Document

Report
PE / PP Market Review
Nick Vafiadis
Director Polyolefins and PVC
North America
PSCI
March 2011
Singapore
Shanghai
Houston
York London
PSCINew
March
2011 Düsseldorf
Dubai
7 “Game Changers”
• Energy costs shift (nat gas / crude): now greatly
favoring light feedstocks utilized in the US
(ethane)
• US resin producers invest, and “shift-light”
• New capacity: plagued by start-up problems
• Strong global demand sparked by China
• Export market became attractive and viable
• Unplanned monomer and polymer outages: supply constraints drove pricing, not cost changes
• Discipline
PSCI March 2011
Agenda
•
•
•
•
•
•
Economy
Energy
Ethylene
Polyethylene
Propylene
Polypropylene
PSCI March 2011
World GDP Growth Rates
Percent (%)
(Constant 2007 U.S. Dollars)
5.0
Forecast
4.0
3.0
2.0
1.0
0.0
-1.0
Possible Scenario
-2.0
Most Likely Scenario
-3.0
00
01
02
03
04
05
06
07
08
09
PSCI March 2011
10
11
12
13
14
15
Positive
Factors
Government
Deficit & Debt
High Unemployment &
Low Wage Growth
Confidence
Mutual
Support
among
Regions
Reduced Capital
& Foreign
Investment
Low Interest
Rates & Inflation
Emerging Market
Economies
PSCI March 2011
Geopolitics
Risks &
Threats
World GDP Growth
Trillion Constant 2007 U.S. Dollars
62.0
Alternative Scenario
61.0
Main Scenario
60.0
59.0
58.0
Peak – Q2 2008
57.0
Q2 2010
56.0
55.0
54.0
Trough – Q1 2009
07 Q2 Q3 Q4 08 Q2 Q3 Q4 09 Q2 Q3 Q4 10 Q2 Q3 Q4 11 Q2 Q3 Q4 12 Q2 Q3 Q4
0
PSCI March 2011
Economic Growth Comparison
(Constant 2007 U.S. Dollars)
Percent Change
8.0
6.0
4.0
2.0
0.0
-2.0
-4.0
-6.0
90
World
92
94
96
N. America
98
00
S. America
02
04
06
W. Europe
PSCI March 2011
08
10
SE Asia
12
NE Asia
14
U.S. GDP Growth
Percent (%)
8.0
Forecast
6.0
4.0
2.0
0.0
-2.0
-4.0
-6.0
-8.0
00
01
02
03
04
05
06
07
08
Source: U.S. Bureau of Census; Forecast: CMAI
PSCI March 2011
09
10
11
12
U.S. Economy Outlook
• Confidence
Consumer – volatile at very low level
Business (ISM) – well above recession threshold
• Retail Sales – improving steadily
• Manufacturing – recovery abating
• Construction/Residential – still at bottom levels
• Construction/non-Residential – moderating declines
• Vehicle Sales – moving higher
• Trade – much reduced deficit is expanding again
• Inflation – limited by output gap & high unemployment
• Dollar – depreciating
• Financial Markets – stabilizing
PSCI March 2011
Crude Oil Highlights
•
Crude oil price volatility drivers…
 Global economic weakness has dampened crude demand
 Political instability in Middle East and Africa
 Speculative money
 Value of the U.S. dollar
 Crude & refined product inventory which remains high
•
The crude oil price forecast anticipates…
 Despite short term demand reduction, global economy recovers
and demand growth returns.
 In spite of higher prices demand will continue to grow, especially in
developing nations such as India and China.
 Higher demand will support prices averaging$100 per barrel level
through 2011 and move higher in 2012
 In the medium to long term, continued non-OECD demand growth
keeps pressure on OPEC to sustain high output
 Tight S/D balance supports elevated prices in the medium to long
term.
