Growing togetherbeyond “Chemistry”

PTA - Retrospection&

Way Ahead

Presented By Mr. Amitava Banerjee

General Manager – Marketing & Raw Materials

5th Aug, 2014

Contents

PTA Capacity (World / Asia / China).

Demand Supply Balance of PTA (World / Asia / China).

Historic Price Trend (Asia).

PTA Demand Supply Scenario in India.

Sector Wise Growth of Polyester in India.

Barriers to Growth in India

PTA Outlook

PTA CAPACITY

World PTA Capacity

11% 8%2%

79%

2011 N.America

S.America

EU

Middle East/Africa

Asia/Far East

7%

1%

6%2%

84%

2014 N.America

S.America

EU

Middle East/Africa

Asia/Far East

7%1%

6% 3%

83%

2017 N.America

S.America

EU

Middle East/Africa

Asia/Far East

Asia dominates the PTA market.

Asia PTA Capacity

China’s share in Asia continues to grow.

45%

10%

1%2%

16%

13%

4% 2%

7%

2011 China

India

Pakistan

Japan

Korea

Taiwan

Indonesia

Malaysia

Thailand

63%

6%1%

2%

11%

9%

3%1% 4%

2014 China

India

Pakistan

Japan

Korea

Taiwan

Indonesia

Malaysia

Thailand

63%10%1%1%

9%

9%

3%1%4%

2017 China

India

Pakistan

Japan

Korea

Taiwan

Indonesia

Malaysia

Thailand

China PTA Capacity

3 Major PTA makers share more than 60% of China PTA capacity.

8% 9%

22%

11%19%

32%

2011 BP Zhuhai

Hengli

Xianglu

Yisheng

Yuandong

Sinopec

Others

4%

13%

15%

26%8%

9%

25%

2014 BP Zhuhai

Hengli

Xianglu

Yisheng

Yuandong

Sinopec

Others

7%

14%

13%

31%

7%

9%

20%

2017 BP Zhuhai

Hengli

Xianglu

Yisheng

Yuandong

Sinopec

Others

PTA Capacity Expansion Plan in Asia

DEMAND SUPPLY BALANCE OF PTA

93%90%

92%

96%

90%

85%

76%74% 73% 73%

74%

50%

60%

70%

80%

90%

100%

110%

0

10

20

30

40

50

60

70

80

90

100

07 08 09 10 11 12 13 14 15 16 17

MMTPTA Capacity PTA Demand PTA O/R

World Supply Demand Balance

Huge capacity expansion from 2013 increased the Supply-demand gap thereby reducing PTA operation rates significantly

93%

88%

85% 85%

92%

86%

74%

70%68% 68%

71%

50%

60%

70%

80%

90%

100%

110%

0

10

20

30

40

50

60

70

80

07 08 09 10 11 12 13 14 15 16 17

MMTPTA Capacity PTA Demand PTA O/R

Asia Supply Demand Balance

Asian PTA oversupply followed the same trend

95%

87% 87%

94% 94%

88%

75%

69% 68%66%

71%

50%

60%

70%

80%

90%

100%

110%

0

5

10

15

20

25

30

35

40

45

50

07 08 09 10 11 12 13 14 15 16 17

MMT

PTA Capacity PTA Demand PTA O/R

China Supply Demand Balance

Huge capacity additions in China reducing overall operation.

-5062 -5443

-2742

5821

10256

11350

13491

11347

105

-50 -248 -591-1156 -764

989131

-11000

-6000

-1000

4000

9000

14000

2010 2011 2012 2013 2014 2015 2016 2017

KT/Y

China Korea Taiwan Thailand India

PTA Trade Balance Country Wise

Oversupply situation peaks in 2016.2017 onwards trade deficit reduces.

HISTORIC PRICE TREND

-

100

200

300

400

500

600

700

800

900

1,000

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Jan

Au

g

Feb Oct

2011

($/T)($/T)PX-MX PX CFRT MX FOBK Average Spread

Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul

2011 2012 2013 2014

PX/MX Price Trend

PX/MX spread is getting squeezed due to PX overcapacity.

-

100

200

300

400

500

600

700

800

900

1,000

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Jan

Au

g

Feb Oct

2011

($/T)($/T)PX-MOPJ PX CFRT MOPJ Average Spread

Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul

2011 2012 2013 2014

PX/Naphtha Price Trend

From 2014 onwards PX / Naphtha spread reduces because of new PX capacities.

PTA & PX Price Trend In China

Whereas PX enjoyed hefty margins, PTA suffered.

