Indian Petrochem Conference – October 2014

IHS Chemical

Acetic Acid:

Overview &

Market Outlook Khevna Shah

Senior Consultant

IHS Chemical Consulting

© 2014, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

• Acetyls Value Chain

• Key Derivatives

• Feedstocks

• Acetic Acid Technology

• Market Outlook

• Global

• Asia

• India

• Acetic Acid Business

• Conclusion

Agenda

Acetyls Value Chain

© 2014, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Acetic Acid

EVA VAE

EVOH

Polyvinyl

Acetate

Polyvinyl

Alcohol

Polyvinyl

Butyral

Films,

Adhesives

Caulks, Joint

Compounds,

Coatings

Coatings,

Adhesives, Paint,

Safety Glass

Vinyl Acetate Monochloroacetic

Acid

PET

Polyester

Fiber

Containers,

Textiles

PTA

Pharmaceuticals

Cellulose

Acetate Flake

Textiles, Fibers

Filter Tow

Textiles, Filter

Media

Acetic Anhydride

Cellulose

Esters

Cellulose Acetate Cellulose Acetate

Butyrate

Cellulose Acetate

Propionate

Acetyls Value Chain

Ethanol

Butyl

Acetate

Ethyl

Acetate

Inks,

Coatings

Propyl

Acetate

Acetate

Esters

Sec Butyl

Acetate

4

© 2014, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Acetic

Acid

CO

Natural Gas

Coal

Methanol Vinyl Acetate

(VAM)

Ethylene

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

reused, or otherwise distributed in any form without prior written consent.

Acetyls Value Chain

5

© 2014, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

• The methanol carbonylation route accounts for more than

90% of the world’s virgin acetic acid capacity

• Technologies are closely held with most technology owners

favouring a JV structure

• Eastman, Celanese and BP are the key technology owners

• In 2013 BP announced the SaaBreTM technology to convert

syngas directly to acetic acid

• China currently has 1.3 million tons capacity for the recovery

of acetic acid from PVA hydrolysis

Technology

6

Acetic Acid Market Outlook

© 2014, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

World Acetic Acid Supply / Demand

8

40%

50%

60%

70%

80%

90%

100%

0

5

10

15

20

25

30

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

Demand (5.5/4.5) Total Capacity (5.4/3.8) Operating Rate

Source: IHS © 2014 IHS

(% AAGR = 09-14/14-24)

Forecast

Mil

lio

n M

etr

ic T

on

s

Op

era

tin

g R

ate

Global operating rates are expected to increase from 2016; significant capacity

addition is expected in long term to meet growing demand

© 2014, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Acetic Acid Capacity Additions by 2019 and 2024

9

0

2

4

6

8

10

12

14

16

NortheastAsia

NorthAmerica

Europe &CIS

SoutheastAsia

MiddleEast

Indian Sub. Other

Mil

lio

ns

Me

tric

To

n 2014 2019 2024

Source: IHS © 2014 IHS

At least a million tons of capacity addition is expected in India in the long term

© 2014, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

World Acetic Acid Demand Forecast

10

0

5

10

15

20

25

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

Vinyl Acetate (4.7/2.5) PTA (5.9/4.4)Acetic Anhydride (4.0/3.0) Monochloro Acetic Acid (3.3/3.3)Ethyl Acetate (6.9/4.3) n-Butyl Acetate (3.8/2.8)Sec-Butyl Acetate (35.9/6.7) Ethanol (0.0/23.2)Others (-1.0/2.6)

Source: IHS © 2014 IHS

(% AAGR = 09-14/14-24)

Forecast

Mil

lio

n M

etr

ic T

on

s

Ethanol is a new high growth demand segment of Acetic Acid

© 2014, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Regional Acetic Acid Net Trade

11

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

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

Source: IHS © 2014 IHS

Forecast

Mil

lio

n M

etr

ic T

on

s

North America is expected to establish itself as the largest net exporter on the back of

low cost methanol production

© 2014, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Northeast Asia Acetic Acid Supply / Demand

12

50%

60%

70%

80%

90%

100%

0.0

4.0

8.0

12.0

16.0

20.0

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

Domestic Demand (8.1/5.3) Production (11.1/4.2)

