rubber market overview bill hyde director c 4 olefins and elastomers [email protected] bill hyde...

Rubber Market OverviewRubber Market Overview

Bill HydeDirector C4 Olefins and Elastomers

[email protected]

Bill HydeDirector C4 Olefins and Elastomers

[email protected]

Chicago Rubber GroupSeptember 23, 2010

Singapore Shanghai Houston New York London Düsseldorf Dubai Bangkok

September 2010

Commercial Strategy Transaction Legal

Olefins & DerivativesPolymers &

Plastics

Methanol

Aromatics

Chlor-alkali & Vinyl

Fibers & IntermediatesEngineering

ResinsC4s and

ElastomersOther

Intermediates & Specialty Chems

Project Economics

Asset Valuations

Technical Analysis

Due Diligence

M&A

CMAI’s Global Consulting Business CMAI’s Global Consulting Business Business Advisory Services

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t/P

lan

nin

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dv

iso

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Se

rvic

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Corporate & Business Planning Support

Market, Value Chain Competitive Analyses

Feasibility Studies

Legal Strategy, Expert Analysis & Testimony, Damage Assessment, Valuation & Arbitration Support

Focused Multi-client

Publications, World

Analyses, Daily, Weekly,

Monthly Services, Training

Corporate Strategies Business Unit Strategies

Functional Strategies

Chicago Rubber Group

CMAI Tire Raw Material IndexCMAI Tire Raw Material Index

Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-1080%

100%

120%

140%

160%

180%

200%

West Europe Asia North America


What’s Next?What’s Next?

• Fundamental Drivers

• Synthetic Rubber

• Natural Rubber


Fundamental Influences

Fundamental Influences

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90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15-10.0

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

Economic Growth Comparison(Constant 2007 U.S. Dollars)

World N. America S. America W. Europe SE Asia NE Asia

Percent Change


2007 2008 2009 2010 2011 2012 2013 2014 201550%

75%

100%

125%

150%

175%

200%

50%

55%

60%

65%

70%

75%

80%

85%

90%

95%

100%

Base Energy Price Outlook

WTI Natural Gas NG as % of Crude

January 2007 = 100 Gas to Oil Ratio


The Synthetic Rubber FutureThe Synthetic Rubber Future

• Asia is the dominant factor and China dominates Asia

• Market limits vary by region– Supply/Demand– Feedstock availability


Global Synthetic Rubber MarketGlobal Synthetic Rubber Market

NAM23%

West Europe11%

Central Europe13%

Northeast Asia42%

Other11%


Is There Enough Capacity?Is There Enough Capacity?

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015-400

-200

0

200

400

600

800

1000

1200

1400

1600

Demand Growth Capacity Additions Surplus CapacityCumulative Surplus

Thousand Tons


China Dominates AsiaChina Dominates Asia

China19%

Other81%

2010 Synthetic Rubber Capacity

China59%

Other41%

2010 - 2014 Synthetic Rubber Capacity Additions


What is China’s Future?What is China’s Future?

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150

500

1000

1500

2000

2500

3000

70%

75%

80%

85%

90%

95%

100%

Production Demand Capacity Self Sufficiency

Thousand Tons


North America is UnderutilizedNorth America is Underutilized

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150

500

1000

1500

2000

2500

80%

85%

90%

95%

100%

105%

110%

115%

120%

125%

130%

Production Demand Capacity Self Sufficiency

Thousand Tons


Cost Differentials Also Drive PricesCost Differentials Also Drive Prices

• Rubber raw material prices have been historically high, but regional differentials have been even worse

• Rubber producers in North America can expect more of the same


BASE PETROCHEMICALSBASE PETROCHEMICALS


Surplus Ethylene Peaks In 2010Surplus Ethylene Peaks In 2010

04 05 06 07 08 09 10 11 12 13 140

5

10

15

20

25

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Annual Cumulative Surplus, Tons Surplus As % of Demand

Percent Ethylene, Million Metric Tons


On-Purpose Propylene ProductionOn-Purpose Propylene Production

01 02 03 04 05 06 07 08 09 10 11 12 13 140

2

4

6

8

10

12

14

16

18

0%

200%

400%

600%

800%

1000%

1200%

1400%

1600%

1800%

Dehydro Metathesis Olefin Cracking Gas-to-Olefins HS FCC

Others % Total Production

Million Metric Tons Percent


Evolving Trends in U.S. Butadiene Feedstock Production

Evolving Trends in U.S. Butadiene Feedstock Production

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 201450%

55%

60%

65%

70%

75%

80%

85%

90%

95%

100%

Ethylene B/E Ratio Crude C

2004 = 100%2004 = 100%

4


New Extraction CapacityNew Extraction Capacity

World China India Southeast Asia

Other Northeast

Asia

North America

Other-0.5

0.0

0.5

1.0

1.5

2.0

2.5

BD Expansions and Closures 2010 – 2014Million Metric Tons


2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Styrene Capacity Expansions

Americas Europe Middle East Asia CIS & Baltic States World

Million Metric Tons

Average Demand


2007 2008 2009 2010 2011 2012 2013 2014 2015(500)

(400)

(300)

(200)

(100)

0

100

200

300

400

North America PBR Cost Dis-advantage Relative to 2007

vs WEP vs NEA

$ per Ton


2007 2008 2009 2010 2011 2012 2013 2014 20150

50

100

150

200

250

North America SBR Cost Disadvantage Relative to

2007

vs WEP vs NEA

$ per Ton


Natural RubberNatural Rubber

• Demand is recovering

• Market balance tightening


Natural Rubber Demand in ChinaNatural Rubber Demand in China

2002 2003 2004 2005 2006 2007 2008 2009 2010*0

500

1000

1500

2000

2500

3000

3500

4000

0%

10%

20%

30%

40%

50%

60%

70%

80%

Demand Percent of Global Demand

ThousandMetric Tons

Percent of Global Demand

* ForecastSource: International Rubber Study Group


Natural Rubber InventoryNatural Rubber Inventory

2002 2003 2004 2005 2006 2007 2008 2009 2010*0

20

40

60

80

100

120

140Days Supply

* Forecast


ConclusionsConclusions

• Fundamentals– Stabilizing

• Synthetic Rubber– China will be biggest

market driver– Cost differences will

cause price differentials and North America will have the highest of both

• Natural Rubber– Tightening

Houston

London

Singapore

Dubai

New York

Shanghai

Duesseldorf

THANK YOU!Contact any CMAI location to assist in your

petrochemicals market analysis

Contact Information Available at CMAIGLOBAL.COM

CHEMICAL MARKET ASSOCIATES, INC.

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rubber market overview bill hyde director c 4 olefins and elastomers [email protected] bill hyde...

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