January 2014 - Global Propylene & Derivatives 2014 · Acrylonitrile is a colorless liquid organic...
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Transcript of January 2014 - Global Propylene & Derivatives 2014 · Acrylonitrile is a colorless liquid organic...
1
January 2014
Acrylonitrile - Agenda
2
•Intro to CCC
•What is AN/How is AN manufactured
•Who makes AN
•Where is AN used
•Global Supply/Demand
•Cost to build / Barriers to build (reinvestment grid)
•Regional Conversion Cost history and impact of regional investment
•Lack of US Reinvestment/the why?
•Conclusions: US Future – no change
The massive dislocation of regional manufacturing costs from 2005-2013 has eliminated opportunistic investment in acrylonitrile and major derivatives with the next major downstream investments only
to come AFTER a demonstrated advantage in US feedstock cost position
Company Overview
3
Cornerstone Chemical Company is a market-leading North American producer of critical intermediate and specialty chemicals
Headquarters: Waggaman, Louisiana
Employees: 475
Market Position:
Acrylonitrile 1 of 3 producers in North America
Melamine Sole producer in North America
Sulfuric Acid Leading merchant producer in the Gulf of Mexico region
Capacity:
Acrylonitrile 525 million lbs (240 kMT)
Melamine 170 million lbs (75 kMT)
Sulfuric Acid 1.7 billion lbs (850 kMT)
200-acre facility on an 820-acre site located on the Mississippi River approximately 20 miles from New Orleans, LA
Highly integrated operation with synergistic production processes and two on-site customers / producers of downstream products
$1.5B+ Replacement Value
1952 1993 2011
What is AN / How is it made
Acrylonitrile is a colorless liquid organic compound formed from the catalytic ammoxidation of propylene utilizing technology invented by Sohio in 1957.
4
Chemical Symbol
Chemical Reaction
2CH3-CH=CH2 + 2NH3 +3O2 → 2CH2=CH-C≡N + 6H2O
Block Flow
Propylene
Ammonia
Air
C
a
t
a
l
y
t
i
c
R
e
a
c
t
i
o
n
Acrylonitrile
78%
1.1 lbs
0.5 lbs
HCN
10%
2%
H 2
O
Ste
am
ACE
CO/CO2
10%
Who makes AN?
5
Data from PCI Acrylonitrile
• Global Capacity is led by the 5 top producers which together account for nearly 70% of capacity
• Global leaders Ineos and Asahi alone represent more than 25% of the market
• Despite the small number of large producers, global price levels are presently dictated by the spot market, often through sales by small marginal producers
• Global Capacity is concentrated in the Asia region at almost 60%
• US is a large production source, primarily due to the legacy of cost advantaged propylene and strong derivative demand
China20%
Other AP24%
Japan11%
Eastern Europe5%
Western Europe14%
South America2%
United States24%
2013 CAPACITY GEOGRAPHY
Asia Capacity
55%
1,3
55
1,0
90
67
5
63
6
59
0
29
0
28
5
28
0
24
0
23
0
21
0
16
5
15
0
10
0
90
70
60
40
2013 GLOBAL CAPACITYKILOTONS
Global Trade Flows (2013)
6
US: +551KT
Japan: +91KT
EU: +179KT
LA: -21KT
ME: -260KT
Other Asia: +14KT
CHN: -554KT
Data from PCI Acrylonitrile
Summary of End Markets (2013)
7
Raw Materials Products and Intermediates Applications
Air
Propylene
Ammonia
Acrylonitrile
ABSStyrene
Butadiene34%
Automotive, electronics, appliances,
construction
Competing products: Polycarbonate, PVC, PP
AF
32%
Garments, carpets, fabric
Competing product: Polyester
AMD
13%
Water treatment, EOR, fracking
Competing product: Specialty Water Treatment
Adipo
8%
Nylon 6,6 (carpet, automotive)
Competing product: Polyester or PP (also
Invista route via BD vs. AN)
NBR
7%
Automotive Rubber
Competing product: Natural Rubbers
Carbon Fiber
2%
Aerospace, automotive, wind
Competing product: Aluminum/Steel
Other
4%
Automotive, mining, etc.
