north american resin markets trends - western...
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North American
Resin Markets Trends
Joel Morales, Director Polyolefins North America Western Plastics Association January 7, 2014
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0%
20%
40%
60%
80%
100%
120%
0
2
4
6
8
10
12
14
16
18
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Natural Gas Crude (WTI) Gas as % of Crude
Gas as % of Crude $US per Million Btu
Energy & Economy North America Energy Price Trends
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Polyethylene Update
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Polyethylene: Global Demand Growing
LDPE HDPE
LLDPE
Total Global Demand = 81.5 Million Metric Tons
2013 Global Demand
LDPE
LLDPE HDPE
Total Global Demand = 102.9 Million Metric Tons
2018 Global Demand
AAGR 13-18 = 4.8%
Growth Forecast = 1.3 x GDP of 3.6%
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2013 – 2018 = +24.6 -4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Asia Pacific Africa/ Middle East North America South America Central Europe/ CIS West Europe Global Demand Change
Million Metric Tons
Polyethylene Capacity Changes
2008-2012 =+19.4 MMT
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70
75
80
85
90
95
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 North America West Europe Middle East Northeast Asia South America World
Polyethylene, Operating Rate, %
Global Operating Rates – Regional Advantages
World Average 13-18= 83.9%
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South America: Imports Increasingly Important
0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 100.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
2008 2010 2012 2014 2016 2018 Domestic Demand Exports Total Capacity Imports Operating Rate
Million Metric Tons Operating Rate
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North America Capacity Expanding
0%
15%
30%
45%
60%
75%
90%
0.0
5.0
10.0
15.0
20.0
25.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Hun
dred
s
Domestic Demand Exports Total Capacity Imports Operating Rate
Million Metric Tons Operating Rate
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Shale Drives North America PE Projects
Company Location Country LDPE LLDPE HDPEResin
Type TBA Startup
Equistar LaPorte, TX United States 23 (4) Q4 2012Equistar Morris, IL United States 45 (4) Q4 2012
Equistar Bay City United States 100 (6) Q2 2014
Ineos Sasol Deer Park, TX United States 475 (7) Q2-Q3 2015Braskem Idesa Nachital Mexico 300 (2) 750 (6,7) Q3-Q4 2015
Nova Joffre Canada 450 (4) Q4 2015Equistar * Corpus Christi, TX United States 500 (3) 2016
Dow Freeport, TX United States 400 (2) 650 (5) Q4 2016
ExxonMobil Mont Belvieu, TX United States 650 (4) 710 (4) Q2 2017Formosa Point Comfort, TX United States 300 (2) Q3 2017CPChem Sweeny, TX United States 500 (5) 500 (7) Q3 2017
Sasol Lake Charles, LA United States 420 (2) 450 (4) Q3 2018Nova* Sarnia Canada 430 (3) Q3 2018Shell* Marcellus United States 500 (3) 1000 (4,7) Q3 2019
Ascent (Braskem)* Marcellus United States 1500 (3) 2019
Totals, 000's MT 1420 3698 3535 2000 10,653*Reported projects not fully verified or approved and not included in IHS capacity database. **Processes: (1) Autoclave, (2) Tubular, (3) TBA, (4) Gas Phase, (5) Other, (6) Ziegler, (7) PF Loop
2018-2019
North America - New Polyethylene Projects
2012-2013
2014
2015-2016
2017
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Economics by Region: Price Forecast
0
20
40
60
80
100
120
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
NAM Cash Cost, Integrated NAM LLDPE WEP LLDPE CHINA LLDPE (Spot)
Cents Per Pound
Saudi ethane based
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-4%
0%
4%
8%
12%
16%
-5.0
0.0
5.0
10.0
2008 2010 2012 2014 2016 2018
South America Net Trade North America Net Trade NAM Exports - SAM Imports NAM Exports - SAM Imports as % of NAM Prod
Net Trade, Million Metric Tons Trade as a % of Production
All PE - America’s Trade Balance
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-4% -2% 0% 2% 4% 6% 8% 10% 12% 14%
-2.0
-1.0
0.0
1.0
2.0
3.0
2008 2010 2012 2014 2016 2018 South America Net Trade North America Net Trade NAM Exports - SAM Imports NAM Exports - SAM Imports as % of NAM Prod
Net Trade, Million Metric Tons Trade as a % of Production
HDPE America’s Trade Balance
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North America PE Contract Discounted Prices
20
30
40
50
60
70
80
90
100
1995 1998 2001 2004 2007 2010 2013 2016 LDPE GP LLDPE C4 HDPE BM
Cents Per Pound
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Polyethylene: Global Price Equilibrate
1102
1323
1543
1764
1984
50
60
70
80
90
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 North America Discounted West Europe Discounted CFR China Spot
Price, Dollars Per Metric Ton Price, Cents Per Pound
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Polyethylene Net Trade Flows
2013 Net Trade
2018 Net Trade
-1637
-1792
-2267
9956
-5759
-1945
745
2699
-3225
(Thousand Metric Tons)
277
6318
13105
-2948
-2860
-1949
-8715
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• Two low cost producing regions emerge (N. Am, MDE) - compete for global market share.
