-Air hoses, Industrial hoses

-Other extruded applications

SABIC®

EPDM 855 82 5 55

-Auto weather seals profiles,

-Auto coolant/Air hoses,

-Industrial gaskets, O rings for pipe/hose,

-Washing machine gaskets.

-Other extruded applications

SABIC®

EPDM 245 25 4.5 50

-Brake parts

-Industrial gaskets/O rings for pipe/hose

-Molded Rubber goods

No. 23

Industrial

EPDM MARKET - SEGMENTS

Automotive

Polymer Modifications

42%

14%

13%

9%

7%

6%

6%3%

1200

kta

Construction

Electrical Appliance

Oil Modification

Source: IHS 2015

Others

EPDM mostly used in out-door and heat resistant applications

SABIC APPLICATION DEVELOPMENT AND TECHNICAL SUPPORT CAPABILITIES

No. 25

TECHNOLOGY AND INNOVATION

World-class technical innovation with 2,000 researchers worldwide. More than

10500 global patents

Application development with key customers is at the heart of SABIC’s winning

strategy

20 Technology and Innovation centers distributed globally in 5 key geographies.

More than 200 equipment and over 300 tests are available

No. 26

RUBBER TESTING AND ANALYSIS CAPABILITIES

Rheological Study

Physical & Mechanical Property

Hot Air Aging Study

Fluid Resistance

Weather/ Ozone Resistance

Dynamic Properties

Thermal Analysis

Rubber

Compounding

and curing

MATERIAL DEVELOPMENT

TECHNOLOGY ASSESSMENT

PROCESS IMPROVEMENT

INNOVATIVE TEST METHODS

MATERIAL CHARACTERIZATION

POLYMERIZATION PROCESSES

TECHNOLOGY LICENSING

PLANT IMPLEMENTATION

R&D PROJECT EXECUTION

RESOURCE UTILIZATION

APPLICATION DEVELOPMENT

No. 27

WE ARE FULLY CAPABLE OF DEVELOPING AND SUPPORTING OUR CUSTOMERS.

• Collaborate with customers for developing new

solutions

• Creates a catalyst for new ideas & thinking.

• Provide technical support and training for

SABIC’s customers around the world

CREATING

LONG-TERM

SUCCESS

A SPIRIT OF

INGENUITY

No. 28

CONCLUSION

• About 90% of the rubber products are currently imported to GCC

• Excellent opportunity for Elastomer in Automotive and Construction industry in GCC owing to the outstanding

growth in this region

• 70 – 80% of the raw materials will be available locally to cater to the Elastomer industry

• Enablers for the Elastomer industry is available locally – Technical support, skilled manpower….

• Strong drive from the Government to localize end use products creates new business avenues

No. 29

THANK YOU