Benzene, Bungee, and

Other Extreme Sports

Peter Feng

Senior Director

+1 281 752 3284

Peter.Feng@ihs.com

What Is An Extreme Sport?

It is an activity that has a higher level of risk

2015 IHS, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

500

1,000

1,500

2,000

2014 2015

Price (Dollars Per Metric Ton)

From Historic Highs to 10-Year Lows

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North America sets new

historic highs:

- Jan 16, 2014, weekly avg of

$1585/MT

- Jul 2014, monthly contract

of $5.28 per gallon

($1580/MT)

Reaches 10 yr lows (excluding

the 2008/2009 recession)

From Historic Highs to 10-Year Lows

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-300

0

300

600

900

1,200

-500

0

500

1,000

1,500

2,000

2010 2011 2012 2013 2014 2015

Delta US-Asia Delta US-Europe Asia Europe America

Price (Dollars Per Metric Ton) Delta (Dollars Per Metric Ton)

New Spot Highs

-1.0

0.0

1.0

2.0

3.0

-1.0

0.0

1.0

2.0

3.0

11 12 13 14 15 16 17 18 19

Americas Europe Middle East/Africa Asia Demand

Million Metric Tons Million Metric Tons

New Asian Capacity Pushes Prices Lower

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Benzene, An Extreme Sport

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Benzene Market Characteristics

Inelastic Supply

Non-Integrated Demand

Long Supply Chains

Plan For The Unexpected

Market & Price Volatility

How To Protect Yourself

Benzene Is Mainly a By-Product

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Natural

Gas

Crude

Oil

NGL

Refinery

Butane

Propane

Ethane

Pipeline Natural Gas

Steam

Cracker

Naphtha

Splitter

Gasoline

Ethylene

BTX

Extraction

Benzene

Toluene

Mixed

Xylenes

Reformer

H2

Pygas

Reformate

Refineries Face Opportunities and Threats

Refiners face both opportunities and threats

Global refining overcapacity West European refiners under pressure

North America benefits from new crude sources Different crude oil, different naphtha

East Coast refiners shrunk but Gulf Coast refiners are expanding

Fuel standards Renewable Fuels Ethanol

New Constraints Benzene, Sulfur

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Declining Benzene Production From US Reformers

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170

190

210

230

250

270

290

2,800

3,000

3,200

3,400

3,600

3,800

4,000

4,200

4,400

10 Q2 Q3 Q4 11 Q2 Q3 Q4 12 Q2 Q3 Q4 13 Q2 Q3 Q4 14 Q2 Q3 Q4

Reformer Feed, PADD 3 US Bz From Reformate

Thousand Barrels Per Day Million Gallons

Lighter Cracker Feedslates Reduce Benzene

0.00

0.05

0.10

0.15

0.20

0.25

0.30

Ethane Propane Butane Light Naphtha HeavyNaphtha

Gasoil

Cracker Feedstocks

Tons Benzene Per Ton of Ethylene

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Lighter Feedstocks

0%

20%

40%

60%

80%

100%

2009 2012 2015 2018

Ethane Propane Butane Naphtha Gas Oil Others

North America West Europe

0%

20%

40%

60%

80%

100%

2009 2012 2015 2018

0%

20%

40%

60%

80%

100%

2009 2012 2015 2018

Different Regional C2 Strategies, Same Result

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Northeast Asia

Over Capacity In PX Is Shifting BZ Eastward

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0.0

20.0

40.0

60.0

80.0

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Demand Capacity Excess

Million Metric Tons

0.0

0.2

0.4

0.6

0.8

1.0

0.0

0.4

0.8

1.2

1.6

2.0

2007 2008 2009 2010 2011 2012 2013

Th

ou

sa

nd

s

World China European Union

Japan United States

Million Metric Tons Million Metric Tons

Steel Demand for Coking Coal Slowing

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Coal to aromatics in China - Coking Coal for Steel

- Coal to Aromatics (via MeOH)

China domestic demand slows - 2014 1.0% - 2015 0.8%

Increased production combined with low demand causing an increase in exports

Push for trade protection

Benzene Demand Has Slowed

0.0% 6.0% 12.0%

Other

Nitrobenzene

Cyclohexane

Cumene

Ethylbenzene

Average Annual Percent Growth

2014-2019 2014 2009-2014

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Ethylbenzene 50%

Cumene 19%

Cyclohexane 11%

Nitrobenzene 11%

Others 9%

Demand = 44.5 Million Metric Tons

How Integrated are Benzene Derivatives?

0%

20%

40%

60%

80%

100%

North America West Europe Asia ROW

Non-Integrated Integrated

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Benzene Cumene/ Phenol

19%

EB/Styrene

50%

Why Benzene Derivatives Arent Integrated

Cyclohexane

11%

Polystyrene

EPS

ABS, SBR, UPR

Bisphenol A Polycarbonate

Ethylene

Propylene

Phenolic Resins

Caprolactam Nylon 6

Adipic Acid Nylon 6,6

Hydrogen

Acetone

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So Benzene Must Travel

-4.0

-2.0

0.0

2.0

4.0

09 10 11 12 13 14 15 16 17 18 19 24

N. America S. America Europe CIS & Baltics

Africa/Middle East Indian Subc. NE Asia SE Asia

Million Metric Tons

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Main Exporters & Importers

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Importers & Exporters > 500 KT

Japan

West

Europe US

Taiwan

China S. Korea

India

Thailand

02,000

4,000

6,000

2009 2014 2019

-2,000

-1,000

0

1,000

2,000

3,000

2009 2014 2019

Benzene Ethylbenzene Styrene Cumene Phenol

Thousand Metric Tons

US West Europe

Benzene Equivalent Trade

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China

-500

0

500

1,000

1,500

2009 2014 2019

0.0

2.0

4.0

6.0

8.0

10.0

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

HDA

Coke Oven

Reformate

Pygas

PX

Demand

Million Metric Tons

The Supply Gap in North America

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North Americas Appetite for Imports Continues to Grow

0%

10%

20%

30%

0.0

1.0

2.0

3.0

09 10 11 12 13 14 15 16 17 18 19 24

Imports Exports Net Imports as % of Total Supply

Million Metric Tons Percentage

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Risk Mitigation

Most of the downstream industry ties itself to the benzene price

Alternatives Forward, spot market Paper market

Best Practices Coordinate Sales & Purchasing

Consequence Desensitizes the industry to benzene volatility

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What Are The Supply Risks?

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Refineries Growing EC Shutdowns GC Expansions

Shutdowns

Ethylene Heavy Crackers Lighter Feedstock Lighter Feedstock

Paraxylene Over Expansion Rationalization Stable

Coal Rationalization Stable Stable

From Scarcity to Excess

-100

0

100

200

300

400

500

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Americas Europe Middle East/Africa

Asia Demand Delta, Asia BZ-Naphtha

Million Metric Tons Price (Dollars Per MT)

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Benzene, An Extreme Sport

Prices/margins have declined due to a shift in market balances and lower crude

oil prices.

The benzene market is inherently unbalanced with inelastic supply,

nonintegrated demand and growing deep

sea trade.

The environment (supply) can quickly change again, be prepared to react.

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