• China also adds low cost capacity – domestic focus • N. American domestic demand accelerates: driven by
increased low cost production, competitive market dynamics, and increased exports of finished goods
• Increased capacity / competition drives PE prices toward global parity
• N. American integrated margins decline as: new capacity starts, feedstock prices rise, and competition increases.
• “Commoditization” of higher margin resins develops as producers add capacity 19
PE Summary
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Polypropylene Update
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North America 13%
South America 5%
West Europe 14% Southeast Asia
9%
Northeast Asia 9%
China 33%
Africa/Middle East 10% Indian Sub.
2%
Other 5%
2013-2018 AAGR Global = 5.0% West Europe = 1.4% North America = 2.3% South America = 5.1% Northeast Asia = 6.0% Southeast Asia = 5.6% China = 6.9% Africa/MDE= 5.3%
2013 Total Global Demand = 56.0 Million Metric Tons 2018 Total Global Demand = 71.6 Million Metric Tons
Global Polypropylene Demand Today
Demand Growth 2013-2018 = 28%
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-2.0 -1.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
North America South America West Europe CEP/CIS Africa/Middle East Indian Sub. Northeast Asia Southeast Asia Global Demand Growth
Million Metric Tons
PP Capacity Builds in Middle East and China Leads to Over-Capacity
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Global Polypropylene Operating Rates
60
70
80
90
100
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 World Northeast Asia West Europe North America Middle East South America
Operating Rate, %
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Oversupply Explains Why Asia Lowest Price
661
882
1,102
1,323
1,543
1,764
1,984
2,205
2,425
30
40
50
60
70
80
90
100
110
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 North America Discounted West Europe Discounted North America Spot Export China Spot
Price, Dollars Per Metric Ton Price, Cents Per Pound
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Regional Polypropylene Prices
881
1,101
1,322
1,542
1,763
1,983
2,204
2,424
2,645
40
50
60
70
80
90
100
110
120
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
North America Discounted West Europe Discounted SAM Domestic Delivered China spot (cfr China)
Price, Dollars Per Metric Ton Price, Cents Per Pound
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US 77%
Canada 17%
Mexico 6% 2013-2018 AAGR
North America = 2.3% United States = 2.1%
Mexico = 3.1% Canada = 2.3%
2013 Total Demand = 8.9 Million Metric Tons 2018 Total Demand = 10.6 Million Metric Tons
North America Polypropylene Demand Today
Demand Growth 2013-2018 = 19%
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North America Polypropylene Demand by End Use
Film & Sheet 17%
Injection Molding
33%
Blow Molding
2%
Fiber 16%
Raffia 2%
Other 30%
2013 Total Demand = 8.6 Million Metric Tons
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PP North America Supply and Demand Forecast
0 10 20 30 40 50 60 70 80 90 100
0.0
2.0
4.0
6.0
8.0
10.0
12.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Domestic Demand Exports Total Capacity Imports Operating Rate
Million Metric Tons Operating Rate
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North American Integrated Producers To Benefit The Most North America PP Margin, Discounted Contract, Dollars Per Metric Ton
-100
100
300
500
700
900
2010 2012 2014 2016 2018 Non-integrated Producer PDH-Integrated Producer Refinery-Integrated Producer
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South America PP Supply and Demand Forecast
0 10 20 30 40 50 60 70 80 90
0.0
1.0
2.0
3.0
4.0
5.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Domestic Demand Exports Total Capacity Imports Operating Rate
Million Metric Tons Operating Rate
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Polypropylene: Americas Trade Balance
-12% -9% -6% -3% 0% 3% 6% 9% 12% 15%
-1.2 -0.9 -0.6 -0.3 0.0 0.3 0.6 0.9 1.2 1.5
2008 2010 2012 2014 2016 2018 South America Net Trade North America Net Trade NAM Exports - SAM Imports NAM Exports - SAM Imports as % of NAM Prod
Net Trade, Million Metric Tons Trade as a % of Production
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Significant Shift for PP Global Trade
2008 Net Trade
2013 Net Trade
(Thousand Metric Tons)
280
296
120
2880
131
1748
461
280
630
1039
1105
959
3167
1382
498
759
331
740
306
644 547
900
158
-249
43
264
248
2018 Net Trade
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How has Polypropylene
compared versus other materials?
