Prospects for the Basic Petrochemical Value Chains - Korea/CMAI APIC 2009... · Chinese capacity...
Transcript of Prospects for the Basic Petrochemical Value Chains - Korea/CMAI APIC 2009... · Chinese capacity...
Prospects for the Basic Petrochemical Value Chains
Singapore Shanghai Houston New York London Düsseldorf Dubai
Steve ZingerManaging Director, Asia
May 14, 2009
Seoul, South Korea
2009 APIC – CMAI Seminar
What Is This Light?
The light at the end of the tunnel?
An on-coming train?
•Short-term price
outlook
•All around Asia for
olefins & aromatics
•Long term price
outlook
•Trends for each key
olefin and aromatic
products
2009 APIC – CMAI Seminar
Prices & Margins Have Collapsed
Naphtha Ethylene Propylene PE PP Crude Oil
08 09
Dollar Per Barrel (Crude Oil)
0
25
50
75
100
125
150
175
200
225
250
275
J F M A M J J A S O N D J F M A 0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
Dollar Per Metric Ton (Olefins Products)
2009 APIC – CMAI Seminar
The Drop in Aromatics Prices
Naphtha, C&F Japan
Benzene, FOB Korea
Toluene, FOB Korea
PX, CFR Taiwan Styrene, CFR China
Crude Oil, WTI
J08 F M A M J J A S O N D J09 F M A 0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
U.S Dollar Per Metric Ton (Products)
0
50
100
150
200
250
US Dollar Per Barrel (Crude Oil)
2009 APIC – CMAI Seminar
China Supportive Of Chemical
Demand & Supply
• Massive new integrated investments in 2008-2011o 6.3 MMT ethylene; +63%
o 5.3 MMT propylene; +57%
o 4.6 MMT benzene; +80%
o 4.4 MMT paraxylene; +109%
• Still not self-sufficient for most chemicals, but import needs are not growing as fast or reducing
• Economic stimulus package will support chemical investment and local consumer demand
• Coal chemistry is a viable option
2009 APIC – CMAI Seminar
India Still Will Grow, But…• Projects under construction will start
o Reliance (Early 2009) refinery
o Indian Oil (Early 2010) olefins &
aromatics
o ONGC aromatics complex (mid 2011)
• India will be large exporter until local
economy grows
• Others major projects being
considered: o Reliance
o ONGC
o IOC
o ESSAR
• Non-financed projects struggle until
economy improves
• Demographics support long-term
petrochemical demand growth
2009 APIC – CMAI Seminar
Southeast Asia Will Continue to Invest
• Projects under construction, only
slightly delayed: o Shell & Exxon in Singapore
o PTT & Siam/Dow in Thailand
• New projects either integrated or
have advantaged feedstock
• Others still being considered:
Singapore, Vietnam, Brunei,
Philippines, Indonesia, Malaysia
• Non-financed projects struggle
until economy improves
2009 APIC – CMAI Seminar
• Reducing operating rates in
short-term to meet demand
• Little expansion of olefins, some
small aromatics projects
associated with refineries in
Japan and Korea
• Integrating with upstream &
downstream facilities
• Adding feedstock flexibility
• Producing specialty products
• Consolidation and closures
likely and necessary
Japan, Korea and Taiwan
Focus On Competitiveness
2009 APIC – CMAI Seminar
Massive Investments In The Middle
East Will Compete in Asia & The World• Massive feedstock advantaged
investments in 2008-2011o 11.4 MMT ethylene; +60%
o 5.0 MMT propylene; +80%
o 0.9 MMT benzene; +30%
o 1.6 MMT paraxylene; +79%
• Refinery based aromatics complexes
starting up in Kuwait and Oman
• Feedstock advantage is greatest in gas
chemistry but liquid feeds being used to
diversify chemical base
• Exporting large volumes of derivatives
(PE, PP, MEG)
• With new capacity in China, China’s thirst
for imports no longer large enough to
consume Middle East excesses– This will impact the rest of the world!
2009 APIC – CMAI Seminar
Middle East Has
The Lowest Cost Ethylene
Cumulative Ethylene Capacity (Million Metric Tons)
Europe Avg.
Southeast
Asia Avg. Northeast Asia Avg.North America Avg.
Middle East Avg.50
450
850
1,250
1,650
2,050
0 20 40 60 80 100 120 140 160
Ethylene Production Cost, Dollars Per Metric Ton
2008
WTI Crude Oil: 2008 = $103/bbl
2009 APIC – CMAI Seminar
Benzene Curve is More Flat
Except for On-Purpose Supplies
0 10 20 30 40 50 60100
300
500
700
900
1,100
1,300
1,500
1,700
Benzene Production Cost, Dollars Per Metric Ton
Cumulative Capacity (Million Metric Tons)
Europe Avg.
