Chemicals & Plastics Outlook - · PDF fileChemicals & Plastics Outlook ... •Cost of...
Transcript of Chemicals & Plastics Outlook - · PDF fileChemicals & Plastics Outlook ... •Cost of...
7th Annual Pricing & Purchasing Summit
Chemicals & Plastics Outlook Howard Rappaport, Senior Director, Pricing and Purchasing Service
Copyright © 2013 IHS Inc. 7th Annual Pricing & Purchasing Summit
Chemicals & Plastics: What To Expect
• Currently a “sellers market” with high and volatile prices
• Demand slowly recovering, but growth is below normal historical rates for
many products
• New capacity is on the way, but not enough to change the short term
market dynamics
• Elevated energy prices (predominantly crude oil) continue to pressure the
cost side (strong profits, however)
• Recent events tipping the scales on supply / demand
• Price direction will be elevated, but more stable with downside potential
later in 2014
• Keep an eye on the Middle East (Syria) and the US Gulf Coast over the
next few months (politics, violence & weather)
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Copyright © 2013 IHS Inc. 7th Annual Pricing & Purchasing Summit
Natural
Gas
Gas
Separation
Unit
Refinery Crude
Oil
Reformer
Reformate BTX
Extraction
Steam
Cracker
Butane
Hydrogen
Propylene
Pygas
BTX
Raffinate
Ethylene
EO/EG
POLYETHYLENE
ETHYLENE
DICHLORIDE / PVC
EP RUBBER
ETHANOL
Naphtha
Gas Oil
Ethane
Propane
Butane
TOLUENE
m-XYLENE
p-XYLENE
BENZENE
o-XYLENE
XYLENES
PTA/DMT PET
PIA
PAN/DOP/Plasticizers
POLYPROPYLENE
Butadiene
Methanol
SBR / PBR
ETHYLBENZENE/
STYRENE
Intimate Connection Between Energy
And The Chemical Industry
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• Capacity expansions being driven by low cost feedstocks &
integration strategies in North America, Asia and the Middle East
• Cost of production is closely tied to the cost of hydrocarbon
feedstock's (ethane from natural gas and naphtha from crude oil). The
Middle East and North America have a natural gas cost advantage
• Higher global crude oil prices put added upward pressure on market
prices in all regions
• North America has had some recent supply issues, but those will
resolve themselves along with new projects coming on line
• Demand growth has been hampered by the slow economic recovery
and the expectation of lower prices in 2014
General Trends
Chemical Industry Building Blocks – Market Dynamics
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Ethane Cracking Reduces Co-Product Volumes In Particular, Propylene & Butadiene
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Ethane (Natural Gas) Naphtha (Crude Oil)
Million Tons Production Yield For World Scale 1 Million Ton Cracker
Other
Benzene
Butadiene
Propylene
Ethylene
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Copyright © 2013 IHS Inc. 7th Annual Pricing & Purchasing Summit
• High prices today with record margins for US producers
• Cost of production is closely tied to cost of hydrocarbon
feedstock's (ethane and naphtha)
• Location of advantaged feedstock's play key role in capital
investment decisions
• North America prepares for a surge in capacity investment
• Asia and Middle East continue to build as planned
Ethylene
Chemical Industry Building Blocks – Market Dynamics
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Copyright © 2013 IHS Inc. 7th Annual Pricing & Purchasing Summit
Ethylene Nameplate Capacity
By Major Region Ethylene Production
By Feedstock
2012 Global Ethylene Capacity 149 Million Metric Tons
Ethane 35%
Propane 8% Butane 4%
Naphtha 47%
Gas Oil 3%
Other 3%
Americas 26%
Europe 20%
Africa/Middle East 20%
Asia 34%
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Copyright © 2013 IHS Inc. 7th Annual Pricing & Purchasing Summit
Ethylene Prices – North America
•Near-term ethylene forecast slightly higher due to
recent spot activity.
•Costs still remain low relative to history.
• Low cash costs and fairly stable spot prices will
continue with a mostly flat forecast through the end
of the year.
•The turnaround schedule in the first half of 2014 for
crackers could affect spot pricing starting in
January as market players start pre-building
inventories…
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Copyright © 2013 IHS Inc. 7th Annual Pricing & Purchasing Summit
Annual Ethylene Price Forecast – Lower In 2014
400
600
800
1,000
1,200
1,400
1,600
1,800
05 06 07 08 09 10 11 12 13 14 15 16 17 18
U.S. Large Buyer Contract Ethylene West Europe Contract Ethylene
Southeast Asia Spot Ethylene South America Ethylene
Dollars Per Metric Ton
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Polyethylene Prices Slightly Lower In 2014
0
20
40
60
80
100
120
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14
NAM Cash Cost, Integrated NAM LLDPE WEP LLDPE CHINA LLDPE (Spot)
Cents Per Pound
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Propylene Prices – North America
• The propylene forecast for next few months remains higher.
• PP supplies are tight and converters are having difficulty
building inventory.
• Chevron Phillips is still on sales allocation due to production
issues.
• Outages of supply expected in the 1H of 2014 boost prices
in the US.
• The average 2014 PG price will be 64 cents. Down 5 cents
from the 2013 average.
