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