Changing Dynamics of Asian Solvents Markets

By Peh Soo Hwee, Senior Editor

Helen Lee, EditorLiu Xin, Editor

agenda

•Market review• Price drivers• Supply/demand • Outlook

Producers aim to raise IPA and MEK prices above $900/tonne CFR Asia on the back of rising costs.

Attempts hampered by weak demand.

Reduced IPA and MEK operating rates in the region.

The Markets Today

IPA

MEK

85,000

90,000

95,000

100,000

105,000

110,000

115,000

1 2 3 4 5

Volume

China IPA imports

2004 2005 2006 2007 2008

MEK

020,00040,00060,00080,000

100,000120,000140,000160,000

1 2 3 4 5

Year

Vo

lum

e

Imports

Exports

China MEK

2004 2005 2006 2007 2008

South KoreaAsia’s largest MEK market. Imports totalled Asia’s largest MEK market. Imports totalled 74,000 tonnes in 2008. 74,000 tonnes in 2008.

Shrinking import demand for IPA, est. at Shrinking import demand for IPA, est. at around 20,000 tonnes in 2008. Market around 20,000 tonnes in 2008. Market demand size at 70,000 tonnes, domestic demand size at 70,000 tonnes, domestic makes up the rest.makes up the rest.

Demand growth in derivative inks and Demand growth in derivative inks and coatings sector capped by competition from coatings sector capped by competition from China and SE Asia.China and SE Asia.

South Korea

What

NEXT

Cost push could see higher prices in H2. Pick-up in demand in Jul-Aug ahead of Ramadan (SE Asia) and in late Aug-Oct in China.

Sustained price recovery expected earliest by 2010/2011.

Modest growth of less than 5% in inks and coatings sector over next few years.

Diversification into higher-end coatings (saturation of decorative coatings).

MEK longer-term outlook:

MEK imports likely to shrink with ADD expected to stay in place and new plants coming on stream (Lanzhou). China as opportunistic exporter of MEK.

Korea to remain key import market in Asia, limited growth in SE Asia.

MEK new capacities

Company New capacity (t/yr) Total capacity (t/yr) Date

Zibo Qixiang Tengda Chemical 80,000 110,000 Q4 2008

Lanzhou Petrochemical 30,000 60,000 Sep 2009

Maoming Petrochemical 30,000 30,000 On hold

Yanbian Petrochemical 30,000 30,000 On hold

IPA longer-term outlook:

Imports into China expected to be more or less stable in the next few years. Korea turned net exporter in 2008, imports to shrink.

SE Asian growth hinges on demand from coatings, oleo-chemicals and pharmaceuticals.

Ethyl Acetate & Butyl Acetate

Market & TrendsJuly 2009

Helen LeeMarkets Editor

ICIS Pricing Asia

Agenda

• Product Uses

• Feedstocks – Acetic Acid, Ethanol & Ethylene

• Downstream trends

• China etac/butac exports

• New capacities

• Outlook

60%15%

15%

10%

Coatings process solvent Printing inks Misc

11% 3%

86%

Lacquer solent Process solvent Misc

Ethyl Acetate Usage Butyl Acetate Usage

Product Usage

Feedstocks

Acetic Acid content: Ethyl Acetate 68%, Butyl Acetate: 53%

Ethylene content: Ethyl Acetate 70-80%

Naphtha to Ethyl Acetate Korea Alcohol and LCY restart ethylene-based

ethyl acetate plants.

Chinese Domestic Ethanol to Ethyl AcetateChinese domestic ethanol prices and ethyl acetate USD/tonne

FOB China prices

40504100415042004250430043504400445045004550

Date range

CN

Y/t

on

ne

$600$620$640$660$680$700$720$740$760$780$800

US

D/t

on

ne

Chinese domestic ethanol prices(CNY/tonne)USD/tonne FOB China

Acetic Acid to Ethyl Acetate

Propylene to Butyl Acetate

Source: International Development Association of Furniture Industry of Japan

Import of Furniture by Items & Countries 2009

010,000,00020,000,00030,000,00040,000,00050,000,00060,000,000

Countries

Uni

t: 1,

000

Yen

Jan-Mar '08

Jan-Mar '09

Source: International Development Association of Furniture Industry of Japan

Butyl Acetate – Wood/furniture Coatings

Growing Exports from China

* Ethyl Acetate 2006: 109,399 tonnes2007: 137,030 tonnes2008: 183,897 tonnes2009: 62,115 tonnes (Jan to May)

