MPMA Seminar

14 March 2013, Johor

Plastic Raw Materials-Present

and Future Trends

Prema Viswanathan

Head of Middle East, South Asia Markets

www.icis.com

Corporate Structure

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ICIS Global Presence

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What information does ICIS produce?

Chemicals Energy Fertilizers

“Trusted market intelligence for the global petrochemical, fertilizer and energy industries”

www.icis.com

Petchems on a roller-coaster ride

• Petchem prices up on high crude, snug supply

• China polymer demand growth not up to expectations

• Margins squeezed down the chain

• Middle East players still lead on cash costs

• But new US supply could be a game changer

• India - the new demand driver, after China?

• China - the polymer price setter

• Southeast Asian polymer market trends

• Feedstock market trends

www.icis.com

Demand growth slows in China

• China’s GDP growth has declined from the

double-digit pace seen in past decade

• Post-2008 stimulus package no longer

available to sustain polymer demand growth

• Slowdown of EU, US economies has caused

sharp fall in Chinese finished goods exports

• Chinese domestic market not expanding fast

enough to make up for export decline

• Polymer demand growth in China in 2010-

2012 below 5%/year

• PE imports from Iran into China continues

despite sanctions

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Middle East a key exporter, but faces hurdles

•Middle East moving up the cost curve

•Mideast PE capacity to hit 28m tonnes by

2015

•Propylene/PP economics not as good as

ethylene/PE, so less expansions for PP

•Gas shortage in GCC, only Iran. Qatar have

surplus supply

•Sanctions impact Iran investments, trade

flows

•Labour shortages, logistics woes, supply

constraints

• Shifting govt priorities in GCC

www.icis.com

US ethylene capacity to expand by 38% by 2019

*Assumption of world-scale cracker at 1.25m tonnes/year Source: ICIS

• Exports of

PE, PVC from

US expected

to surge in

2016-17

www.icis.com

India - the new demand driver, after China?

• Polyolefins demand grew steadily in

2012, overriding a sluggish

economy.

• April to Nov 2012 Market

Estimate: PP demand increased by

16%, LLDPE by 15%, HDPE by 11%

and LDPE by 21%.

www.icis.com

India PE, PP demand (2013)

• Consumption in India is likely to see

steady growth in Q1 2013 on

domestic demand

• However, in early Feb 2013, India

projected weaker GDP growth in the

current fiscal

• Logistics challenges caused by weak

infrastructure

• Significance: Sluggish growth may

dampen polyolefins buying sentiment

Source: Plasopedia

www.icis.com

China – a key price driver

• Regional prices tend to gain support when China is

buying.

• China produced 57.81m tonnes of plastics finished goods in January-December 2012, up 9% year-on-year, a much lower growth rate compared with 2011.

• China’s manufacturing activity still in expansion mode, but lower export index for February indicates unstable external demand.

Source: ICIS

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China PE, PP stable to higher in March

Bullish factors:

• High feedstock prices in Asia

• Low end-user inventory

• Relatively tight export supply from Mideast

because of planned and unplanned plant

shutdowns in December and January

Bearish factors:

• High producer inventory post Lunar New Year

• Low operating rates at Chinese processors

as workers returned from holiday only after

24 February

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SE Asia’s PE market to

experience mixed trends

• Regional LLDPE prices may be dampened on the start-up of new plants.

• New Middle East

supply started up in 2012 may affect HDPE and LDPE prices in SE Asia.

www.icis.com

Tighter regional supply may

support SE Asia’s non-dutiable

PP prices

• Supply in Indonesia and Malaysia may be tight because of local production issues.

• ExxonMobil’s new

PP plant in Singapore may ease the tight regional supply.

www.icis.com

• C2 exports from Iran to China infrequent

• Saudi spot exports tight because of derivative

demand

• Most Asian crackers running at 90-100% in Feb

• Japanese crackers still at low rates (80-90%)

• Near term outlook positive on tight supply

Asia C2 outlook for 2013 positive

www.icis.com

• China to remain key driver

• China’s propylene supply to increase

• 8 new PDH/MTO units in China due to start

in 2013

• But imports to rise on demand from new

phenol-acetone and PO units

• Demand to grow in line with China’s GDP

growth

• Asian prices may hover at high levels on

China’s imports

Asia C3 supply, imports to rise

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ICIS pricing methodology

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ICIS pricing plays a special role

• Complex markets need trusted and independent price

discovery mechanisms to manage risk and ease business

negotiations.

• Competition laws prohibit market participants from direct

communication, producers cannot speak to each other on

pricing.

• ICIS pricing has grown to be a key information conduit for

global chemical markets. ICIS pricing has a privileged and trusted position as the

independent clearing house for business-critical market

pricing information

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The process of price reporting

Buyers

Producers Traders

Information Exchange, phone, yahoo, email – daily or weekly Other Interested

Parties* Other Interested

Parties*

*Shipbrokers, storage companies, government organisations, etc

Trusted as the central repository of price information

www.icis.com

Our commitment

• Provide unbiased and accurate

price assessments

• Information gathered from wide

cross section of contacts

• Rigorous cross-checking of

information.

• Build close contacts with the

industry.

Reflect The Market, Not Lead It

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Critical skill – Staff market expertise

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Types of Market Information

Confirmed Deals

Bids and Offers

Inventory Levels

Freight Rates

Plant Production Data

Derivatives/Feedstock

Historical Data

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Check Parameters

Volume

Time Period

Product Specification

Geographic Basis

Spot or Contract

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Price Reporting Challenges

Manipulation

Illiquid, opaque markets

Conflicting news

Confidentiality

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Cartels and price fixing

• Anti-trust legislation prevents producers from discussing prices

• Price Reporting Agencies provide a route for producers to convey

their views to the market

• ICIS’s procedures are subject to rigorous internal and external

RBI compliance

• ICIS conferences avoid presentations in which producers forecast

prices

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Methodology for Asia polyolefins

• Fridays at 1730 hours in Singapore.

• Cargoes typically loading or delivered 2-4 weeks forward from the date of

publication.

• Assessments for China, Hong Kong, Taiwan, southeast Asia and India are

based on a LC at sight basis only, although deals with differing credit terms

will be taken into consideration.

• Bulk parcels are in the range of 100-1,000 tonnes.

Contributions

Chow Bee Lin (Asia polyolefins)

beelin.chow@icis.com

Tel. +65 6780 4398

Muhamad Fadhil (Middle East and South Asia polyolefins)

muhamad.fadhil@icis.com

Tel: +65 6780 4334

Peh Soo Hwee (Asia olefins)

soohwee.peh@icis.com

Tel. +65 6780 4347

Joseph Chang (ICIS Chemical Business)

joseph.chang@icis.com

Malini Hariharan (ICIS training)

malini.hariharan@icis.com

Thank you!

prema.viswanathan@icis.com