nylon is resilient – what about the nylon industry?

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6th China International Polyamide & Intermediates Forum

Nylon is Resilient –What about the Nylon Industry?

6th China International Polyamide & Intermediates F orum3-5 Dec 2008, Rainbow Hotel, Shanghai, China

Speaker : Charles FryerCompany : Tecnon OrbiChem

230

240

250

260

270

280

290

300

310

320

330

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Thousand Ton

Monthly

6 MonthMean

Source: Tecnon OrbiChem

Figure 1

Optimistic view1.3% Growth pa

Pessimistic view0% Growth pa

POLYAMIDE FILAMENT WORLD MONTHLY PRODUCTION

2


0

200

400

600

800

1,000

Europe incCIS & Turkey

USA China South Korea Taiwan Japan

Ktpa

2003

2004

2005

2006

Figure 2

1999

2000

2001

2002

2007

2008 est.


GLOBAL PRODUCTION OF NYLON FILAMENT OVER LAST 10 YE ARS

2,500

3,000

3,500

4,000

4,500

5,000

5,500

1984 1988 1992 1996 2000 2004 2008 2012 2016

Thousand Tons

Figure 3

No new plants2010-2016

Consumption

Growth 3.4% pa

Growth 3.0% pa

Growth 2.7% pa

Growth2.3% pa

Capability


WORLD CAPROLACTAM CAPABILITY versus DEMAND

1984-2016

3


0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Dollars Per Ton

CyclohexanePrice

BenzeneContract

AmmoniaPrice

Naphtha Price

Figure 4


EUROPEAN CYCLOHEXANE, BENZENE, AMMONIA and NAPHTHA PRICES

0

400

800

1,200

1,600

2,000

2,400

2,800

3,200

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Dollars Per Ton

Polyamide Fibre PA6 75 den Taiwan

Asian Caprolactam Import Contract

WE 1.03 Cyclohexane + 0.30 Ammonia

WE Naphtha Price

Figure 5


CHAIN FROM NAPHTHA TO POLYAMIDE

4


0

500

1,000

1,500

2,000

2,500

3,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Dollars Per Ton

Margin



Figure 6

WE HeavyFuel Oil Spot


ASIAN CAPROLACTAM MARGIN over WEST EUROPEAN 1.03 CYCLOHEXANE + 0.3 AMMONIA

0

500

1,000

1,500

2,000

2,500

3,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Dollars Per Ton



Figure 7

WE HeavyFuel Oil Spot

Margin


ASIAN CAPROLACTAM MARGIN over WEST EUROPEAN 1.03 CYCLOHEXANE + 0.3 AMMONIA

5


0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Dollars Per Ton

Margin

Asian Caprolactam Import Contract CFR

Taiwanese Nylon 6 Filament 70 den DEL

Figure 8


TAIWANESE POLYAMIDE 6 FILAMENT MARGINover 1.03 ASIAN CAPROLACTAM IMPORT CONTRACT

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Dollars Per Ton

Price Gap

Taiwanese Polyester Filament150 den DTY Price DEL

Taiwanese Nylon 6 Filament 70 den DEL

Figure 9TAIWANESE POLYAMIDE 6 FILAMENT PRICE PREMIUM ABOVE POLYESTER FILAMENT


6


0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

2,400

2,600

2,800

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Dollars Per Ton

Differential

Polyester Raw Material Cost = 0.865 xPTA + 0.35 x MEG

Caprolactam Import Contract

Figure 10EAST ASIAN DIFFERENTIAL BETWEEN POLYAMIDE 6 AND POLYESTER RAW MATERIAL COSTS

Forecast


Figure 11CAPROLACTAM PRODUCTION vs CONSUMPTION DISTRIBUTION 2007


