IFAI –Outlook 2016 · 2017-06-29 · 5/5/2016 6 Trusted commercial intelligence 11 Energy...

5/5/2016

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IFAI – Outlook 2016

Oil and Natural Gas: Impact on Synthetic FibersAlasdair Carmichael, April 2016

[email protected]

Trusted commercial intelligencewww.woodmac.com


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Agenda

1. Introduction

2. Oil & Gas

3. Impact on Fibers

4. Total Fibers Market

5. Industrial Filament & Markets

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Verisk Analytics, Inc., Acquires The PCI Group - Nov 20 2015

Acquisition of PCI will create an industry-leading chemicals business at Verisk’s Wood Mackenzie.

Verisk Analytics, is a New Jersey based company providing risk assessment and data analytics services to a variety of industries. 2014 revenues of $1.75 billion and over 6,000 full time people.

In Q1 2015 Verisk bought Wood Mackenzie, an Edinburgh, Scotland company est. in 1844. Wood Mackenzie developed an oil and energy business in 1973 and have built on that to become a global leader in commercial intelligence for the energy, metals and mining industries.

The PCI Group and its associates are now a part of Wood Mackenzie in an additive and complimentary function bringing downstream expertise through the supply chain across petrochemicals, xylenes and polyesters, resins, nylons and fibres, and films.

PCI Update


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Product Coverage

Oil Refinery / Gas Field Petrochemical Complex Downstream Products

FertilisersExplosives ResinsPlastics and Films

EOD’s/DetergentsAntifreezePolyester Fibers

PlasticsAcrylic FibersPlastic Coatings

Synth RubbersTyres/Nylon66Plastics & FoamsNylonsNylons, PC Resins

Plasticizers/ResinsPolyester Fibers & ResinsUrethane Foams

Petroleum Refining

Crude Oil

Reformate

NaphthaGas Oil

Natural GasProcessing

Natural Gas

EthaneLPG

Methane

FeedstocksEnd Products

IntermediatePetrochemicals

BasicPetrochemicals

Gasoline

Kerosene Fuel OilDiesel

JetFuel

LubeOils

Asphalt

Reforming

Olefins Plant

AromaticsSeparation

p-Xylene

Toluene

o-Xylene

Benzene

Crude C4s

Syngas

Ethylene

Propylene

g

Olefant

Ar

Oma

tics

Processing MethanolAmmoniaUrea Polyethylenes

EDC/VCM/PVCEthyleneOxideEthylene Glycol

PolypropyleneAcrylonitrileOxo-alcohols

Butadiene

StyreneCyclohexaneCumene/Phenol/Acetone

Phthalic Anhydride

DMT/PTA

TDIBenzene / MDI

PCI Research Wood Mackenzie Future Research

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5

Oil Prices $/barrel

20

40

60

80

100

120

140

WTI Brent

Oil Prices are Global. Brent & WTI expected to remain close.


6

Daily WTI Oil Prices – April 2016, $/barrel

30

32

34

36

38

40

42

44

46

48

1-A

pr 5 6 7 8 11 12 13 14 15 18 19 20 21 22 25 26 27 28 29

OPEC Doha - no agreement on

production limits

Highest since Nov

2015

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7

Unlikely to see significant price appreciation until market sentiment finds a positive price catalyst

Brent price outlook (US$/bbl)

Source: History - Argus; Forecast - Wood Mackenzie

0

20

40

60

80

100

120

140

2013 2014 2015 2016 2017

Forecast


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Need about 5 million b/d of new supply by 2020 to meet demandPrices of at least $60-$70/bbl needed to support necessary supply

0

1

2

3

4

5

6

7

8

9

Oil SandsTight OilUltra-DeepwaterDeepwaterShallow WaterOnshore

86

88

90

92

94

96

98

100

2015

Dem

and

Dem

and

Growth

Onstream

Decline

Under

Developmen

t

Other

Supply Gap

2020 supply gap (mb/d) Potential 2020 supply by breakeven tranche & asset type (mb/d)

Sup

ply

Ga

p

<$4

0*

$40

-$60

*

$60

-$70

*

$70

-$80

*

>$8

0*

Te

chn

ical

san

d Y

TF

* Planned Pre-FID projects + New US L48 Drilling

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9

Natural Gas Prices – USA $/mm bthus

0

2

4

6

8

10

12

14

2007Jan

2008 2009 2010 2011 2012 2013 2014 2015 2016

Natural Gas prices are Regional. US to keep significant advantage.