Southeast
Asia Avg.
Northeast Asia Avg.
North America
Avg.
Middle East Avg.
WTI Crude Oil: 2008 = $103/bbl
2009 APIC – CMAI Seminar
The Profit Cycle Is Still Alive
Cash Margin Ethylene, CFR SE Asia Propylene, CFR SE Asia
0
200
400
600
800
1,000
1,200
1,400
1,600
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
Olefins Profitability, Dollars Per Metric Ton
Forecast
2009 APIC – CMAI Seminar
The Profit Cycle Is Still Alive (Mostly)
BZ to Naphtha Spread PX to Naphtha Spread Benzene,FOB Korea
Naphtha, C&F Japan PX, C&F Taiwan
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 150
200
400
600
800
1,000
1,200
1,400
1,600Aromatics Profitability, Dollars Per Metric Ton
Forecast
2009 APIC – CMAI Seminar
Olefins & Derivatives
Ethylene
Propylene
Butadiene
Polyethylene
Ethylene Glycol
PVC
2009 APIC – CMAI Seminar
Ethylene Market Summary• Demand loss in Q4 was painful to the
industry; some recovery in Asia in late
Q1 and early Q2
• Middle East and China continues to
build large capacity volumes in 2009-
2011
• Some shutdowns of high cost crackers
in NAM, WEP, and NEA will likely occur
• Gas prices (ethane) in US will likely
stay disconnected with crude oil
(naphtha), giving US exporters an
advantage
• Economic and market crisis will likely
cancel or delay projects beyond 2012
• Low utilization rates and profit margins
expected to persist until 2012/2013.
Global Demand
Growth
Demand Capacity Utilization Rate
82
84
86
88
90
92
94
96
0
30
60
90
120
150
180
90 92 94 96 98 00 02 04 06 08 10 12 14
Forecast
Operating Rates, %Global Ethylene Supply/Demand, MMT
Americas Europes/CIS/Baltics Middle East/Africa Asia
-6
-4
-2
0
2
4
6
8
10
90 92 94 96 98 00 02 04 06 08 10 12 14
Forecast
New Ethylene Capacity & Demand, MMT
2009 APIC – CMAI Seminar
Propylene Market Summary• Demand loss due to economic
meltdown a concern, but some
improvement in Asia recently
• Middle East investing heavily in
LPG cracking and on-purpose
capacity o PDH, DCC, OCT in Saudi
Arabia
o OCT in Abu Dhabi
• Heavy crackers being added in
China, Singapore, & Thailand
• Some on-purpose propylene
being added in Asia: PDH and
metathesis
• Lower cracker operating rates
not significantly impacting
supply availability
-3
-2
-1
0
1
2
3
4
5
6
90 92 94 96 98 00 02 04 06 08 10 12 14
Forecast
New Propylene Capacity & Demand, MMT
Americas Europes/CIS/Baltics Middle East/Africa AsiaGlobal Demand
Growth
72
75
78
81
84
87
90
0
20
40
60
80
100
120
90 92 94 96 98 00 02 04 06 08 10 12 14
Forecast
Operating Rates, %Global Propylene Supply/Demand, MMT
Demand Capacity Utilization Rate
2009 APIC – CMAI Seminar
Butadiene Market Summary• Record high prices in early 2008
have collapsed with the economic
downturn. Producers and
consumers started looking at on-
purpose sources.
• Most butadiene goes into the
synthetic rubber / automotive
industry.
• Suffering auto industry causing
massive demand loss and limited
upward price movement in near
term
• Plenty of new butadiene extraction
capacity additions planned for
2009-2010.
• Crude C4 availability will become
short again as demand recovers
(in 2010) faster than cracker
utilization rates rise to high rates
(2012-2013).