PSCI March 2011
WTI Crude Oil Forecast Comparison
Dollars Per Barrel
140
120
100
80
60
40
20
Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12
New Forecast
Old Forecast
PSCI March 2011
WTI Crude Oil Forecast Comparison
Dollars Per Barrel
120
100
80
60
40
20
0
00
01
02
03
04
05
06
New Forecast
07
08
09
10
11
Old Forecast
PSCI March 2011
12
13
14
15
Global Naphtha Prices
•Dollars Per Metric Ton
1,100
1,000
900
800
700
600
500
400
300
05
Q3
06
Q3
07
Q3
08
US Natural Gasoline
Southeast Asia Naptha
Q3
09
Q3
10
Q3
11
Q3
West Europe Naptha
Notheast Asia Naptha
PSCI March 2011
12
Q3
MillionBarrels
Barrels
Million
390
U.S. Crude Oil Inventories
370
350
330
310
290
270
•Data Through 11-Feb-11 - Excludes U.S. Strategic Petroleum Reserve
250
Jan
Feb
Mar
Apr
Apr
May Jun
5-Yr MIN-MAX Range
Jul
Aug Sep
Oct
2009
2010
2011
PSCI March 2011
Nov Dec
Natural Gas Highlights
• The natural gas price forecast anticipates…
 Prices will remain relatively stable vs 2010 due to
strong supply and rising crude prices
 In 2011, LNG imports and production from shale will
keep supply healthy and prices low relative to crude
oil.
 In the medium to long term, supply from shale
remain high.
 Increasing LNG imports to meet demand growth as
needed.
 Long term crude to gas ratio is below parity due to
healthy natural gas supply
PSCI March 2011
•U.S. "Working Gas" In Underground Storage
Weekly Data - Billion Cubic Feet
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
Jan
Through
11-Feb-11
•Data•Data
Through
24-Jul-09
Feb Mar
Apr
5-Yr MIN-MAX Range
Apr May Jun
Jul
Aug Sep
5 Year Average Range
PSCI March 2011
2009
Oct Nov Dec
2010
2011
U.S. Natural Gas Liquids Prices
Gas Liquids,Cents Per Gallon
250
Natural Gas$/ MMBtu
20
200
16
150
12
100
8
50
4
0
0
05 Q3 06 Q3 07 Q3 08 Q3 09 Q3 10 Q3 11 Q3 12 Q3
Natural Gas
Ethane
Propane
PSCI March 2011
N-Butane
New Ethane Frac Capacity
•
The capacities listed in thousand barrels per day of ethane with the total fractionation capacity in
thousand barrels per day in parenthesis.
•
•
•
•
•
•
2010: Q2 – Copano – Houston, TX 10 (24)
Q4 – Enterprise Fractionator, Mt. Belvieu, Texas – 30 (60)
2011:
Q2 – Targa Resources, Mt. Belvieu, Texas – 30 (60)
Q3 – Copano – Houston, TX Expansion 5 (11)
Q3 – MarkWest, Houston, PA – 30 (60) – This project will not affect the ethane balance on the
immediately since no decisions have been finalized on the disposition of the ethane.
•
•
•
•
2012:
1H 2012 – Gulf Coast Fractionators, Mt. Belvieu, TX – 20 (43)
2H 2012 – Enterprise, Mt. Belvieu, TX – 30 (65)
2H 2012 – Targa, Mt. Belvieu, TX - 45 (100)
•
•
•
•
2013:
USGC
1H 2013 – Formosa, Point Comfort, TX – 32 (75)
Others:
Dominion Resources planning to build a unit in West Virginia with a capacity of 15 kbbl/day of ethane (38). The
disposition of the ethane from this plant is not currently known. Could be early 2013.