Data from PCI Acrylonitrile
Regional Breakdown of Majors
8
ABS and AF Represent 66% of Demand with 70% ofthe consumption in Asia (45% of Global Demand)
Data from PCI Acrylonitrile
32%
34%
13%
8%
7%2%
4%
2013 PROJECTED GLOBALACRYLONITRILE END USE
Acrylic Fiber
ABS/SAN
Acrylamide
Adiponitrile
NB Copolymer
Carbon Fiber
Other
5.5MMT
23%36%
6%35%
ACRYLIC FIBER (AF)1.8MMT OR 32% OF GLOBAL DEMAND
Asia Ex Chn China Americas Europe/Africa
10%
46%
22%
22%
ACRYLAMIDE (AMD)0.7MMT OR 13% OF GLOBAL DEMAND
Asia Ex Chn China Americas Europe/Africa
51%
29%
9%
11%
ACRYLONITRILE-BUTADIENE-STYRENE (ABS)1.9MMT OR 34% OF GLOBAL DEMAND
Asia Ex Chn China Americas Europe/Africa
89%
80%83% 84%
87% 86% 88% 90%
75%80%
88%
77% 75%72% 71% 74% 75%
78%81% 83% 84%
6% 5% 8%2% 5% 2% 4% 5%
-1%3%
7% 5% 8% 6%2% 3% 0% 0% 1% 2%
-10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
2000
4000
6000
8000
10000
12000
14000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
ABS Capacity Utilization
Global ABS Capacity (MT) Global ABS Demand (MT) Utilization (%) Growth Rate
Forecast
79% 79%76% 76% 77%
70% 70% 70%66%
80%83% 85% 83%
89% 89% 88% 89% 89% 90% 89% 89%
12%6%
3% 5% 6% 5% 2% 4% 4%
25%
9% 10% 12%6% 7%
15%9% 8% 7% 9% 6%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
200
400
600
800
1000
1200
1400
1600
1800
2000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
AMD Capacity Utilization
Global AMD Capacity (MT) Global AMD Demand (MT) Capacity Utilization (%) Growth Rate (%)
Forecast
85% 84% 86% 89% 91% 89% 90%86%
73%
88% 86% 87% 83% 86% 87% 88% 89% 89% 90% 90% 91%
-1%3%
-3% -3% -1%-5%
-1%-7%
-12%
2% 0% 1%-5%
0% 0% 0% 0% 0% 0% 0%
-20%
0%
20%
40%
60%
80%
100%
1600
1800
2000
2200
2400
2600
2800
3000
3200
3400
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Acrylic Fiber Capacity Utilization
Global AF Capacity (MT) Global AF Demand (MT) Utilization (%) Growth Rate
Forecast Period
Growth and Capacity Utilization of Majors
9
• AF: A 25% reduction in capacity due to high cost position relative to competitive products, no growth anticipated, now only specialty product
Data from PCI Acrylonitrile
• ABS: Growth slowing with the Chinese economic conditions, butadiene cost and availability, product content/size
• AMD: High global growth due to technology improvements/fracking
Growth Rate – Major Elements of Demand
10
• AF: No growth, however product performance limits downside from current levels• ABS: Growth tied to global economic growth rates, primarily electronics, appliances,
and automotive demand growth rates• AMD: High growth potential due to rapid growth of fracking applications
Share of demand by Big 3 remains ~80% over forecast period
Data from PCI Acrylonitrile
-4%5% 3% 3% -1% 0% 0%
-15%
8% 6%-2% 2% 2% 3% 5% 4% 4% 3% 4% 3%
83%87% 88% 86% 86% 85% 85% 84% 82% 84%
81% 80% 80% 79% 79% 78% 78% 77% 77% 77% 77%
-20%
0%
20%
40%
60%
80%
100%
0
500
1000
1500
2000
2500
3000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Tho
usa
nd
Met
ric
Ton
s
AN Growth Rate
AF ABS AMD Growth Demand Share
US Customer Differentiation
11
• US growth is Adiponitrile (global demand for nylon 6,6) and AMD (fracking) however fracking is only 20% of the base with tremendous overhang of overall capacity
• Driver for US investment in capacity by 2018 relies on predictable and sustainable raw material advantage
Data from PCI Acrylonitrile
32%
34%
13%
8%
7%2%
4%
2013 PROJECTED GLOBALACRYLONITRILE END USE
Acrylic Fiber
ABS/SAN
Acrylamide
Adiponitrile
NB Copolymer
Carbon Fiber
Other
5.5MMT
0%
19%
20%
48%4%4%
5%
2013 PROJECTED NORTH AMERICAACRYLONITRILE END USE
Acrylic Fiber
ABS/SAN
Acrylamide
Adiponitrile
NB Copolymer
Carbon Fiber
Other
0.8MMT
US Supply and Demand
12
• US market is totally disconnected from global market– US exports ~40% of capacity
– US demand by AF is 0. Demand for ABS is <10% of capacity versus global share of 70%
• First Speculative Capacity in 2018, however FEED for that facility would need to begin by 2015
56%
50% 49% 50% 48% 47%
41%39% 38%
33%29% 28%
34% 34%
0%
10%
20%
30%
40%
50%
60%
0
200
400
600
800
1000
1200
1400
1600
1800
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Tho
usa
nd
Met
ric
Ton
s
Domestic Demand
Acrylic Fiber ABS/SAN Adiponitrile Acrylamide NB Copolymer
Carbon Fiber P Other Production Export
Exports
Forecast Period
Data from PCI Acrylonitrile
Given the US Cost advantage to come, who will build?