207262 245

9075

63

0

200

400

600

800

1000

1200

1400

1600

1800

JA

N

MA

R

MA

Y

JU

L

SE

P

NO

V

JA

N

MA

R

MA

Y

JU

L

SE

P

NO

V

JA

N

MA

R

MA

Y

JU

L

SE

P

NO

V

JA

N

MA

R

MA

Y

JU

L

SE

P

NO

V

JA

N

MA

R

MA

Y

JU

LY

SE

P

NO

V

Ja

n

Ma

r

Ma

y

2009 2010 2011 2012 2013 2014

Spread China PTA PX China Avg Spread (Yearly)$/MT

2010 Avg.PTA 946$/T

PX 1,037 $/T SPREAD 262$/T

2011 AvgPTA 1,277$/T PX 1,541$/T

SPREAD 245$/T

2012 AvgPTA 1,001$/T PX 1,510$/T

SPREAD 90$/T

2013 AvgPTA 1,074$/T PX 1,490 $/T

SPREAD 75$/T

2009 Avg.PTA 818$/T PX 912 $/T SPREAD 207$/T

PTA Supply & Demand Scenario - India

PTA Supply Demand Balance in India

1.4 1.41.6

1.8 1.92.1

2.32.7 2.9

3.3

3.7 3.7 3.8

4.2

4.8

5.4

6.2

7.0

0

1

2

3

4

5

6

7

8

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17

JBF MCPI IOC RIL Domestic Demand as PTA (MMT/Y)

Lehman Shock

India Economy Slowdown (High inflation, High

interest, Low GDP growth)

Capacity in SEZ unit

Growth Rate 13.5%/Y

MCC PTA Production History

0

200

400

600

800

1000

1200

1400

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 (Est)

KT MCPI has been a partner to the growth of Polyester industry in India.

Currently the biggest PTA merchant seller in India.

India PTA Production Matrix

87%89%

85%82%

85%

90%

93%

99%98% 97%

99%

50%

60%

70%

80%

90%

100%

110%

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

07 08 09 10 11 12 13 14 15 16 17

MMT

PTA Capacity PTA Demand PTA O/R

India – Immense Potential for Growth

0

2

4

6

8

10

12

14

16

18

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

GDP growth (%) Polyester growth

2014 GDP Growth Estimate 5.4%

• 13.5% Polyester Growth Estimated from 2014.• Strong Co-relation with GDP.

Actual Polyester Growth 10% in 2013.

General Election Year

General Election Year

Source : IMF

GDP Vs Polyester Growth - India

General Election Year

Polyester Demand - India

India has witnessed a steady polyester growth in the last decade.

PET is witnessing the fastest growth.

Yarn & Film are also growing at a reasonable pace, while PSF is flat.

6.8 7.38.2

8.9

12.713.5 13.9 14.2

20.3

26.6 26.9 27.2

0

5

10

15

20

25

30

KG/Capita

Per Capita Fibre Consumption (kg)

Huge potential for growth

World Average: 11.5

Per Capita PET Consumption (kg)

0.60 0.71 0.73

2.73 2.90 3.05

4.04

4.55

5.95

6.83

8.43

9.48

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00KG/Capita

World Avg: 2.7

India offers immense growth potential

Barriers to Growth

- Disproportionate duty structure - hindrance to growth.

- Disproportionate duty structure for “Virgin” and “Re-cycled” Staple Fibre.

- India’s power cost is 30-75% higher compared to other countries. Need to select cheap source of fuel. Coal based power & Hot Oil heating system introduced by most of the polyester makers.

- Stringent labour law & lack of skilled manpower.

- Unorganized downstream. Less number of integrated players having the entire chain up to dying and processing.

Retrospection - Asia

Huge capacity addition in China led to PTA oversupply

situation.

However PX expansions could not catch up with PTA.

Polyester growth also could not catch up with the huge PTA

capacity.

PTA faced historically low spread from November 2011.

Operation cuts of many PTA plants started from 2013.

Taiwan has been the biggest sufferer till now.

Future Ahead - Asia

Tight PX situation to ease in 2H 2014 after planned PX

start ups in Asia leading to long PX situation.

PTA manufacturers suffering for last two years because of

poor PX-PTA spread expect recovery of spread to better

levels.

All countries in Asia already introduced PX link price for

PTA. India need to follow soon.

PTA is one of those few commodities in the world which is

growing at 5~6%.

Ray of Hope

India holds huge potential for Polyester Growth.

Polyester to grow in line with positive GDP.

Recent investment in Yarn & Fibreto get absorbed in near future, although PET will be in excess.

New investments expected in polyester in near future.

Introduction of GST should make tax laws simpler.

PTA producers shall continue to operate & maintain healthy operation in view of robust domestic demand.

THANK YOU…