Total Capacity (9.3/3.5) Operating Rate

Source: IHS © 2014 IHS

(% AAGR = 09-14/14-24)

Forecast

Mil

lio

n M

etr

ic T

on

s

Op

era

tin

g R

ate

Northeast Asia, led by China, has increasingly become the most important region in

the global acetic market – the epicentre of demand and capacity addition

© 2014, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Southeast Asia Acetic Acid Supply / Demand

13

60%

70%

80%

90%

100%

0.0

0.5

1.0

1.5

2.0

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

Domestic Demand (7.1/5.1) Production (-2.9/0.9)

Total Capacity (0.0/0.0) Operating Rate

Source: IHS © 2014 IHS

(% AAGR = 09-14/14-24)

Forecast

Mil

lio

n M

etr

ic T

on

s

Op

era

tin

g R

ate

Currently, the regional production is export oriented targeting the Indian and Northeast Asian

markets; new capacity in China coupled with regional demand growth will shift the region to a net

importer by 2020

© 2014, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Indian Subcontinent Acetic Acid Supply / Demand

14

30%

40%

50%

60%

70%

80%

90%

100%

0.0

0.3

0.5

0.8

1.0

1.3

1.5

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

Domestic Demand (6.8/5.4) Production (-6.3/25.6)

Total Capacity (0.0/23.3) Operating Rate

Source: IHS © 2014 IHS

(% AAGR = 09-14/14-24)

Forecast

Mil

lio

n M

etr

ic T

on

s

Op

era

tin

g R

ate

GNFC the only operational producer on the subcontinent; Assam PC to start up 65

kta of capacity in 2016

© 2014, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Indian Subcontinent Acetic Acid 2014 Demand Profile

15

PTA 30%

Acetic Anhydride

10%

Monochloro Acetic Acid

8%

Ethyl Acetate 37%

n-Butyl Acetate

1%

Others 14%

Source: IHS © 2014 IHS Indian Subcontinent Domestic Demand = 826 metric tons

Expansions by ethyl acetate producers over the last three years have bolstered

Indian demand for acetic acid

© 2014, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 16

Average 2014 Trade

Flows

Net Imports

Net Exports

620

450

40

600

Indian Imports

160

India a key target market for Southeast Asian producers as China adds capacity

© 2014, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

200

300

400

500

600

700

800

12 Apr Jul Oct 13 Apr Jul Oct 14 Apr Jul Oct 15 Apr Jul Oct

Do

lla

rs P

er

Me

tric

To

n

China Spot, FOB WEP Spot, FD US Spot, FOB

Source: IHS © 2014 IHS

Forecast

Acetic Acid Prices

17

Indian prices track the China / Southeast Asia market, but of late have shown a ceiling set

by the exports of acetic acid derivatives

Acetic Acid Business

© 2014, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Acetic Acid Competitive Production Cost

19

0

100

200

300

400

500

600

NAM WEP CHI NAM WEP CHI NAM WEP CHI

2009 2014 2019

Do

llars

per

Met

ric

Ton

Methanol Contribution Carbon Monoxide Contribution Variable Cost Fixed Cost

© 2014 IHS Source: IHS

North American producers to become increasingly competitive

Conclusion

© 2014, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

• In the medium term operating rates and margins will recover due to

delayed capacity addition in China and strong demand growth in Asian

and South American markets

• North America to strengthen it’s export position on the back of low cost

methanol

• IHS expects additional acetic acid capacity to come to fruition in India by

2020 – this is likely to spur local VAM production

Conclusion

21

© 2014, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Methanol & Acetyls Market Service

• Weekly & monthly publication

• Worldwide market coverage

• Methanol

• Acetic acid

• Vinyl acetate

• Acetic anhydride

• Ethyl/butyl acetate

• Price discovery

• Near-term market analysis and

forecast

• Supply / demand

• Trade flows

• Price

22

© 2014, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

2015 World Analysis

• Annual report

• Long-term analysis up to 2025

• Global and regional description

• Capacity

• Supply / demand

• Trade

• Price

• Downstream analysis

23