… and what barriers exist to prevent future build out.
13
Investment Decision Criteria
• What are the barriers to construct capacity?
• How does the regional conversion cost differential impact decisions?
• Does China have plans?
14
Barriers to Construction
15
Permits Regulatory environment for AN and co-products
Waste Treatment
Technology Limited Availability (Ineos, Asahi, Ascend, Sinopec, maybe Dupont)
Capital $1500 per ton, M$450 for World Class
Raw Materials Propylene and Ammonia Globally challenging to transport (source proximity)
HCN Outlet Must have an economic offtakeAlternative to fuel or flare is a non-starter
Energy Units are ExothermicLong steam in reactors and pollution control
Outbound Logistics
AN transport heavily regulatedIn China, for example, no river transport on Yangtze
Large quantities of hazardous effluent
AN investment decisions are complicated, Existing or new facilities must meet ALL criteria for success
Raw Material Cost
16
Air
Propylene
Ammonia
Acrylonitrile
The massive dislocation of regional manufacturing costs from 2005-
2013 has eliminated opportunistic investment in acrylonitrile and major derivatives with the next major downstream investments
only to come AFTER a demonstrated advantage in US
feedstock cost position
Geographies of AN demand will drive incremental production into the lowest cost regions, with the largest
component of cost = Propylene
Regional Raw Material Cost
17
$0.15
$0.25
$0.35
$0.45
$0.55
$0.65
$0.75
$0.85
$0.95
$1.05
Jan-0
3
Apr-
03
Jul-0
3
Oct-
03
Jan-0
4
Apr-
04
Jul-0
4
Oct-
04
Jan-0
5
Apr-
05
Jul-0
5
Oct-
05
Jan-0
6
Apr-
06
Jul-0
6
Oct-
06
Jan-0
7
Apr-
07
Jul-0
7
Oct-
07
Jan-0
8
Apr-
08
Jul-0
8
Oct-
08
Jan-0
9
Apr-
09
Jul-0
9
Oct-
09
Jan-1
0
Apr-
10
Jul-1
0
Oct-
10
Jan-1
1
Apr-
11
Jul-1
1
Oct-
11
Jan-1
2
Apr-
12
Jul-1
2
Oct-
12
Jan-1
3
Apr-
13
Jul-1
3
Oct-
13
cen
ts/l
b P
GP
basis
Propylene Global
US
EU
AP
Step change in Asian economic advantage in early 2007 due to investment in crackers outpacing derivative units.
Since recovery in ‘09, US shift to ethane clearly shows with relative price point and volatility
Hurricane Impact (US)
Ethane Preference (US)
Qtly to Monthly (EU)
Naptha crack > demand (AP)
Regional Raw Material Cost
18
-$0.30
-$0.20
-$0.10
$0.00
$0.10
$0.20
$0.30
Jan-0
3
Apr-
03
Jul-0
3
Oct-
03
Jan-0
4
Apr-
04
Jul-0
4
Oct-
04
Jan-0
5
Apr-
05
Jul-0
5
Oct-
05
Jan-0
6
Apr-
06
Jul-0
6
Oct-
06
Jan-0
7
Apr-
07
Jul-0
7
Oct-
07
Jan-0
8
Apr-
08
Jul-0
8
Oct-
08
Jan-0
9
Apr-
09
Jul-0
9
Oct-
09
Jan-1
0
Apr-
10
Jul-1
0
Oct-
10
Jan-1
1
Apr-
11
Jul-1
1
Oct-
11
Jan-1
2
Apr-
12
Jul-1
2
Oct-
12
Jan-1
3
Apr-
13
Jul-1
3
Oct-
13
Propylene Differences and Export Spread
US/EU Diff US/AP Diff Spread
US Disadvantaged
US Advantaged
High Utilization Period
US spread over inputs disappears in 2007 as Asia lengthens feedstock propylene availabilityProfitability in 2010 and 2011 is demand driven despite feedstock disadvantage
The China to Come
19
Expected Rationalization- Japan Inc. : Current Cracker Rationalization Process will also result in AN casualties. Asahi cracker announced to shut down, limiting propylene (current AN capacity of 790KT expected to fall by 260KT)
- Europe: Exposed naptha feedstock cost and geographical challenges, ~300KT at risk
- Taiwan/Korea: Heavy export reliance, ~800KMT of capacity under heavy threat of China to come
- China Capacity: Exports not expected, industry believes 75% cap utilization a likely outcome
Existing Capacity Expansion Capacity Timing Approval Technology Propylene HCN
Anquing 80 130 2013 Y Sinopec Purchased MMA
Wanda 0 130 12.2014 Y Sinopec Purchased MMA
SECCO 260 260 1Q2015 Y Sinopec PDH/Steam Cracker MMA
Shenghong 0 260 4Q2015 Y DuPont MTO ?
