The Party Goes on for Caprolactam Producers, But How Long ... · 2000 2004 2008 2012 2016 2020...

The Party Goes on for Caprolactam Producers,

But How Long Will It Last?

Charles Fryer

Board Chairman

Tecnon Orbichem

17

9th China International Polyamide & Intermediates F orum

The Party Goes on for Caprolactam Producers, But How Long Will It Last?

Charles Fryer, Tecnon OrbiChem

9th China International Polyamide & Intermediates Forum Shanghai, 1- 2 December 2011

Caprolactam

• Supply – Demand Balance

• Growth Prospects

• World Trade

• Nylon Fibre Growth

• Economics

• Profitability

Source: Tecnon OrbiChem

18


2,500

3,000

3,500

4,000

4,500

5,000

5,500

6,000

1984 1988 1992 1996 2000 2004 2008 2012 2016 2020


Figure 1WORLD CAPROLACTAM CAPABILITY versus DEMAND Period: 1984-2020

Growth 3.4% Growth 3.0%

Growth 2.7% pa

Forecast Growth 2.8% pa

Capability to produce

Annual Caprolactam Consumption

1,000 Metric Tons

2,500

3,000

3,500

4,000

4,500

5,000

5,500

6,000

1984 1988 1992 1996 2000 2004 2008 2012 2016 2020



Growth 3.4% Growth 3.0%

Growth 2.7% pa



1,000 Metric Tons

Effect of unscheduledplant downtime 2010-2011

19


BAS

F

DS

M

Ub

e

Hon

ey

we

ll

CP

DC

Ca

pro

Cor

p

Sum

itom

o

Lanx

ess

Leun

a

C.I

.S

Pol

and

Oth

ers

Bra

ske

m

MC

C

Sin

ope

c

Chi

na

Ne

w

-200

0

200

400

600

800

1,000

Figure 3CAPROLACTAM CAPACITY 2009 – 2015Ktpa

Haili (Bohui)

Hongye

Hengyi


Hengyi

Additions 2010

2009

Closures 2009-10

Additions 2011

Additions 2012

Additions 2013

Additions 2014

2015 orlater

?

?