10

Natural Gas Prices $/mm Btus

0

2

4

6

8

10

12

14

16

18

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

Japan

Germany

UK

US

Source: BP

2015 US 2015 US avg.$2.67

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Energy Overview

Crude markets are poised for a rebound. Capital expenditures have fallen, keeping the production outlook constrained. Breakeven economics for those plays that are still viable will likely require crude above the $60-$70 range.

Gas markets will continue to be range-bound near $3-$4 per MMBTU in North America for the next several years. Significant expansions in consumption still cannot overtake the huge, cheaply available inventory of gas reserves.

What does this mean for fibers? When there are no supply demand constraints in petrochemicals then oil is going to be the leading price driver – but not on a one for one basis.


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Oil to US Raw Materials – Indexed to Jan 2005

0

50

100

150

200

250

300

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Oil PTA/MEG Capro Propylene

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13

0

500

1000

1500

2000

2500

3000

2014 2015 2016

Oil PTA/MEG Capro Propylene

Oil to US Raw Materials – $/ton


14

0

16

32

48

64

80

96

112

128

144

0

2

4

6

8

10

12

14

16

18

2000 2002 2004 2006 2008 2010 2012 2014

US Henry Hub Natural Gas Brent North Sea Crude OilChina Qinhuangdao Coal Saudi Arabia Natural Gas

$p

er

mil

lio

n b

tu

$p

er b

arre

l (cru

de o

il)

$p

er ton

(coal)

0

40

79

119

159

198

238

278

318

357

Emergence of the North America

Gas-based & China Coal-based ChemicalIndustry Advantage

Ethylene - The Gas & Coal Based Chemical RenaissanceThe “rollercoaster” of volatility of regional energy valuations drives investment decisions across the chemical industry

Source: ArgusMedia, NYMEX, SXCoal

Key Global Energy Benchmarks

North America Lost Competitiveness

to Asia/Middle East

2016

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15

-4

0

4

8

12

2005 2010 2015 2020

Americas Europe + Japan Russia and The Caspian Middle East + Africa China + India Rest of World

Source: Wood Mackenzie Long-Term Ethylene Service

million tons

Ethylene - The Gas & Coal Based Chemical RenaissanceAs a result of low natural gas prices (and ethane) relative to high crude oil prices (and naphtha), N. America adding most of the new ethylene capacity in the world

Global Ethylene Capacity Additions

Emergence of the North America Gas-based & China Coal-based Chemical

Industry AdvantageNorth America

Lost Competitivenessto Asia/Middle East


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Ethylene = 1,000 ktons

Propylene = 570 ktons

C4s (Butadiene) = 365 ktons

Pygas (Benzene) = 525 ktons

Other = 520 ktons

Lt. Naphtha = 2,980 k tons

Typical Naphtha Steam Cracker

Ethane = 1260 k tons

Ethylene = 1,000 ktons

Propylene = 25 ktons

C4s (+Butadiene) = 30 ktons

Pygas (Benzene) = 35 ktons

Other = 170 ktons

Typical Ethane Steam Cracker

Outputs from Different Routes to Ethylene

Impact of feedslates on pygas volumes is very significantImpact of feedslates on pygas volumes is very significant

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Polyester - US Competitiveness Change?

A new scenario is developing in the US, partly as a result of lower cost petrochemicals, which is moving the US into a potential overcapacity which will rely on exports to keep plants operational. (Just like China!)

Polyester raw materials are PTA and MEG (0.86 + 0.35 approximately). PTA production in US has been in hands of BP and DAK. BP has sold 1 of its 2 US plants to Indorama and the Italian company M&G is building a 1.2 million ton PTA plant to partially feed its new PET resin plant. Indorama has also bought the only PTA plant in Canada.