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More “On Purpose” Production Will Drive Global Propylene Capacity Growth
0
5
10
15
20
25
30
35
2000 2002 2004 2006 2008 2010 2012 2014 2016 2022
Ex Dehydro - PDH Metathesis Olefin Cracking
Via Methanol: CTP HS FCC Others On-Purpose
On Purpose Propylene Production, Million Metric Tons
25%
45%
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1,000
1,200
1,400
1,600
1,800
2,000
2,200
10 A J O 11 A J O 12 A J O 13 A J O 14 A J O
NAM Net Trans. Contract Price WEP Disc. Contract Price SEA CFR Spot Price
Dollars Per Metric Ton
U.S. Propylene Prices
In & Out Of Global Competitiveness
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Lower Regional Polypropylene Prices In 2014
882
1,102
1,323
1,543
1,764
1,984
2,205
2,425
2,646
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)
Dollars Per Metric Ton Cents Per Pound
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Benzene
• Supply trends complicated by ethylene, gasoline,
paraxylene and shifting environmental regulations
• Refinery operations and renewable fuel trends are critical to
benzene supply
• Shale crude oil actually results in lower benzene yields
• Growth in demand and capacity migrating to Asia (where
majority of polystyrene & ABS growth is)
• Elevated prices are expected for the next 12-18 months
Chemical Industry Building Blocks – Market Dynamics
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Benzene Prices Remain Over $4.00 Per Gallon
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
Jan-2000 Jan-2002 Jan-2004 Jan-2006 Jan-2008 Jan-2010 Jan-2012 Jan-2014
US Asia
Price (Cents Per Gallon)
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Chemical Industry Building Blocks – Market Dynamics
Butadiene
• On-Purpose production will continue to rise
• Technology related to region and feedstock availability
• Steam cracker and refinery (FCC) supply trends also vary
by region. North America is “supply challenged” near term
• Demand growth trending towards GDP due to emphasis
on more durable goods applications (auto, construction,
appliances, electronics)
• Prices heavily influenced by crude oil trends
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Regional Butadiene Prices “Coming Down”
0
25
50
75
100
125
150
175
200
0
551
1,102
1,653
2,205
2,756
3,307
3,858
4,409
07 May Sep 08 May Sep 09 May Sep 10 May Sep 11 May Sep 12 May Sep 13 May Sep
Contract WEP, CIF Spot Korea, FOB Contract USA, FOB
Dollars Per Metric Ton Cents Per Pound
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2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2000 2002 2004 2006 2008 2010 2012 2014 2016
Russia China U.S. Global Share
Thousand Tons Percent
More “On Purpose” Butadiene Production Coming In The US & China
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Chlorine (and PVC)
• New capacity in North America will require increasing
exports of vinyls and caustic
• China will be more self-sufficient in PVC production
• Cost structure is critical to investment; electricity is the
major cost factor
• Middle East followed by North America are lowest-cost
regions for Chlor-Alkali production
Chemical Industry Building Blocks – Market Dynamics
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Regional Energy Chains Impact
Chlorine & PVC Production
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China
Coal Carbide Acetylene
Coal Electricity Chlor-Alkali VCM
PVC
North America & Middle East
Natural Gas Ethane Ethylene
Natural Gas Electricity Chlor-Alkali EDC VCM
PVC
Most of the World
Oil Naphtha Ethylene
Oil valued energy Electricity Chlor-Alkali EDC VCM
PVC
Pip
e/S
idin
g &
Oth
er
Fab
ricate
d P
VC
Pro
du
cts
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PVC Price Forecast Down In 2014, Then Trending Higher
700
800
900
1,000
1,100
1,200
1,300
06 07 08 09 10 11 12 13 14 15 16 17
NEA Spot NAM Contract-Market WEP Contract-Market
Dollars Per Metric Ton
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• Soft demand and new capacity in Asia have
depressed caprolactam and nylon 6 prices
• New capacity in China is built ahead of demand
• North American suppliers have relied on exports of
caprolactam and nylon 6
• Buyer’s market for compounding grades
Nylon 6 Market Price Drivers
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Honeywell
DSM - Europe
BASF, DSM,
UBE, Univex,
Baling PC,
Mitsubishi
Benzene Cyclohexane Caprolactam Nylon 6
Nylon 6 Producers:
Benzene
Cumene Phenol Cyclo-
hexanone
Propylene
Nylon 6 Chain Overview
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Nylon 6 Regional Price Forecast – “Flat Line”
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
Jan-10 Sep-10 May-11 Jan-12 Sep-12 May-13 Jan-14 Sep-14
NAM Market Price WEP Market Price NEA Market Price
Dollars Per Metric Ton
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0
20
40
60
80
100
120
140
160
Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14
Styrene Contribution Acrylonitrile Contribution
Butadiene Conversion Costs (Var. + Fixed)
GP ABS Market Price
Cents Per Pound
~
US ABS Cash Costs & Price Forecast Relatively Flat In 2014
Forecast
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Copyright © 2013 IHS Inc. 7th Annual Pricing & Purchasing Summit
Implications For Buyers
• Ethylene • Lower prices near term, but higher in early 2014
• Keep an eye on hurricane activity in USGC
• Big investments coming in US capacity longer term
• Propylene
• Tight supply in the US near term
• Higher prices in 2H of 2013 and early 2014. More “on purpose” production
• Benzene • Closely following oil price trends
• Prices will remain above $4.00 per gallon through 2014
• Butadiene • Recent high prices coming down in 2014 as supply improves
• Continuing volatility will plague rubber prices until “on purpose” capacity arrives
• Chlorine & PVC
• US has a cost advantage due to natural gas and low electricity prices
• PVC exports will increase from the US as global prices rise
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