chor-alkali & vinyls - orbichem 2012/kichem2012_4_chlor...chor-alkali & vinyls roger lee...

Chor-Alkali & Vinyls

Roger Lee

Tecnon OrbiChem Seminar at KICHEM 2012Seoul - 2 November, 2012

KICHEM 2012

CHLORINE CONSUMPTION BY END-USE 2011

Vinyls39%

Chloromethanes4%

Water Treatment6%

Synthesis HCl11%

Hypochlorite4%

Other Inorganics13%

Other Organics4%

Phosgene (MDI, TDI, PC)

9%

Chlorinated C3 (PO, ECH)

9%

Source: Tecnon OrbiChem

• Can’t store• GDP-driven• Summer strength

KICHEM 2012

CAUSTIC SODA CONSUMPTION BY END USE 2011

Source: Tecnon OrbiChem

Sodium SilicatesSTPP

PharmaceuticalsPolycarbonateAg ChemicalsCH PO Organic

18%

Inorganic11% Alumina

13%

P&P16%

Soaps & Detergents

8%Textiles10%

Hypo4%

Water Treatment3%

Other Uses16%

Food1%

• Many End Uses• Follows GDP Growth, but…• Not driven by GDP• Easily shipped

and stored

0

100

200

300

400

500

600

700

800

900

1,000

1,100

1,200

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

$/Metric Ton

Source: Tecnon OrbiChem

KICHEM 2012

US GULF CAUSTIC SODA & CHLORINE PRICES

ChlorineDomestic

ChlorineDomestic

Caustic SodaEx Works

Caustic SodaEx Works

$/Metric Ton

Source: Tecnon OrbiChem

KICHEM 2012

COST of ECU on the US GULF

0

50

100

150

200

250

300

350

400

450

500

550

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

ECU Production Cost

Energy Costof ECU

(27mmBtu plus $30)

0

10

20

30

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

$/mmBtu

Source: Tecnon OrbiChem

KICHEM 2012

NATURAL GAS, CRUDE OIL & COAL PRICES

US Nat Gas $/mmBtu

Oil $/mmBtuequivalent

Coal $/mmBtuequivalent

WE Nat Gas $/mmBtuequivalent

NorthAmerica

SouthAmerica

WestEurope

EastEurope

M East &Africa

SE Asia NE Asia China-500

500

1,500

2,500

3,500

4,500

5,500

6,500

Source: Tecnon OrbiChem

KICHEM 2012NET CHANGE IN CHLORINE CAPACITY 2010-2015

1,000 Metric Tons

KICHEM 2012

EFFECT OF ENERGY COST ON CASH COST OF PRODUCTION OF THE ECU (Metric)

$/ECU

0

100

200

300

400

500

600

700

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Energy Cost $/mmBtu

Diaphragm

Mercury

Membrane

Cell Type

Includes evaporation of lye to 50%

Natural Gasat Source

Coal in China

Fuel oilbasis

Source: Tecnon OrbiChem

KICHEM 2012

CYCLES IN CHLOR-ALKALI BUSINESS

Chlorine Price

Low High

1

3

4

5

= 5-6 month trend

Price Trend1 Chlorine up, Caustic down

2 Chlorine peak, Caustic up

3 Chlorine down, Caustic up

4 Chlorine down, Caustic peak

5 Chlorine trough, Caustic down

Caustic Soda Price

2

Higher

Lower

PlantUtilisation

Low

High

$/Metric Ton

Source: Tecnon OrbiChem

KICHEM 2012

US GULF DOMESTIC CAUSTIC SODA& CHLORINE PRICES

0

100

200

300

400

500

600

700

800

900

1,000

1,100

1,200

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

ChlorineDomestic

ChlorineDomestic

Caustic SodaEx Works

Caustic SodaEx Works

5 51 2 3 4

1 Chlorine up, Caustic down

2 Chlorine peak, Caustic up

3 Chlorine down, Caustic up

4 Chlorine down, Caustic peak

5 Chlorine trough, Caustic down

$/Metric Ton

Source: Tecnon OrbiChem

KICHEM 2012

US GULF EXPORT CAUSTIC SODA& CHLORINE PRICES

-400-300-200-100

0100200300400500600700800900

1,0001,1001,200

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Caustic Soda FOB Gulf CoastChlorine value into Exported EDC1.38 x [EDC - (0.285 x Ethylene) -20]

Caustic Soda

$/Metric Ton

KICHEM 2012

ASIAN CAUSTIC SODA & CHLORINE PRICES

-200

-100

0

100

200

300

400

500

600

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Caustic Soda Liquid Spot Export FOB Northeast AsiaChlorine value into Imported EDC 1.38 x [EDC - (0.285 x Ethylene) -20]

Source: Tecnon OrbiChem

0

400

800

1,200

1,600

2,000

2,400

2,800

3,200

2006 2007 2008 2009 2010 2011 2012

Source: Tecnon OrbiChem

ChlorineLiquid

ChlorineLiquid

Caustic SodaLiquid Market

membrane

Caustic SodaLiquid Market

membrane

KICHEM 2012

CHINESE CAUSTIC SODA & CHLORINE PRICES

Rmb/Metric Ton (inc. VAT)