PSCI March 2011
U.S. Natural Gas Liquids Prices•Natural Gas
•Gas Liquids
•Cents Per Gallon
250
•$/ MMBtu
10
9
200
8
7
150
6
5
100
4
3
50
2
1
0
0
05
06
07
08
Natural Gas
09
10
Ethane
11
12
Propane
PSCI March 2011
13
14
N-Butane
15
North America Energy Trend Prices
$ / MM Btu
20
Gas as a % of Crude
120%
New Forecast
18
100%
16
14
80%
12
10
60%
8
40%
6
4
20%
2
0
0%
00
01
02
03
04
05
Crude (WTI)
06
07
08
09
Natural Gas
10
11
12
13
14
Gas as % of Crude
PSCI March 2011
15
U.S. Ethylene Cash Costs
Cents Per Pound
60
Dollars Per Ton
1,320
50
1,100
40
880
30
660
20
440
10
220
0
0
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
Wt. Average
Propane
Butane
Lt. Naphtha
PSCI March 2011
Purity Ethane
2011 Global Ethylene Cash Costs
Dollars Per Metric Ton
Average Feedstock Basis
1,450
1,250
Heavy Feed
1,050
NEA Avg.
WEP Avg.
Light Feed
850
ISC Avg.
NAM Avg.
650
450
SEA Avg.
MDE Avg.
250
50
0
20
40
60
80
100
120
140
CUMULATIVE ETHYLENE CAPACITY (million tons)
PSCI March 2011
160
Ethylene Capacity & Demand
Changes
Million Metric Tons
16
Forecast
12
8
4
0
-4
-8
00
01
02
03
04
05
North America
Southeast Asia
Northeast Asia
Annual Demand Change
06
07
08
09
10
11
12
Middle East
West Europe
Others
PSCI March 2011
13
14
15
…So Why Aren’t We Swimming In
Middle East Olefin Derivatives?
• Project delays, especially
derivative capacity
• Stronger demand than
expected, led by China
• Capacity closures in
North America and West
Europe reduce supplydemand imbalance
PSCI March 2011
Poor Operating Rates
% Nameplate Operating Rate, Middle East
120
Forecast
110
Historical Average = 92%
100
90
80
70
60
50
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
Middle East
Saudi Arabia
Iran
Kuwait
PSCI March 2011
Qatar
UAE
Global Ethylene Operating Rates
Percent
115
Forecast
105
95
85
75
65
2000
2003
N. America
2006
West Europe
2009
Middle East
PSCI March 2011
2012
Northeast Asia
2015
World
U.S Ethylene Supply/Demand
Operating Rate
Billion Pounds
Outlook
17
105%
Forecast
16
100%
15
95%
14
90%
13
85%
12
80%
11
75%
10
70%
9
65%
01
02
03
Total Demand
04
05
06
07
08
09
Effective Operating Rate
PSCI March 2011
10
11
12
Nameplate Operating Rate
U.S. Ethylene Margins
Cents Per Pound
25
Dollars Per Ton
551
Forecast
20
441
15
331
10
220
5
110
0
0
2008
2009
2010
2011
2012
2013
U.S. Wtd. Avg Contract Cash Margin
PSCI March 2011
2014
PE: US Current Status
• Domestic PE resin demand has been stable
• Price increases pending for March (2 – 6) cpp
and 5 cpp for April
• Global uncertainties around Middle East, Japan,
keep pressure on crude oil prices and provide
momentum for higher resin pricing
• Production cash costs rising as ethylene moves
higher
• Inventories snug for LLDPE and LDPE while HDPE
appears adequate
• Export options remain attractive for US producers
utilizing light feedstocks PSCI March 2011
PE Demand Year Over Year
U.S./Canada Polyethylene Demand
End Use
Percent Change, Year over Year
06
07
08
09
10
%AAGR
'05-‘10
%AAGR
‘10-'15
Film & Sheet
-1.0
4.1
-11.4
-0.5
6.2
-1.4
2.7
Injection Molding
-1.4
-4.0
-12.0
-4.4
7.5
-4.0
2.6
Pipe & Profile
15.8
-6.7
-8.6
-17.2
19.1
-3.1
3.7
Extrusion Coating -6.9
-2.6
-8.3
-11.0
17.5
-4.9
3.1
Blow Molding
0.3
-2.8
-11.5
-0.8
6.9
-2.0
2.9
Wire & Cable
9.1
-0.3
-3.0
-2.3
4.3
1.4
2.1
Rotomolding
Domestic
Demand
4.9
-5.0
-3.8
-6.0
18.0
-1.2
3.9
3.8
-1.0
-12.5
-5.0
8.5
-2.7
2.9
PSCI March 2011
HDPE in 2010
• Domestic resin sales:
• Export sales:
• Total HDPE resin sales:
PSCI March 2011
+6.1%
-24.1
+1.8
HDPE – Injection Molding
2010 Results
HDPE
Percent Change
Injection Molding, Total
4.2
Pails
-1.5
Housewares
15.5
Tubs and Containers
17.4
Crates and Totes
19.3
Caps and Closures
-11.5
•Source: ACC, Plastics Division; Gov’t Trade Data
PSCI March 2011
HDPE Cost and Price
Cents Per Pound
90
80
70
60
50
40
30
20
2005
2006
2007
2008
2009
2010
North America Cash Cost - Integrated
West Europe HDPE Contract Disc.