MEG: Because of US cheap Natural Gas, the US becomes the world’s low cost producer of MEG and from 2018 to 2020 has 3 million tons of new capacity projects. US demand forecast to increase 500,000 tons. The US has to become a major exporter, and therefore has to price below Asian levels to compete.


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Polypropylene - US Competitiveness Change?

The scenario that helps Polyester (MEG) become more competitive hurts Propylene.

MEG comes from ethane production and Natural Gas is the most cost efficient route in the US, whereas Propylene is generally a by product from Naphtha (oil). Due to low cost Natural Gas in the US (regional pricing) there is a major expansion into natural gas cracking and this is producing much less propylene.

This is leading to investments in on purpose propylene

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Textile Mill Consumption (million tonnes)

0

20

40

60

80

100

120

1991

1994

1997

2000

2003

2006

2009

2012

2015

2018

2021

2024

2027

2030

PolypropyleneCellulosicsPolyesterNylonAcrylicCottonWool


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Nylon fibres in context 2015 (ktes)

1,705

3,532

4,098

5,325

24,055

48,030

Acrylic

PP

Nylon

Cellulosics

Cotton

Polyester

An Astronomers View

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Global Mill Consumption - 1980

Wool

Cotton 47%

Acrylic

Nylon

Polyester 17%

Cellulosics

Polypropylene

1980 = 30.3 million tons


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Wool

Cotton 38%

Acrylic

Nylon

Polyester 37%

Cellulosics

Polypropylene


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Wool

Cotton 27%

Acrylic

Nylon

Polyester 55%

Cellulosics

Polypropylene



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Wool

Cotton 24%

Acrylic

Nylon

Polyester 59%

Cellulosics

Polypropylene


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Overcapacity in synthetic raw materials 2015

2015 overcapacity levels With no additions in capacity demand would catch up by:

0 10 20 30 40 50 60Percent

Adiponitrile 33.0%

Adipic acid 50.0%

Caprolactam 30.0%

MEG 18.0%

PTA 27.0%

Paraxylene 23.0% 2020

2022

2019

2047

2037

2038


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Overcapacity in synthetic fibre chains 2015

0 10 20 30 40 50 60 70 80 90Percent

NTF 78.5%

NIF 66 34.0%

NIF 6 55.0%

PIF 37.0%

PTF 38.3%

PSF 57.4%

Source: PCI Fibres Red Book 2015

2015 overcapacity levels With no additions in capacity demand would catch up by:

2055

2024

2025

2045

2027

Never!

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Nylon 6 and Polyester US Raw Materials Comparison ($/ton)

0

200

400

600

800

1000

1200

1400

1600

1800

2000

0

500

1000

1500

2000

2500

3000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Delta WTI Oil PTA/MEG Caprolactam


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Nylon Polymer v Polyester – US Prices per ton

28

0

500

1000

1500

2000

2500

3000

3500

4000

2007 2008 2009 2010 2011 2012 2013 2014 20… 20…

66 Polymer

6 Polymer

Polyester

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-

500

1000

1500

2000

2500

3000

3500

4000

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

J,K,T

China

India

S.Asia

A/ME

Europe/Turk

Americas

Polyester Industrial Filament Capacities (000 tons) – High Tenacity


30

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

J,K,T

China

India

S.Asia

A/ME

Europe/Turk

Americas

Polyester Industrial Filament Capacities (% Share) – High Tenacity

China has 70% of Global Capacity in 2015

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Polyester Industrial Filament US Production & Trade (000 tons)

-50 0 50 100 150 200 250

2012

2013

2014

2015

2016

2017

Production

Exports

Imports

Import Share of US Consumption: 2012 = 42%; 2015 = 68%


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Polyester Industrial Filament Segmentation (2015) – High Tenacity

2.34 m tons or 5.2bn lbs

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Nylon Industrial Filament segmentation (2015) – High Tenacity

7.0%

Cap ply24.0%

Tyrecord

30.0%

Airbags

25.3%

Sewing thread

3.8%

LDI

1.0%

Ropes&nets

3.0%

Broad wovens

5.6%MRG

63.5%

Tyrecord

2.2%

Other LDI

12.0%

Broad wovens

MRG

Ropes / nets

12.0%

11.0%

PA66: 551ktes

PA6: 798ktes


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End-use mix - % Share global fibres activity 1990-2025

In every region, the share of Apparel activity is reducing.