W est Europe23.1%

East Europe4.1%

N America17.1%

Taiwan11.4%

China7.6%

China11.6%

Rest of W orld19.0%

Japan6.0%

W est Europe6.0%

W est Europe23.4%

East Europe4.0%

East Europe6.9%

N America16.9%

N America4.4%

Japan5.8%

Japan5.8%

Rest of W orld18.8%

China8.0%

SURPLUS

SURPLUS

Needing imported

caprolactam

Needing imported

caprolactamCAPROLACTAM

CAPACITY

Total: 4,500 kt Total: 4,100 kt

CAPROLACTAMCONSUMPTION

SURPLUS

SURPLUS

7


Figure 12WORLD CAPROLACTAM REGIONAL NET TRADE 2004-2007

-500

-400

-300

-200

-100

0

100

200

300

400

Thousand Tons

S &

SE

Asia

E E

urope

W E

urope

N A

merica

S A

merica

ME

& A

frica

E A

sia/Japan

China

2005

2004

2006

2007


Figure 13NYLON INTERMEDIATES PRODUCERS 2007Share of Production Capacity


BASF16.7%

DSM12.0% Honeywell

7.6%

CPDC6.1%

Ube Ind8.8%

CIS10.9%

Others14.8%

Toray Ind2.1%

Capro Corp5.3%

Sinopec China4.7%

Caproleuna3.1%

Lanxess3.8%

Sumitomo Chem4.1%

Invista30.0%

Solutia16.3%

Rhodia13.2%

BASF5.1%

Asahi Kasei4.3%

DuPont12.7%

Sabanci7.0%

China Shenma5.7%

Radici2.9%Others

2.8%

AH Salt (PA66)3,500 kt

Caprolactam (PA6)4,500 kt

8


0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2001 2002 2003 2004 2005 2006 2007 2008

Asian Polyamide PA66 Tyrecord Filament Price

China AH Salt Import Price

Asian Adipic Acid

WE Naphtha Price

Asian Benzene

Dollars Per Ton

Figure 14THE PA66 SUPPLY VALUE CHAIN

They were!Things seemed too good to be true


Invi

sta

Rh

od

ia

So

lutia

BA

SF

Ra

dic

i

Lia

oy

an

g

Asa

hi K

ase

i

Lan

xe

ss

Ch

ina

Sh

en

ma

Uk

rain

e

Ch

ina

Ne

w

0

200

400

600

800

1,000

1,200

Figure 15ADIPIC ACID CAPACITY 2007: ADDITIONS 2008-2010

Ktpa

Bohui

Hongye

Dushanzi

2008-2010

2007


9


Figure 16WORLD ADIPIC ACID SUPPLY/DEMAND BALANCE 2000-2015Thousand Tons

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2000 2002 2004 2006 2008 2010 2012 2014

Consumption

Capacity


-300

-250

-200

-150

-100

-50

0

50

100

150

200

Thousand Tons

Figure 17WORLD ADIPIC ACID REGIONAL NET TRADE 2004-2010est

S &

SE

Asia

E E

urope

W E

urope

N A

merica

S A

merica

ME

& A

frica

E A

sia/Japan

China

2005

2004

2006

2008est

2009est

2010est

2007


10


Figure 18WORLD ADIPIC ACID CONSUMPTIONBY END-USE 2000-2015Thousand Tons

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

AH Salt

Plasticisers

Urethanes

Growth 2.3%

Growth 6.0%

Other

Growth 4.2%

Growth 3.0%


Dollars Per Ton

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2001 2002 2003 2004 2005 2006 2007 2008

Margin(Tyrecord –1.17 x AH Salt)

China AH Salt Import cfr

Asian Nylon 66 Tyrecord 1260 den Filament

Figure 19MARGIN FOR PA66 1260 DEN FILAMENT PRODUCTION IN ASI A


11


0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

2,400

2,600

2,800

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

0

2

4

6

8

10

12

14

16

18

20

22

24

26

28

Dollars Per Ton

Butadiene

Ammonia

Natural Gas(mmBtu)