2011
2012
2013
2014
2015
North America HDPE Contract Disc.
CFR China HDPE Spot
PSCI March 2011
Regional HDPE Non-Int. Margins
Dollars Per Ton
351
Cents Per Pound
16
263
12
175
8
87
4
-1
0
-89
-4
-177
-8
-265
-12
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
West Europe
Southeast Asia
PSCI March 2011
North America
U.S. Monthly Total PE Trade
Thousand Metric Tons
600
Exports
500
400
300
200
100
0
-100
-200
Imports
-300
Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10
Asia
Europe
SAM
NAM
PSCI March 2011
Other
Net Trade
U.S.
PE
Trade
Trends
Million Metric Tons
6
Percent
40
Forecast
5
35
4
30
3
2
25
1
20
0
15
-1
10
-2
-3
5
-4
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Imports
Exports
Production as a % of Exports
PSCI March 2011
Polyethylene Capacity Changes
NAM
Company
WEP
kta Company
MDE
kta Company
1Q-10
Borealis BEL HD (200)
HD/
Borealis SWE LL (90)
SABIC
UK LD 400
NEA / SEA / ISC
kta Company
Yansab KSA HD 400 Sinopec/SABIC JV
Sharq
KSA HD 400
Qatofin QAT LL
450
2Q-10
GFR HD 250
Borealis SWE LD 350
SABIC NET LD (120)
THA LD 300
Bangkok PE
Panjin Eth.
THA HD 250
CHI HD 300
HD/
IND LL x 125
Zhenghai Ref. CC
CHI
LL 450
MOC
THA
LL 300
TPE
CNOOC & Shell
Indian Oil
3Q-10
Indian Oil
HD/
Borouge UAE LL 600
Baotou Shenhua
CNOOC & Shell
Gail
LG Chem
4Q-10
HD/
CHI LL 600
PTT Chem
Haldia
LBI
Net
kta Increase
2,935
THA HD 400
CHI LD 75
IND HD 300
HD/
IND LL 350
HD/
CHI LL 300
CHI HD 75
IND LL 50
2,355
KOS HD
1,065
40
Polimeri
Nova CAN LD x 60
Eur. FRA LD 260 Q-Chem II QAT HD 350
Amir Kabir IRN LD 300
970
PSCI March 2011
Polyethylene Capacity Changes
MDE
NEA / SEA / ISC
4Q-11 3Q-11 2Q-11 1Q-11
Company
Kayan
kta Company
SAR
HD
400
0
ExxonMobil
ExxonMobil
SIN
SIN
HD/LL
LL
650
650
1,300
Zhongyuan
Evolue Japan
CHI
JAP
LL
LL
60
50
110
NEA / SEA / ISC
Company
1Q-12
Net Increase
400
MDE
4Q-12 3Q-12 2Q-12
kta
QAPCO
Llam PC
kta Company
kta
Net Increase
QAT
IRN
LD
HD
250
300
Hanwa Chem.