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
90 92 94 96 98 00 02 04 06 08 10 12 14
Forecast
50
55
60
65
70
75
80
85
90
95
100
0
2
4
6
8
10
12
14
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90 92 94 96 98 00 02 04 06 08 10 12 14
Forecast
New Butadiene Capacity & Demand, MMT
Americas Europes/CIS/Baltics Middle East/Africa AsiaGlobal Demand
Growth
Operating Rates, %Global Butadiene Supply/Demand, MMT
Demand Capacity Utilization Rate
2009 APIC – CMAI Seminar
Polyethylene Market Summary• Most new ethylene plants tied to
PE downstream operations; Very
similar supply/demand situation as
ethylene:
o Demand loss in Q4, some
recovery in Asia
o Too much Middle East and
Asia capacity coming on-line
from 2009-2011
o Low utilization rates and profit
margins until 2012/2013
• Large Middle East export volumes
will go to China, new domestic
Chinese capacity will limit growth
in imports
o Middle East resin will flow to
other parts of Asia, Europe,
and even the Americas
-4
-2
0
2
4
6
8
90 92 94 96 98 00 02 04 06 08 10 12 14
Forecast
75
77
79
81
83
85
87
89
91
93
95
0
20
40
60
80
100
120
90 92 94 96 98 00 02 04 06 08 10 12 14
Forecast
Americas Europes/CIS/Baltics Middle East/Africa AsiaGlobal Demand
Growth
New PE Capacity & Demand, MMT
Operating Rates, %Global PE Supply/Demand, MMT
Demand Capacity Utilization Rate
2009 APIC – CMAI Seminar
Ethylene Glycol Market Summary• Many large MEG facilities
coming on-line in Middle East
and Asia
• Middle East producers will
dominate trade flow of MEG
globally
• Low operating rates and
margins for the next 3 to 5
years.
• Higher cost producers in the
US, Europe, and part of NE Asia
will struggle – rationalizations
likely
• The temptation to invest in
ethoxylates, ethanolamines,
and other EOD’s will be strong,
but these are small markets.
3.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
90 92 94 96 98 00 02 04 06 08 10 12 14
Forecast
65
70
75
80
85
90
95
100
0
5
10
15
20
25
30
90 92 94 96 98 00 02 04 06 08 10 12 14
Forecast
New MEG Capacity & Demand, MMT
Americas Europes/CIS/Baltics Middle East/Africa AsiaGlobal Demand
Growth
Operating Rates, %Global MEG Supply/Demand, MMT
Demand Capacity Utilization Rate
2009 APIC – CMAI Seminar
PVC Market Summary• Recent global demand loss
unprecedented even in
previous economic
downturns
• PVC greatly impacted by
economic outlook with many
durable end-uses (housing
and construction).
• When economic stimulus
packages develop, this
should be very positive for
PVC demand recovery
• Significant Chinese coal-
based PVC capacity added in
2005-2009, causing excess
supply and changing market
structure
-3
-2
-1
0
1
2
3
4
90 92 94 96 98 00 02 04 06 08 10 12 14
Forecast
0
10
20
30
40
50
60
70
75
80
85
90
95
90 92 94 96 98 00 02 04 06 08 10 12 14
Forecast
New PVC Capacity & Demand, MMT
Americas Europes/CIS/Baltics Middle East/Africa AsiaGlobal Demand
Growth
Operating Rates, %Global PVC Supply/Demand, MMT
Demand Capacity Utilization Rate
2009 APIC – CMAI Seminar
Aromatics & Derivatives
• Benzene
• Toluene
• Paraxylene
• Styrene
• Phenol
2009 APIC – CMAI Seminar
Benzene Market Summary
• Benzene Supply Storm
o New capacity justified based
on strong market in 2004-
2007.
o Continued by-product
capacity additions due to
growth in ethylene and PX
o More benzene being removed
from motor gasoline pools
• Combined with demand loss at
end-2008: train wreck – benzene
trades below naphtha
• Benzene surplus to stay for many
years
• By-product problem: source (from
ethylene and PX) growing faster
than main demand (styrene)
-3
-2
-1
0
1
2
3
4
90 92 94 96 98 00 02 04 06 08 10 12 14
Forecast
50
55
60
65
70
75
80
85
90
95
100
0
10
20
30
40
50
60
70
90 92 94 96 98 00 02 04 06 08 10 12 14
Forecast
New Benzene Capacity & Demand, MMT
Americas Europes/CIS/Baltics Middle East/Africa AsiaGlobal Demand
Growth
Operating Rates, %Global Benzene Supply/Demand, MMT
Demand Capacity Utilization Rate
2009 APIC – CMAI Seminar
Toluene Market Summary• Similar to benzene, by-product
supply continues to grow.
• Chemical demand is mainly for
making on-purpose Benzene or
PX
o HDA units (on-purpose
benzene) rarely needed to
meet benzene demand
o STDP/TDP units run
opportunistically based on
economics
o TA units still growing to
support PX growth.