2,500

3,000

3,500

4,000

4,500

5,000

5,500

6,000

2000 2004 2008 2012 2016 2020





Growth 2.7% pa

China

1,000 Metric Tons

Two new 200 ktpa plants

20


0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2005 2010 2015 2020

CaprolactamConsumption

CaprolactamConsumptionplus PA6 netimport

Figure 5CHINA CAPROLACTAM SUPPLY vs DEMAND


Capacity on stream2015 or later

Capacity

Caprolactam Productionignoring post 2015 new capacity

1,000 Metric Tons

Caprolactam Import

PA6 NetImport

-700

-600

-500

-400

-300

-200

-100

0

100

200

300

400

1,000 Metric Tons


Figure 6WORLD CAPROLACTAM REGIONAL NET TRADE 2004-2010

S &

SE

Asia

E E

urope

W E

urope

N A

merica

S A

merica

ME

& A

frica

Taiw

an & S

Korea

China

2005

2004

2006

2007

2008

2009

2010

Japan

21


200210220230240250260270280290300310320330340350360370380

19981999

20002001

20022003

20042005

20062007

20082009

20102011

20122013

20142015

2016

Monthly WorldProduction


Figure 7POLYAMIDE FILAMENT WORLD MONTHLY PRODUCTION

Back on trend from 2011 1.5% growth pa long term

1,000 Metric Tons

Growth 1.2%pa

0

200

400

600

800

1,000

1,200

1,400

1,600

Europe incCIS &Turkey

USA China South Korea Taiwan Japan

Ktpa


Figure 8GLOBAL PRODUCTION OF NYLON FILAMENT OVER LAST 13 YEARS

2003

2004

2005

2006

1999

2000

2001

2002

2007

2008

2009

2010

2011est

22


0

400

800

1,200

1,600

2,000

2,400

2,800

3,200

3,600

4,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Dollars Per Ton

Rest of the World

Figure 9POLYAMIDE FILAMENT PRODUCTION 1999-2011


China

0

400

800

1,200

1,600

2,000

2,400

2,800

3,200

3,600

4,000

4,400

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Dollars Per Ton

Rest of the World

Figure 10POLYAMIDE FILAMENT PRODUCTION 1999-2020


China

50:50reached

23


0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

1999 2001 2003 2005 2007 2009 2011

Dollars Per Ton

CyclohexanePrice

BenzeneContract Price

AmmoniaPrice

Naphtha Price

Figure 11EUROPEAN CYCLOHEXANE, BENZENE, AMMONIA and NAPHTHA PRICES


0

400

800

1,200

1,600

2,000

2,400

2,800

3,200

3,600

4,000

4,400

4,800

5,200

1999 2001 2003 2005 2007 2009 2011

Dollars Per Ton

Polyamide Fibre PA6 75 den Taiwan

Asian Caprolactam Import Contract

WE 1.03 Cyclohexane + 0.30 Ammonia

WE Naphtha Price

Figure 12 THE PA6 SUPPLY VALUE CHAIN


24


0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

1999 2001 2003 2005 2007 2009 2011

Dollars Per Ton

Margin over Feedstocks



Figure 13ASIAN CAPROLACTAM MARGIN over 1.03 CYCLOHEXANE + 0.3 AMMONIA


0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

1999 2001 2003 2005 2007 2009 2011

Dollars Per Ton




Source: Tecnon OrbiChem revised Oct 2011

Margin overFeedstocksand Energy

Energy Requirement

25


0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

1999 2001 2003 2005 2007 2009 2011

Dollars Per Ton


Source: Tecnon OrbiChem revised Oct 2011



Margin overFeedstocksand Energy

Energy Requirement

Energy plus Fixed Costs

Cash Flow

0

500

1,000

1,500

2,000

2,500

3,000

3,500

0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150

$/ton Caprolactam


Figure 16DEPENDENCE OF CAPROLACTAM PRODUCTION COST ON THE PREVAILING CRUDE OIL PRICE

Asia CaprolactamAverage Import Contract Price

Cyclohexane

Energy related costs (steam, ammonia, etc.)

Packing, loading

Bunker

Fixed costs of supplying plants

Cats & Chemicals

Fixed costs of caprolactam plant

Cost of Production in Europe and delivery to Asia

Energy dependant costs

Crude oil price $/bbl

26


0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150

$/ton Caprolactam


Figure 17DEPENDENCE OF CAPROLACTAM PRODUCTION COST ON THE PREVAILING CRUDE OIL PRICE

Cyclohexane

Packing, loading shipping

Fixed costs of supplying plants

Cats & Chemicals Fixed costs of

caprolactam plant

Cost of Production in Europe and delivery to Asia

Energy dependant costs

Crude Oil Price $/bbl

Bunker

Energy related costs (steam, ammonia, etc.)

11

1 2 3 45

6 78

9

1012

2009

2008

12

3 4

5 6

7

89

1011

12

2010

Profit zone

12

34

5

7

6

8 910

11121 2

3 4

5

2011

109

86 7


Figure 18CAPROLACTAM CASH COST INDUSTRY CURVEQ3 2011

0

500

1000

1500

2000

2500

3000

3500

0 500 1000 1500 2000 2500 3000 3500 4000

Cumulative Capacity in ktpa

Cash cost in $/ ton

27


Comparisons with Polyester

• Correlations of PTA and MEG prices with crude oil

• PTA + MEG versus Caprolactam

• High Energy Cost = Bad News for Nylon


0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150

Figure 19 Asian Caprolactam Import Contract Price vs Brent Crude Oil Price Correlation (Caprolactam price compared with the crude oil price of the same month) 1999-2011

Source: Tecnon OrbiChem Brent Crude Oil $/bbl

Asian Caprolactam Import Contract $/ton

1999-2008

2009

2010

2011

28


Figure 20 Asia 0.865PTA + 0.35MEG Margin vs Brent Crude Oil Price Correlation (Margin price compared with the crude oil price of the same month) 1999-2010


0

500

1,000

1,500

2,000

2,500

3,000

3,500

0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150

Brent Crude Oil $/bbl

Asian 0.865 PTA vs 0.35 MEG Margin $/ton

1999-2008

2009

2010

2011

Figure 21 Asia 0.865PTA + 0.35MEG Prices, trend line vs Crude Oil Price 1999-2011; Caprolactam Trend Line


0

500

1,000

1,500

2,000

2,500

3,000

3,500

0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150

Brent Crude Oil $/bbl

$/ton

Caprolactam

PTA + MEG

29


PA66 Raw Materials

• ADN/HMD Raw Materials Prices


0

400

800

1,200

1,600

2,000

2,400

2,800

3,200

3,600

4,000

1999 2001 2003 2005 2007 2009 2011

Dollars Per Ton

Butadiene

Ammonia

Heavy Fuel Oil

Figure 22EUROPEAN BUTADIENE, AMMONIA and HEAVY FUEL OIL PRICES


30


0

400

800

1,200

1,600

2,000

2,400

2,800

3,200

3,600

4,000

1999 2001 2003 2005 2007 2009 2011

Dollars Per Ton

Ammonia

Methane (Natural Gas)