Sichuan PC
KOS
CHI
LD
HD/LL
30
600
Saudi Polymers SAR
HD
1100
Qilu PC
Fushun PC
CHI
CHI
HD
HD/LL
250
450
2,530
Fushun PC
CHI
HD
350
800
Honam PC
KOS
HD
210
210
0
PSCI March 2011
Global Total PE Operating Rates
Operating Rate, Percent
95
Forecast
Forecast
90
85
80
75
70
2005
2006
2007
World
2008
2009
WEP
2010
2011
MDE
PSCI March 2011
2012
NEA
2013
2014
NAM
2015
Price Differentiation
Cents Per Pound
100
(NAM Discounted Prices)
Dollars Per Metric Ton
2205
Forecast
90
1984
80
1764
70
1543
60
1323
50
1102
40
882
30
Jan-07 Sep-07 May-08 Jan-09 Sep-09 May-10 Jan-11 Sep-11 May-12
661
LDPE GP
HDPE BM
PSCI March 2011
LLDPE C4
U.S. Polyethylene Chain Margins
Cents Per Pound Polyethylene
60
Dollars Per Metric Ton
1,320
Forecast
50
1,100
40
880
30
660
20
440
10
220
0
0
05
06
07
08
09
10
11
12
13
14
15
Ethane Margin - Ethane Price Minus Shrinkage & 5.5 cpg Extraction Costs
PE Margin - Contract HDPE Blow Molding Non-Int. Including Discounts
Ethylene Margin - Average Acquisition Ethylene Price Minus Ethane Cracking Costs
PSCI March 2011
PE Take-Aways
• Hindsight: Energy shift, start up delays, export options, and
unplanned outages transform would-be trough to record
profits for US resin producers
• US producers: sitting on cash – expansions likely
• Price: increasingly tied to global naphtha price trends, and
export options
•
– unplanned outages remain the wildcard
• New capacity: in MDE and China will be absorbed – less
dramatic impact on pricing and margins
• Export market: remains attractive for US resin producers –
resin imports minimized
• Imports: Reduced incentive to import resin and film and bags
• Watch out: Too rapid, and too high crude increase could kill
demand and resin prices could fall as in 2008
PSCI March 2011
Propylene
Polypropylene
PSCI March 2011
World 2010 PG/CG Propylene
Supply/Demand
HS FCC
Olefin
2.6% Others
Cracking
0.7%
Gas-to- 0.3%
Olefins
0.2%
Polypropylene
67%
Stm.
Crackers
58.1%
Metathesis
3.3%
Dehydro
3.4%
Oxo Alc.
8%
Cumene
4%
FCC
Splitters
31.4%
Acrylonitrile
7%
Acrylic Acid Others
2%
4%
Production 75.5 MMT
PSCI March 2011
Propylene
Oxide
8%
Demand 74.6 MMT
Billion Pounds
10
Propylene Production
6 Billion Pounds Lost
9
8
7
6
5
4
3
2
Lowest production since before 1990
1
0
86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
Co-Product Propylene
Refinery Sourced Propylene
PSCI March 2011
North America
2010 PG/CG Propylene Demand by End Use
Propylene Oxide
11%
Others
5%
Acrylic Acid
6%
Acrylonitrile
10%
Cumene
1%
Isopropanol
2%
2-Ethyl Hexanol
2%
Butanols
5%
Polypropylene
58%
Domestic Demand = 13.5 Million Metric Tons
PSCI March 2011
Domestic Demand Still In Doldrums
Million Pounds
600
550
500
450
400
350
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
IM
Jul-09
Average
PSCI March 2011
Jan-10
Jul-10
Jan-11
PP 2010 Results
Polypropylene
Injection Molding, Total
Percent Change
2.6
19.4
Appliances
Consumer Products
-4.5
Rigid Packaging, Total
1.5
Cups and Containers
-15.9
Caps and Closures