* Butyl Acetate2006: 12,782 tonnes2007: 15,922 tonnes 2008: 11,643 tonnes2009: 8,440 tonnes (Jan to May)

Producer Capacity (tonnes/year)

Location Status

Yankuang Cathay Coal Chemicals

100,000 Tengzhou, Shandong

province, China

90%

Nanchang Ganjiang Solvents

Factory

80,000 Nanchang, Jiangxi province, China

Full

Shandong Haihua 100,000 Weifang, Shandong

province, China

Onstream early ’08 - idled Aug ‘08

Taixing Jinjiang Chemical (Jiangmen

Handsome)

100,000 (ethanol integrated)

Jiangsu, China Onstream Oct ‘09

Daicel Industries 50,000 (bioethanol-based)

Otake, Hiroshima, Japan

Onstream 1 July ‘09

New Ethyl Acetate Capacities

New Butyl Acetate Capacities

Producer Capacity (tonnes/year)

Location Status

Quanzhou Chuangyuan

Chemical

50,000 Fujian, China Study

Jiangsu Sopo 50,000 Zhenjiang, Jiangsu province, China

Study

Taixing Jinjiang Chemical (Jiangmen

Handsome)

50,000 Jiangsu, China Onstream Oct ‘09

Outlook

• Moderate price fluctuations expected, along with squeezed margins

• Flexible Operating Rates

• Low inventory to minimise risk

• Conservative buying/trading activity

Asian Acetone MarketAsian Acetone Market

Liu Xin

Markets Editor

ICIS pricing, Asia

Acetone margins squeezed

Source: ICIS pricing

Import margin narrows

Source: ICIS pricing & CBI

Rise of SE Asian imports

China acetone imports 2009

China acetone imports 2008

Source: China customs statistics

Zero tariff boosts Zero tariff boosts ASEAN acetone ASEAN acetone

exports to Chinaexports to China

Losing momentum…

Source: China customs statistics

New capacities 2009

Company Capacity Start-up

Sinopec Tianjin petchem 350ktpa End-2009

Sinopec Gaoqiao petchem (+) 40ktpa, (T) 100ktpa Sep-2009

Shutdown schedule 2009Producer Location

CapacityTurnaround

（ KTPA）Mitsui Chemicals Chiba phe 230; ace 80 20 March- mid April 2009

Mitsui Chemicals Chiba phe 190; ace 114 No shutdown schedule

Mitsui Chemicals Osaka phe 200; ace 120 4 July - end July 2009

Mitsui Chemicals Singapore phe 300; ace 180 15 May - 20 June 2009

Mitsubishi Chemical Kashima phe 250; ace 150 21 May - end June 2009

Kumho No.1 Yeocheon phe 30; ace 20 Idle

Kumho No.2 Yeocheon phe 100; ace 60 7-22 May 2009

Kumho No.3 Yeocheon phe 250; ace 155 7-22 May 2009

LG Chem Yeocheon phe 260; ace 160 No shutdown schedule

FCFC Mailiao phe 400; ace 250 mid Jan - early Feb 2009

TPCC Kaohsiung phe 340; ace 204 No shutdown schedule

Chang Chun Kaohsiung phe 300; ace 185 No shutdown schedule

PTT Mab Ta Phut phe 200; ace 124 No shutdown schedule

Gaoqiao Petchem Caojing phe 120; ace 80 15 May - 20 June 2009

Bluestar Harbin Petchem Heilongjiang phe 72; ace 48 29 June - mid July 2009

Yanshan Petchem Beijing phe 112.5; ace 67.5 early August for 23 days

Thank yousoohwee.peh@icis.com

helen.lee@icis.comliu.xin@icis.com