Industrial textiles rapidly increasing global share -will take 26% of global demand by 2025. (inclnon high tenacity)

Household Textiles stabilize after 2007 –failure to globalize carpet activity

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1990 1995 2000 2005 2010 2015 2020 2025

% s

har

e

Apparel Household Industrial

% share 1990 2025

Apparel 69.4% 53.4%

Industrial 14.9% 26.1%

Household 15.7% 20.5%

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End-use mix - Volume global fibres activity 1990-2025

Apparel +8 million mtover 2015 – 2025 (but +10m tons 2005 –2015)

Industrial +8 million tons 2015 – 2025 very strong growth.

Household textiles +3 million tons 2015 -2025

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

1990 1995 2000 2005 2010 2015 2020 2025

Kte

s



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West Europe mill consumption end-use mix

Most developed regions lost major apparel activity

Apparel activity is becoming more specialist.

Industrial textiles will increase consumption for high performance markets.

Household textiles should show modest recovery from the recession, then stability

0

500

1,000

1,500

2,000

2,500

3,000

1990 1995 2000 2005 2010 2015 2020 2025

Kte

s


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North America mill consumption end-use mix

North America shows huge mix changes:

Apparel mill cons fell heavily after 1995 but we see stabilization of all fibers demand 2015 –2025. CAFTA

Industrial textiles are still resilient and higher tech systems are emerging

Household textiles show recovery after 2008 with slow household recovery and carpet use.

0

500

1,000

1,500

2,000

2,500

3,000

3,500

1990 1995 2000 2005 2010 2015 2020 2025

Kte

s



38

China mill consumption end-use mix

In China we expect slowing Apparelvolume growth but upgrading of the value as China goes up-market.

Industrial textiles continue powerful growth for domestic infrastructure, automotive and export.

Household textiles show slower growth in China

0

5,000

10,000

15,000

20,000

25,000

30,000

1990 1995 2000 2005 2010 2015 2020 2025

Kte

s


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Conclusions

Oil prices to increase over coming 2 years, but not to spike to recent levels (Middle East conflicts permitting)

Natural Gas a major benefit to US industry and Petrochem –2019/20

Polyester continues to dominate; Industrial textiles growth rates higher than apparel or household textiles.

Eco issues a very serious threat to plastics and synthetic fibers – microfiber pollution becoming an increasing issue.

THANKS


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Disclaimer

This report has been prepared for the Outlook 2016 Conference by Wood Mackenzie Limited. The report is intended solely for the benefit of attendees and its contents and conclusions are confidential and may not be disclosed to any other persons or companies without Wood Mackenzie’s prior written permission.

The information upon which this report is has either been supplied to us by the market or comes from our own experience, knowledge and databases. The opinions expressed in this report are those of Wood Mackenzie. They have been arrived at following careful consideration and enquiry but we do not guarantee their fairness, completeness or accuracy. The opinions, as of this date, are subject to change. We do not accept any liability for your reliance upon them.

Strictly Private & Confidential

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Email [email protected] www.woodmac.com

Wood Mackenzie™, a Verisk Analytics business, is a trusted source of commercial intelligence for the world'snatural resources sector. We empower clients to make better strategic decisions, providing objective analysisand advice on assets, companies and markets. For more information visit: www.woodmac.com

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IFAI –Outlook 2016 · 2017-06-29 · 5/5/2016 6 Trusted commercial intelligence 11 Energy...

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Transcript of IFAI –Outlook 2016 · 2017-06-29 · 5/5/2016 6 Trusted commercial intelligence 11 Energy...