Crates and Totes
Media Enclosures
13.3
16.1
12.1
All Other Injection Molding
•Source: ACC, Plastics Division; Gov’t Trade Data
PSCI March 2011
67.6
North America PP Industry
Demand 2010-2015
2.4%
Injection Molding
Total Domestic Demand 2010: 6.9 MMT
3.0%
Blow Molding
Total Domestic Demand 2015: 7.7 MMT
Film and Sheet
2.6%
1.6%
Fiber and Filament
Other
Total Percentage Growth Rate
2010-2015: 2.0 %
2.4 %
2.3%
0
500
1,000
1,500
2,000
Million Metric Tons
2015
2010
PSCI March 2011
2,500
3,000
3,500
PGP Price Drivers: Crude, ACN, Supply
C3, Cents per Pound
90
ACN, $/Ton
3,000
Cracker
Turnarounds
2,500
75
2,000
60
Extreme TX
Weather +
Refinery
Turnarounds
+ High ACN
Prices
1,500
1,000
December
C3
Production
Issues +
High Cotton
Prices +
High ACN
Prices
500
0
Jan-09
May-09
Sep-09
Jan-10
May-10
ACN Asia
PSCI March 2011
Sep-10
PGP NAM
45
30
15
0
Jan-11
Regional Propylene Prices
Cents Per Pound
90
Dollars Per Metric Ton
1,980
80
1,760
70
1,540
60
1,320
50
1,100
40
880
30
660
20
440
10
Forecast
0
220
0
Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12
WE Contract Net Transaction
CFR SEA Spot
PSCI March 2011
US Contract Net Transaction
NAM Moving to Top of PP Price
Dollars Per Metric Ton
Chain
2,200
Forecast
2,000
1,800
1,600
1,400
1,200
1,000
800
600
Jan-09 Jun-09 Nov-09 Apr-10 Sep-10 Feb-11 Jul-11 Dec-11 May-12 Oct-12
NAM PP Disc. Price
NEA PP Spot
WEP PP Disc. Price
NAM PP Spot Export
PSCI March 2011
Capacity: How Much is too Much?
PP, Million Metric Tons
9
Forecast
8
7
2009-2011
17 Million Metric Tons
6
5
4
3
2
1
0
-1
2009
2010
North America
Asia/Pacific
2011
2012
South America
West Europe
PSCI March 2011
2013
2014
C. Europe/CIS
Africa/Middle East
Demand
Investment
+
= Oversupply!
Drop
Excess
PP, Million Metric Tons
14
Operating Rate, Percent
100
Forecast
12
95
10
8
90
6
85
4
2
80
0
75
-2
-4
70
2005
2007
2009
Capacity Increase - Demand Increase
Operating Rate
2011
2013
2015
Cummulative Delta Caps-Delta Dem
PSCI March 2011
U.S. PP Exports
Regional Exports, Thousand Metric Tons
140
Total Exports, Thousand Metric Tons
250
120
200
100
80
150
60
100
40
50
20
0
0
07 M M J S N 08 M M J S N 09 M M J S N 10 M M J S N
Total Selected Regions
Europe
N.America
Far East
PSCI March 2011
S.America
Other
Trade Patterns Changing
Polypropylene Trade
263 -1350
-1747 -2607
556 -308
-75 -399
1788 4927
-489 -469
-57 -504
2010
2015
Thousand Metric Tons
PSCI March 2011
-239 709
PP Summary
• Propylene remains scarce – keeping
propylene and PP prices high
• Volatility in N. Am here to stay.
• PP less competitive
• Through propylene capacity investments,
imports, and replacement by other
polymers – US PP prices will ultimately
align with rest of the world (within five
years).
PSCI March 2011
Thank You!
• Presentation Copies
• Report Trials ( Global Plastics and
Polymers Report)
• Conference – Houston, Chicago
• N. Vafiadis contact info:
281-752 -3206
[email protected]
PSCI March 2011

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