• Toluene will trade closer to its
floor value of motor gasoline
blending for the foreseeable
future
-0.5
-1.5
-1.0
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
90 92 94 96 98 00 02 04 06 08 10 12 14
Forecast
50
55
60
65
70
75
80
85
90
95
100
0
5
10
15
20
25
30
35
40
45
90 92 94 96 98 00 02 04 06 08 10 12 14
Forecast
Americas Europes/CIS/Baltics Middle East/Africa AsiaGlobal Demand
Growth
New Toluene Capacity & Demand, MMT
Operating Rates, %Global Toluene Supply/Demand, MMT
Demand Capacity Utilization Rate
2009 APIC – CMAI Seminar
Paraxylene Market Summary• Continues to rapidly grow 6-7%
o Polyester – preferred fiber
o PET – rapid growth into bottles
• Short-term recovery in PX
market is not sustainable
• Cyclical downturn expected due
to capacity build-up in 2009-11
• Demand hurt in many ways
o Economic downturn at year-end
o 2007/8 inventory build of fiber
o 2007/8 PET light-weighting
o Increased recycle of PET
bottles to staple fiber (more
economic at high oil, but “being
green” long-term)
• Capacity additions will slow, and
long-term recovery expected in
2014-2015
-2
-1
0
1
2
3
4
5
90 92 94 96 98 00 02 04 06 08 10 12 14
Forecast
50
55
60
65
70
75
80
85
90
95
100
0
5
10
15
20
25
30
35
40
45
50
90 92 94 96 98 00 02 04 06 08 10 12 14
Forecast
New Paraxylene Capacity & Demand, MMT
Americas Europes/CIS/Baltics Middle East/Africa AsiaGlobal Demand
Growth
Operating Rates, %Global Paraxylene Supply/Demand, MMT
Demand Capacity Utilization Rate
2009 APIC – CMAI Seminar
Styrene Market Summary• Demand has suffered in the short-
term due to economic downturn
• Longer-term demand prospects are
weak because of mature
polystyrene industry:
o Loss of demand to non-
plastics or to PP/PET in
packaging applications
o Changing consumer product
trends (CRT to flat TV,
video/audio cassette to CD to
MP3)
• New styrene capacity in Middle
East and Asia in 2009-2010
• Capacity rationalizations in US,
Europe, and Japan already
occurring
• More industry consolidation and
restructuring needed to sustain a
long-term recovery
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
90 92 94 96 98 00 02 04 06 08 10 12 14
Forecast
70
75
80
85
90
95
100
0
5
10
15
20
25
30
35
40
90 92 94 96 98 00 02 04 06 08 10 12 14
Forecast
New Styrene Capacity & Demand, MMT
Americas Europes/CIS/Baltics Middle East/Africa AsiaGlobal Demand
Growth
Operating Rates, %Global Styrene Supply/Demand, MMT
Demand Capacity Utilization Rate
2009 APIC – CMAI Seminar
Phenol Market Summary• Like other commodities, phenol
demand hurt in economic downturn.
o Particularly influenced by
weakness in the construction
and automobile sectors
o Optical media (polycarbonate)
is also showing long-term
demand maturity trends
• Middle East and Asia adding
significant capacity
• Additional rationalization needed to
recover operating rates to strong
level
• Acetone by-product continues to be
a disposal problem
o Solvent applications grow
slowly
o Trading near propylene recently
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
90 92 94 96 98 00 02 04 06 08 10 12 14
Forecast
50
55
60
65
70
75
80
85
90
95
100
0
2
4
6
8
10
12
14
90 92 94 96 98 00 02 04 06 08 10 12 14
Forecast
Americas Europes/CIS/Baltics Middle East/Africa AsiaGlobal Demand
Growth
New Phenol Capacity & Demand, MMT
Operating Rates, %Global Phenol Supply/Demand, MMT
Demand Capacity Utilization Rate
2009 APIC – CMAI Seminar
What Is This Light?
2009 APIC – CMAI Seminar
Train Wreck or New Light?
Make The Right Choices
To Survive the Downturn
2009 APIC – CMAI Seminar
CMAI’s Key Visions:
Significant Change Is Underway You can leverage the resulting opportunities…
• Demand loss is largest concern of current market; demand will recover with
economy by 2010, returning to trend-line patterns
• Over-capacity still looms despite demand recovery, causing margins to
underperform expectations until next up cycle.
• Industry restructuring likely & necessary Low margins expose marginal performers with high debt loads
Capacity closures of old/inefficient facilities will occur
Financing difficulties for marginal projects will delay start-ups for 2012+
Cost reduction becomes critical for competitiveness
Innovation needed: technical, application development, operational efficiency, etc
• “Asia” investments chasing local demand recovery
• “Middle East” investments mitigating margin risk with low-cost feedstocks
• Petrochemical cycle is alive and well: good times will return again; survival is key!