Hali Chemical 0 130 2015 ? ? ? ?
Ineos Bohai 1355 260 4Q2016 N Ineos PDH MMA
1170 KMT
Wanda II 130 130 2017 N Sinopec
CPDC 300 0 2017 N
Qinghua 0 300 After 2017 N
Dazhou 0 200 After 2017 N
Jiangsu 0 100 After 2017 N
Yangkou 0 200 After 2017 N
Tieshan 0 260 After 2017 N
Pingluo 0 300 After 2017 N
Kuytan 0 100 After 2017 N
1590 KMT
2012 Global Capacity 6359 KMT 43% Increase in Global Capacity if all built
Relocate Taiwan Plant to China
Probable Capacity
Possible Capacity
1019 1019 10191124
12061289 1311
1429
1852
23392534 2599
71%
90%
79% 79% 78%83% 83% 86%
106%
128%132% 129%
0%
20%
40%
60%
80%
100%
120%
0
500
1000
1500
2000
2500
3000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
China Capacity (KMT)
PetroChina Daqing PetroChina Lanzhou PetroChina Fushun PetroChina Jilin
Sinopec Jinshan Sinopec Qilu Sinopec Anqing Sinopec Secco
Sinopec Wanda Sinopec Shenghong Shangdong Haili Ineos Tianjin
China Capacity/Demand
- --
-- - 2 8
39 59 40 66
39
101 54 128 75 53 48 65
100
64
141 154
151 158
132 61 78
104
87
65 76
78 120 139
143 142
130
90
113 122
125 145 216
316 325
430
285
451 453
521 552
589 550
210
100 100 100
-
100
200
300
400
500
600
700
2005 2006 2007 2008 2009 2010 2011 2012 2013A(Jul)
2014 2015 2016 2017 2018
China Imports (KMT)
Other Thailand Japan US Taiwan Korea
US Investment Likelihood?
20
Limited… at best.
• #1 REASON: HISTORICAL BEHAVIOR OF US PROPYLENE PRODUCERS = Risk
•#2 Global Supply: US is structurally long and is not in need of additional AN capacity
•#3 Global Demand: AF cannot compete with Polyester so largest use has no growth
•#4 Reinvestment is complicated and expensive: to be successful one must also have a use for HCN and energy balance. Waste handling is a consideration
•#5 Strategic entities have sold AN units due to poor historical performance, current US producers will only invest given certain and predictable returns
The Focus of AN production remains in Asia, NOT the US
Conclusions
North America• AN manufacturing has migrated toward private ownership over the last 10 years due to poor
return on investment.
• US propylene producers have been content to “let the market determine the survivors” rather than support local production in the International marketplace due to the extremely tight market during the period in which ethane crackers went “light”
• The recent history on propylene pricing in the US (since 2003) shows a market marked byvolatility and one that frequently disconnects (and at times significantly disconnects) from the International comparative indexes
21
… as a result
Globally• The two largest end uses for AN are ABS Plastic and Acrylic Fiber, with the former dependent
on a Chinese recovery and the latter permanently reset as a specialty niche player with poor growth potential
• China engaging in a wave of investment over the next 5 years which will necessitate another global restructuring in AN production
Producers will manufacture for local demand with the US focusing on the growing AMD segmentNo major capacity will be constructed in the USA unless a major structural advantage appears in the USA