Figure 20US BUTADIENE, AMMONIA and NATURAL GAS PRICES

Dollars Per mmBtu


0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Dollars Per Ton

Butadiene

Ammonia

Heavy Fuel Oil

Figure 21EUROPEAN BUTADIENE, AMMONIA and HEAVY FUEL OIL PRICES


12


0

500

1,000

1,500

2,000

2,500

3,000

3,500

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Dollars Per Ton

HMDA JapanImport cfr

Ammonia

Methane (Natural Gas)

Figure 22US BUTADIENE, AMMONIA and NATURAL GAS PRICES vsJAPAN IMPORT HMDA cfr PRICE

Butadiene

Feedstock Costs per Ton HMDA


0

500

1,000

1,500

2,000

2,500

3,000

3,500

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Dollars Per Ton

HMDA est. Export Price fob

Feedstock Costs per Ton HMDA

Fixed costs plus Cash

Margin

Figure 23US BUTADIENE, AMMONIA and NATURAL GAS PRICES vs JAPAN IMPORT HMDA cfr PRICE

HMDA JapanImport cfr


13


Figure 24LONG TERM AVERAGE PRICES OF FIBRES & INTERMEDIATES - Crude Oil ~$50/bbl


500

700

900

1,100

1,300

1,500

1,700

1,900

2,100

2,300

2,500

2,700

Dollars Per Ton

Caprolactam

800 average

PA6 Polymer

250 300

400

PA6 Filament(FDY 70den)

200

100

500

0.865 PTA + 0.35 MEGMEGPTA

100

300PEs Staple

700

750

1100

PEs FDY 70 den

Benzene

PA66 Staple

Crude oil ~ $50/bbl

1100

PA6 Staple

0.66 AA + 0.52 HMDA

1.17 AH salt

PA66 Polymer


Figure 25LONG TERM AVERAGE PRICES OF FIBRES & INTERMEDIATES - Crude Oil ~$75/bbl


500

700

900

1,100

1,300

1,500

1,700

1,900

2,100

2,300

2,500

2,700

2,900

3,100

3,300

Crude oil ~ $75/bbl

Caprolactam

1000 average

PA6 Polymer

250 300

550

PA6 FilamentFDY 70den)

200

PA66 Staple

800

100

300PEs Staple

700

1200

1550

PEs FDY 70 den

100

Dollars Per Ton

0.865 PTA + 0.35 MEG

MEGPTABenzene

1300

PA6 Staple


0.66 AA + 0.52 HMDA

PA66 Polymer

1.17 AH salt

14


0

500

1,000

1,500

2,000

2,500

3,000

3,500

0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150

Dollars Per Ton

China AH Salt Import Price x 1.17

Asia 0.865 PTA+ 0.35 MEG

Figure 26PA6, PA66 and PES RAW MATERIAL COST vsBRENT CRUDE OIL 2000-2008

Asia CaprolactamImport Contract Price

Brent Crude Oil $/bbl


CONCLUSIONS

• Growth: nylon fibre has been growing at 1.3% per year worldwide, but in recent years this has fallen to zero and negative growth is likely in 2008 and 2009

• Polyamide engineering resin is growing at around 4% per year, through its penetration into new areas, such as automobile components, but growth will slow or go negative in 2009 with recession in some automobile industries

• Long term polyamide growth overall (PA6 + PA66) is thus likely to be around 2.2%/year, but only after three years’ loss of growth 2007-2010

• Poor growth prospects will discourage investment in new caprolactam plants

• The present pattern of caprolactam trade will thus continue

• Caprolactam producers are having to pass on to customers all the recent reduction in their benzene, ammonia and energy costs

• PA66 producers still have high costs, with butadiene prices still high

• Caprolactam and PA6 will be hard pressed by competition from polyester

• PA66 is suffering the greatest feedstock pressures, but so far is managing to retain its premium quality image and pricing

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