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Global Polypropylene Competiveness (PP/HDPE Ratio) vs. HDPE Improving
0.7
0.8
0.9
1.0
1.1
1.2
1.3
1.4
2003 2005 2007 2009 2011 2013 2015 2017
PP/HDPE North America PP/HDPE West Europe PP/HDPE China
Price Ratio
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-2.0
-1.0
0.0
1.0
2003 2005 2007 2009 2011 2013 2015 2017 PP to PE Spread PP to PS Spread PP to PET Spread
North American Material PP Spreads (cents/cubic inch)
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• North American PP margins forecasted to expand and improve with likely peak in the 2016/2017 time period
• Cost to remain competitive with HDPE − While positioned favorably to PS and neutral to PET
• PDH based PP in North America to be advantaged −New PP capacity will continue to drive off propane based
economics • Next 5 Years brings significant shifts in trade
−China becomes more self sufficient −Middle East Redirects Exports −New capacity in North America increases export position post
2017 −Europe transitions to new import position
Polypropylene: Key Takeaways
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PET Update
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Polyethylene Terephthalate End Uses
Fiber 62%
PET Resin (Rigid
Packaging) 31%
Oriented PET Film 4%
Other 3%
2012 Total Demand = 55.6 Million Metric Tons
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World PET Capacity Versus Demand
0
25
50
75
100
0
10
20
30
40
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 EMEA Capacity Americas Capacity Asia Capacity EMEA Demand Americas Demand Asia Demand Op. Rate w/o Hypo Capacity
Million Metric Tons Operating Rates, %
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0
20
40
60
80
100
-2
0
2
4
6
8
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
U.S. Mexico Canada Net Exports Capacity Operating Rate
Million Metric Tons Operating Rate, %
North America PET Demand
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30 40 50 60 70 80 90 100
-2.0
-1.0
0.0
1.0
2.0
3.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 DAK Indorama M&G Nan Ya Selenis Eastman Invista Wellman Hypothetical Domestic Demand Growth Excess Regional Capacity Operating Rate
Operating Rate, Percent Million Metric Tons
North American Capacity Growth M&G 1 million metric ton expansion at Corpus Christi, Texas
Indorama 540 thousand metric ton expansion.
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Conclusions - PET
• Global PET markets will continue to be vastly oversupplied.
• North America is embarking on even further capacity expansion which will change the economic dynamic.
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Polystyrene Update
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Polystyrene – Demand Decline in Developed Regions
0.0
2.0
4.0
6.0
8.0
10.0
12.0
2003 2005 2007 2009 2011 2013
North America West Europe China World
Demand, Million Metric Tons
Average Annual Demand Decline (0.6%)
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North American High Heat Polystyrene Cash Cost & Margin
0
20
40
60
80
100
120
140
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 High Heat Polystyrene Cash Cost NAM Polystyrene HH Net Transaction Polystyrene Non-Integrated Producer Margin
Cents Per Pound
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• Pricing Outlook – High − No shale gas benefits - Benzene/
Styrene prices to remain high − NAM PS prices at highest level seen to
date driven by benzene. − Despite margin improvement, PS
reinvestment economics still not there • Demand Outlook – Weak
− Below GDP growth globally for PS in the next five years
− Future demand growth from Electronics and Consumer segment.
− Packaging market remains weak – threat from substitution and environmental pressures (New York ban)
Polystyrene Market Summary
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• Conditions very favorable today for PE producers • Conditions improving for PP and PS producers • PET producers look to continue to struggle • Converters to benefit post 2015 time frame with more
competitive pricing for PE and PP on a global basis • Converter North American PE and PP demand expected
to see bump as a result • Tough sledding for converters with PS but PET prices
should be competitive with ceiling set by Asian imports.
Resin Markets Summary
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Thank you and upcoming in March
World Petrochemical Conference March 25 – 28th Houston, Texas Hilton Americas
Global Plastics & Polymers Market Advisory Service – Polyolefins North America Joel Morales Robin Waters Nick Vafiadis Javier Ortiz [email protected] [email protected] [email protected] [email protected] 832 619 8588 832 619 8576 281 752 3206 281 752 3293