0

100

200

300

400

500

600

700

800

2006 2007 2008 2009 2010 2011 2012

$/Metric Ton/ECU

Source: Tecnon OrbiChem

ECU Value Cl + 1.10 NaOH

Caustic SodaLiquid Market

membrane

Chlorine Liquid

All inc VAT

KICHEM 2012

CHINESE VALUE OF ECU

Source: Tecnon OrbiChem

VCMFurnace

VCMFurnace

EDCDirect

EDCDirect

EDC Oxy

EDC Oxy

Air

HClEthylene

ChlorineVCM

VCM

WaterCalcium Carbide

ChlorineHydrogen

HClAcetyleneChlorine

Burner

ChlorineBurner

VCM Reactor

VCM Reactor

ReactorReactorPVC

PVC

KICHEM 2012

PRODUCTION ROUTES TO PVC

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Rmb/Ton (inc VAT)

Calcium Carbide

HCl (100%)

Liquid Chlorine

Source: Tecnon OrbiChem

KICHEM 2012

EAST CHINA RAW MATERIAL PRICES

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Rmb (inc VAT)

Calcium CarbideRmb/Ton

CoalRmb/2.5 Tons

Source: Tecnon OrbiChem

KICHEM 2012

EAST CHINA COAL vs CALCIUM CARBIDE PRICES

0

200

400

600

800

1,000

1,200

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

$/Metric Ton

Source: Tecnon OrbiChem

EthyleneBased

AcetyleneBased

KICHEM 2012

PVC CASH COST COMPARISON

East China Rmb price less VAT converted to US$

KICHEM 2012

EAST CHINA PVC PRODUCTION COSTS(May 2012)

0

200

400

600

800

1,000

1,200

Ethylene + Chlorine Calcium Carbide + HCl

Other costs

Chlorine (0.62) +

Hydrogen

CaC2 cost(1.45)

$/Ton (excl VAT)

Source: Tecnon OrbiChem

Price in E China ex works

Othercosts

Ethylene

(0.47)

Chlorine

(0.59)

Export Sales

Northeast Asia cfr International Supplies

Source: Tecnon OrbiChem

KICHEM 2012

PVC PRODUCTION COSTS vs CRUDE OIL PRICE

0

500

1,000

1,500

0 25 50 75 100 125 150

Production cost of PVC-A (from calcium carbide) in E China (excl VAT), May 2012

International PVC cash cost from ethylene ex naphtha cracker plus chlorine = ECU cost ÷÷÷÷ 2.1

$/TonChina can export PVC-A

Brent Crude Oil Price $/bbl

International PriceNE Asia - May 2012

-200

0

200

400

600

800

1,000

1,200

2005 2006 2007 2008 2009 2010 2011 2012

$/Ton

Source: Tecnon OrbiChem

KICHEM 2012

CHINA PVC-A PRODUCTION GROSS MARGIN

Acetylene Based(Price ex. VAT)

Acetylene Based (Cash Cost)

Difference between Acetylene Based

Price (ex VAT) and Acetylene Based

Cash Cost

-200

0

200

400

600

800

1,000

1,200

2005 2006 2007 2008 2009 2010 2011 2012

$/Ton

Source: Tecnon OrbiChem

KICHEM 2012

CHINA PVC-E PRODUCTION GROSS MARGIN

Ethylene Based PVC Cash Cost

Ethylene BasedPVC Price(excl. VAT)

Difference between Ethylene Based

Price (ex VAT) and Ethylene Based

Cash Cost

0

20

40

60

80

100

120

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

0

20

40

60

80

100

120

140

160

180

200

1,000 Metric Tons

KICHEM 2012

CHINA PVC EXPORTS vs CRUDE OIL PRICE

$/bbl

PVC Exports

WTI Crude Oil

Source: Tecnon OrbiChem

Brent Crude Oil Price $/bbl

KICHEM 2012

CRUDE OIL PRICE, ECU COST, CFBT, CHLORINE PRICE & CAUSTIC SODA PRICE RELATIONSHIP

Source: Tecnon OrbiChem

0

100

200

300

400

500

600

700

800

900

0 50 100 150

ECU $ Cost and Cash Flow

0

100

200

300

400

500

600

700

800

900

0 100 200 300 400 500 600 700 800

Caustic Soda Price $/ton

25%

20%

15%

10%

5%

0%

CFBT%

Chlorine Price per ton

$400

$300

$200

$100 $0

US DomesticOct 2012

KICHEM 2012

‘SHOULD WE SELL LOW-PRICED EDC TO MAKE ADDITIONAL CAUSTIC SODA AVAILABLE FOR SALE?’

Source: Tecnon OrbiChem

Brent Crude Oil Price $/bbl

0

100

200

300

400

500

600

700

800

900

0 50 100 150

ECU $ Cost and Cash Flow

0

100

200

300

400

500

600

700

800

900

0 100 200 300 400 500 600 700 800

Caustic Soda Price $/ton

25%

20%

15%

10%

5%

0%

CFBT%

Chlorine Price per ton

$400

$300

$200

$100 $0

US DomesticOct 2012

KICHEM 2012

CONCLUSIONS

• The current downturn in the Chinese economy and building construction has led to weakened prices for vinyl chain products, worldwideo Lower rates are supporting higher caustic soda values

• Low-cost gas from shale has greatly strengthened the US competitive position, apparently for the long termo Naptha-based ethylene and crude oil-based energy are now at a

competitive disadvantageo US natural gas prices somewhat limited by coal values

• The traditional chlor-alkali cycle will resume in conjunction with general economic improvement, possibly as early as 2013.o Operating rates and chlorine values will riseo Caustic soda values will decline

• Chinese PVC, largely acetylene-based, has become less competitive based on escalating coal costs

Source: Tecnon OrbiChem

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