PetroChem Wire

Resin and feedstocks update

PetroChem WireSamantha Hartke, Product Manager

June 2016

Agenda

• PetroChem Wire: Who we are• Update on feedstocks, resins prices and

producing margins• What’s coming: Capacity additions and price

impacts• The South American export market• What’s next: Seeking direction from wide spec

resin and recycled markets

PetroChem Wire: Who we are• Daily, independent publisher creating global awareness of the

US NGLs, olefins, polymers, aromatics and refined products markets by providing useful and clear information at the close of each business day

• Formed in 2007• US olefins, polyolefins prices serve as benchmarks for physical

and swap contracts on CME/NYMEX• US benzene prices serve as benchmarks for ICE contract• Spot prices cover the entire value chain:

NGLs/ Naphtha Olefins/ Aromatics PlasticsCrude Aromatics Refined products

Current state of US resin prices

• Like most other chemicals, resin prices have tumbled alongside feedstock olefins and further upstream, crude.

• Polymers prices have fallen between 20-34% since 2008 compared to 50-53% fall in olefins and 51% in crude. PS bucks the trend; prices up 8-16% in the same time frame

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Spot resin prices (PetroChem Wire prices)

HDPE Blow Mold - FOB Houston LLDPE Film Butene - FOB Houston

HoPP Raffia FOB Houston HIPS - Domestic

GPPS - Domestic

Ethylene & PE

Margins to produce polyethylene from ethylene are still healthy (up 88% since the beginning of 2008)

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Polyethylene-ethylene margins (PetroChem Wire prices)

HDPE-Ethylene differential Ethylene Mt. B-Wms

HDPE Blow Mold - FOB Houston

Infrastructure plans: Ethylene

Ethylene production capacity will increase by 29.6 billion lb/yr (51%) by early next decade

COMPANY WHERE WHEN NOTES B lbs/yr

ExxonMobil TX 1Q 2017 under construction 3.300

Oxy/Mexchem TX 1Q 2017 under construction 1.000

ChevronPhillips TX Mid-2017 under construction 3.300

Dow LA 2Q 2017 on schedule 3.300

Formosa TX 2017 under construction 3.307

Indorama Ventures LA end 2017 brownfield 1.000

Sasol LA 2019 under construction 3.000

Axiall/Lotte Chem LA late 2018/ early '19 under construction 2.200

Appalachian Resins OH 2019 ON HOLD 0.508

Total TX 2019 conducting FEED 2.200

PTTGC/ Marubeni OH 2020 FID in early 2017 0.500

Odebrecht/Braskem WV TBD FID expected end 2015 TBD

Shintech LA 1H 2018 under construction 1.102

Formosa LA 2020 FID expected mid-2016 2.4

Shell PA 2021 3.000

TOTAL PROPOSED NEW ETHYLENE CAPACITY = 30.117

Infrastructure plans: PE

CRACKER WHERE WHEN DERIVATIVE UNITS

ExxonMobil TX 1Q 2017 mLLDPE (2 x 650 kta)

Oxy/Mexchem TX 1Q 2017 VCM, PVC current ops

ChevronPhillips TX Mid-2017 HDPE (500 kta), mLLDPE 500 kta)

Dow LA 2Q 2017 LLDPE (450 kta), LDPE (400 kta)

Formosa TX 2017 LDPE (400 kta)

Indorama Ventures LA end 2017 EO, MEG current ops

Sasol LA 2019 LLDPE/HDPE (470 kta), LDPE (420 kta)

Axiall/Lotte Chem LA late 2018/ early '19 PVC, MEG current/new units

Appalachian Resins OH 2019 ON HOLD

Total TX 2019 conducting FEED

PTTGC/ Marubeni OH 2020 PTT HDPE (700 kta)

Odebrecht/Braskem WV TBD FID expected end 2015

Shintech LA 1H 2018 Current/expanded PVC ops

Formosa LA 2020 LDPE (400 kta)

Shell PA TBD HDPE (500 kta), LLDPE (500 kta)

PE expansions and new builds from end 2016-2020 will add: LLDPE = 2750 kta; LDPE = 1755 kta; HDPE = 4155 kta

Current state of US spot ethylene prices

• Chemical companies opted to increase existing capacity through debottlenecking

• Oil prices crashed• Crackers ran at

historically high rates for most of 2015 into this year

• Spot ethylene prices fell nearly 51% in five years (lost 44% of value since Feb 2015 alone)0

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US Gulf Coast ethylene (PetroChem Wire prices)

With the lag time between new crackers and derivative units coming online, PE margins could remain healthy or at least stay at current levels

Infrastructure plans: Propylene & PP

WHO B lbs/yr WHERE DERIVATIVE UNITS

Dow 1.65 Freeport, TX

Enterprise 1.65 Mont Belvieu, TX

Williams 1.10 Alberta 90% sent to NAPP's HoPP plant

Formosa 1.30 Point Comfort, TX 300 kta

Pembina/PIC 1.76 Alberta Wholly consumed by PP plant

Ascend 2.00 Alvin TX

REXtac 0.66 Odessa 2 x 135 kta plants

Sunoco TBD Marcus Hook, PA

PP expansions and new builds will add 2455 kta between end 2016-end 2020

Propylene & PP: Margins

Margins to produce polypropylene from propylene also still healthy (down 1% since 2009, but up more than fourfold since the beginning of 2011)

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PP-propylene margins: PetroChem Wire prices

PP-propylene margin PGP Mt. B-EPC

HoPP Raffia FOB Houston

Styrene & PS

PS-styrene differential has widened about 25-30% on softer styrene due to weaker upstream prices (benzene, Brent) and weaker US exports

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Styrene, PS prices (PetroChem Wire prices)

HIPS - Domestic GPPS - Domestic Styrene

Price outlook for exports: PE & PP

Price direction for exports in flux• PE arb is tight (differential

down 25% between Jan 2013-today)

• PP arb opening up slightly• Will increased resin

production allow for greater exports?

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SAmer-US HDPE (PetroChem Wire prices)

WCSA HDPE BM HDPE BM FOB Houston

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SAmer-US HoPP (PetroChem Wire prices)

WCSA HPP HPP FOB Houston

Current state of PE & PP exports

• Still, despite tighter arbs, PE exports are robust with most recent monthly data (Apr) showing an increase vs YTD, thanks to increased movements to Mexico

• YOY, PE exports are also on the rise

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Key takeaways• Despite the overall softer commodity environment,

resin prices have not tumbled with the same severity as upstream products i.e. olefins, NGLs, crude

• As a result, margins remain healthy and attractive plants running hard, appetite for plastics still robust (?)

• Aggressive infrastructure buildout in olefins and polymers could alter this dynamic

• Majority of new production would be consumed by on-site derivatives units

• Wildcards in the mix: exports, logistical constraints (i.e. tight railcar availability, etc.)

Thank you!

Samantha HartkeProduct ManagerPetroChem Wire

samantha@petrochemwire.comwww.petrochemwire.com

Ph: (832) 330-3340

Critical market information

for the entire petrochemical chain