Figure 23US BUTADIENE, AMMONIA and NATURAL GAS PRICES and HMDA RAW MATERIALS COST


Butadiene

Feedstock Costs per Ton HMDA =0.48 Butadiene

+ 0.35 Ammonia+1.2 Methane

0

400

800

1,200

1,600

2,000

2,400

2,800

2006 2007 2008 2009 2010 2011

Dollars Per Ton

AcrylonitrileBulk Contract

Figure 24UNITED STATES HMDA RAW MATERIALS COST ACRYLONITRILE vs BUTADIENE etc PRICES


Feedstock Costs per Ton HMDA =0.48 Butadiene

+ 0.35 Ammonia+1.2 Methane

31


0

400

800

1,200

1,600

2,000

2,400

2,800

3,200

3,600

4,000

2002 2004 2006 2008 2010

Dollars Per Ton

Feedstock costs =0.65 x Adipic Acid

+0.52 x [HMDA

Feedstock costs]

Figure 25UNITED STATES PA66 ENGINEERING RESIN PRICE vs RAW MATERIAL COSTS


US PA66 Engineering Resin

Price

Price Overview

• Scenarios with Crude Oil at $120/bbl and $90/bbl

• Likely Average Market Values …

• … but Supply-Demand Factors can Cause Wide Departures


32


400600800

1,0001,2001,4001,6001,8002,0002,2002,4002,6002,8003,0003,2003,4003,6003,8004,0004,2004,400

Figure 26LONG TERM AVERAGE PRICES OF FIBRE & INTERMEDIATES: CRUDE OIL AT ~ $120/bbl


Dollars Per Ton

Crude oil ~ $120/bbl

Caprolactam

1400 average

PA6Polymer

350 400

850

PA6Filament(FDY 70den) PA6

Staple200

PA66Staple

1300

150

400PEs Staple800

1800

2400

PEs FDY 70 den

PA66 Filament(FDY 70den)

0.66 AA + 0.52 HMDA

PTA Benzene

300

0.865 PTA + 0.35 MEG

PA66 Polymer1.17 AH salt

MEG

500700

9001,1001,300

1,5001,700

1,900

2,1002,300

2,5002,7002,900

3,1003,300

Figure 27LONG TERM AVERAGE PRICES OF FIBRE & INTERMEDIATES: CRUDE OIL AT ~ $90/bbl


Dollars Per Ton

Crude oil ~ $90/bbl

Caprolactam

1100 average

PA6Polymer 250 300

650

PA6Filament(FDY 70den)

PA6Staple

200

PA66Staple

800

100

200PEs Staple

700

1300

1600

PEs FDY 70 den

PA66 Filament(FDY 70den)

0.66 AA + 0.52 HMDA

PTA Benzene

100

0.865 PTA + 0.35 MEG

PA66 Polymer1.17 AH salt

MEG

33


CONCLUSIONS

• Caprolactam consumption bounced back in 2010, and appears to have almost returned to its historical trend line

• Caprolactam consumption registered a 12% growth in 2010 over 2009, due to a surge in demand from China but part of this growth was due to a pull forward of future demand, such that 2011 will see almost zero growth, even in China

• Caprolactam growth will return to trend from 2012 onwards, at a long term rate of 2.8% per year

• Five new caprolactam projects are under way in China, coming on stream over 2012-2014

• This will lead to over-capacity over 2012-2015 but supply-demand will return to balance by 2016 if no further caprolactam plants are built

• Caprolactam has shown excellent profitability in 2010 and until September this year, but profits are now collapsing as Chinese nylon growth falters

• PA66 producers have to grapple with high and volatile costs, especially on butadiene

• High butadiene prices are likely to persist, damaging long term PA66 growth• PA6 and PA66 will be hard pressed by competition from polyester, to a growing

extent if crude oil prices escalate


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The Party Goes on for Caprolactam Producers, But How Long ... · 2000 2004 2008 2012 2016 2020...

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Transcript of The Party Goes on for Caprolactam Producers, But How Long ... · 2000 2004 2008 2012 2016 2020...