2014 ihs aromatics and fibre

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Fibers: Capacity ExplosionHurting Growth Prospects

ITMF Annual Conference, 2014Beijing, P.R. China

Ashish Pujari,Senior Director (Aromatics & Fibers)

IHS Singapore



Fibers Are Essential in Our Lives



Agenda

• Overview

• Cotton

• Polyester

• Nylon



Global Fiber Mix

Cotton, 29%

Polyester, 49%

Nylon, 5%

Olefin, 6%

Cellulosic, 5%

Acrylic, 3%

Wool, Silk &

Linen, 2%

Other SyntheticFibers, 1%

Cotton

Polyester

Nylon

OlefinCellulosic

Acrylic

Wool, Silk & Linen

Other Synthetic Fibers

2014 Total Fiber Demand:85.3 Million Metric Tons



World Total Fiber Consumption

Apparel55%

Industrial &Others

20%

HomeFurnishing,Rug/Carpets

25%

Apparel

Industrial & Others

Home Furnishing, Rug/Carpets

2014 Total Fiber Demand:85.3 Million Metric Tons



Fiber Demand Increases in Line with GDP

40

50

60

70

80

90

100

110

46 50 54 58 62 66 70 74 78 82 86

GDP (Billion 2010 $)

Thousands

F i b e r , M i l l i o n M

e t r i c T o n s

2010

2012

Total Natural and Man-Made Fibers

2000

Fibers Growth = 1.6 X GDP Growth

2016

2014

2018



Polyester Gaining Share at the Expenseof Others

0

10

20

30

40

50

60

1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Percentage (%)

Polyester Cotton Nylon



Agenda

• Overview

• Cotton

• Polyester

• Nylon



Demand Growth Depends on CottonAvailability

-3

-2

-1

0

1

2

3

4

5

-8

-6

-4

-2

0

2

4

6

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

GDP Growth, %

Cotton Polyester Nylon Others GDP

Fibers, Million Metric Tons



Demand Continues to Lag Behind Supply

0

5

1015

20

25

30

2 0 0 3 / 0 4

2 0 0 4 / 0 5

2 0 0 5 / 0 6

2 0 0 6 / 0 7

2 0 0 7 / 0

8

2 0 0 8 / 0 9

2 0 0 9 / 1 0

2 0 1 0 / 1 1

2 0 1 1 / 1 2

2 0 1 2 / 1 3

2 0 1 3 / 1 4

2 0 1 4 / 1 5

Ending Stocks Consumption Production

Source: USDA, Forecast as of August-14

Million Metric Tons



High Cotton Inventory – Mainly in China expectedto put pressure on Cotton

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

0

5,000

10,000

15,000

20,000

25,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

China Inventory World Inventory Cotlook A

T h o u s a n d M e t r i c T o n s

A

I n d ex ( F ar E a s t S t ar t i n g2 0 0 8 / 2 0 0 9 )



Agenda

• Overview

• Cotton

• Polyester

• Nylon



Fibers Account For Around 60 percentof Total Polyester Demand

PET Resin31%

Staple16%

TextileFilament

42%

IndustrialFilament

4%

Film5%

OtherPolyester

2%

PET Resin

Staple

Textile Filament Industrial Filament

Film

Other Polyester

2014 Total Polyester Demand:60.8 Million Metric Tons



0

22

44

66

88

110

132

154

176

198

220

243

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500

Jan-11 Sep-11 May-12 Jan-13 Sep-13 May-14 Jan-15 Sep-15

Cotton 'A' Index Staple Fiber

Dollars Per Metric Ton Cents Per Pound

Weak Cotton Will Create a Price Ceiling ForPolyester Staple



PSF Demand – Affected by Cotton Availability

0%

15%

30%

45%

60%

75%

90%

0

4

7

11

14

18

21

25

28

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

World Capacity World Demand World Op Rate

Million Metric Tons

3.5 3.2%3.0% 2.9%

3.7%10.5% 1.7% -1.6%0.6% 3.6%4.4

Operating Rate

PSF Demand has Rebounded in 2014



Filament Demand – Off from Peak but Stable

0%

10%

20%

30%

40%50%

60%

70%

80%

90%

0

10

20

30

40

50

60

70

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

World Capacity World Demand World Op Rate

Million Metric Tons

5.6%

7.0%7.4%6.8%7.5%15.8%

6.6%

4.8%

5.1%7.5%

6.7%

Operating Rate (%)



Provided No Further

Expansions

45

50

55

60

65

70

75

80

-2

0

2

4

6

8

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Million Metric Tons

Demand Growth Americas Europe

CIS & Baltic States Middle East/Africa China

Asia (exclude China) Operating Rate

Operating Rate (%)

Cyclic Upturn Soon



65

70

75

80

85

90

-4

0

4

8

12

16

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Americas EMEAAsia Excess CapacityWorld Demand Growth World Operating Rate

Million Metric Tons Operating Rate (%)

Conditions Worsen With More PX Capacity



19

50

60

70

80

90

100

-6.0

-3.0

0.0

3.0

6.0

9.0

12.0

2008 2010 2012 2014 2016 2018Global Demand Growth China India SubcontinentNEA net China SEA EuropeMiddle East & Africa N. America S. AmericaOperating Rate


PQS 640 KTAM&G 1.2 MMT

Lotte UK DAK US

Global PTA Capacity Growth



20

2013 2018

Capacity (MMT): 67 95

Number of Plants: 117 140

Average Plant Size(KMT):

567 675

To Achieve 85% Industry Utilization

Capacity to Rationalize (MMT): 9 20

Plant Size (KMT): <= 380 <= 520

Plants to Rationalize (#): 31 55

Demand (MMT): 49 64

Demand

Rationalize

Excess Capacity

Is Realistic Rationalization Possible?



© 2014 IHS, Inc. No portion of this presentation may be reproduced, reused, or

otherwise distributed in any form without prior written consent.

0

1

NAM

-10

SAM

-10

1

Europe

-3

-2

-1

0

MEA

-7

-6

-5

-4

-3-2

-1

0

China 0

1

2

3

45

6

7

NEA

01

2

SEA-2

-1

0

1

ISC

2010/2013/2018 NET IMPORT /EXPORT MILLION METRIC TONS

Diminishing PTA Trade



0

25

50

75

100

0

100

200

300

2008 2010 2012 2014 2016 2018

PTA Spread Over PX PTA Global Operating Rate

Dollars Per Metric Ton Operating Rate, %

85% OR

$125 Per Ton Spread

Asia PTA Spreads



Overbuilds Depress Profitability

0

50

100

150

200

250

300

0

500

1000

1500

2000

2500

3000

Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13

PET EXPORT PET POY PSF

Domestic, CNY Export, USD



Agenda

• Overview

• Cotton

• Polyester

• Nylon



Key Raw Materials for Nylon Fiber

Fiber & Plastics End Uses

AdipicAcid

Cyclohexane

Cumene

Phenol

Nylon 6

Cyclohexane

HMDA

Acrylonitrile

Adiponitrile Adiponitrile

Caprolactam

Nylon6,6



50

55

60

65

70

75

80

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

China Asia (Exclude China) Middle East

CIS & Baltics C. Europe/W. Europe Americas

Global Demand Growth Global Operating Rate


Additional Nylon 6 Capacity In Asia KeepsGlobal Operating Rate Down

26



Nylon 6,6 Chip Capacity Additions

27

30

40

50

60

70

80

90

-0.3

-0.2

-0.1

0.0

0.1

0.2

0.3

0.4

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

N. America W. Europe Middle East

NE Asia (Exclude China) China Demand Growth

Global Operating Rate




60

65

70

7580

85

90

95

-0.4

0.0

0.4

0.8

1.2

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Asia (Exclude China) China CIS & BalticsC. Europe/W. Europe Americas Global Demand GrowthGlobal Operating Rate


Healthy Margins Boost Asian CaprolactamInvestment, Slashing Operating Rates

28



50

55

60

65

70

75

80

85

90

-0.8

-0.4

0.0

0.4

0.8

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Asia (Exclude China) China N. America

S. America W. Europe CIS & Baltics

Global Demand Growth Global Operating Rate


Strong Demand Drives New Adipic AcidCapacity But Cuts Operation Rates

29



Investments Run Counter Cyclic to Margins

-50

0

50

100

150

-2

0

2

4

6

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Supply Growth Demand Growth EBITA

Million Metric Tons Dollars Per Metric Ton

Polyester Filament



Will Investor Fervor Cool Off?

(10.00)

0.00

10.00

20.00

30.00

40.00

50.00

0

20

40

60

80

100

120

2004 2007 2010 2013

Chemical Fiber Investment In China

Investment YOY Growth Rate

Billion CNY YOY Growth Rate

Positive Signs:

• Major producers have almost

completed an aggressive

expansion wave.

• NDRC’s guideline has

changed, no longer

encouraging new capacities in

East China.

Complexity:

•

Local governments.• Projects may move inland.

• Consumers’ desire to

integrate upstream.



Conclusion

•

Demand growth hasslowed significantly inemerging economics.

• All major fibers and raw

materials are inoversupply – but notmuch capacityexpansion under way.

• Margins are negativeand will not improveunless there are capacityrationalizations.

2014 ihs aromatics and fibre

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