PVC and Chlor-Alkali In a Vibrant Region

Transcription

1 PVC and Chlor-Alkali In a Vibrant Region Joel Lindahl Director, Chlor-Alkali & Vinyls Americas Foro PEMEX Petroquímica Junio Singapore Shanghai Bangkök Houston New York London Düsseldorf Dubai

2 Latin America A Growing Pie All Other 10% 2010 GDP Contribution Brazil 50% Mexico 25% Venezuela 6% Peru 3% Chile 4% Colombia 6% Argentina 8% GDP %AAGR = 4.3 2

3 Mexico: Vibrant Durable Growing Middle Class More stable economy, better balance Strong manufacturing base Economy Need for infrastructure Drives demand for durable materials, goods Important trade partner 3

4 GDP Growth Three Versions Year-over-Year Percent Change 8% 6% 4% 2% 0% -2% -4% -6% -8% Mexico Brazil United States

5 Durable Goods = PVC Demand Wire & Cable 8% Bottles 2% All Others 13% Pipe & Fittings 42% Film & Sheet 16% Profiles & Tubes 19% 2010 Global Demand = 34.8 Million Metric Tons 5

6 U.S. Housing Starts Housing Starts, Total Privately Owned (Thousands) Source: U.S. Bureau of Census Forecast: CMAI

7 U.S. Total Construction Spending Index Index in Recessions Months Prior to Peak Peaks: January 1981 February 1990 December 2001 March 2006 Months After Peak 1980/82 Recession 1991 Recession 2001 Recession 2008/09 Recession Source: Federal Reserve Board Mar 11 7

8 Pipe Resin Vs. Housing Starts Billion Pounds, Pipe & Tubing 7.0 Thousands Units (SAAR), Housing Starts Pipe & Tubing Housing Starts 8

9 U.S. PVC Pipe Resin Demand Billion Pounds AAGR = 3.1%

10 PVC Demand Brazil Leads Africa/ Middle East 8% Indian Subc. 6% CIS & Baltics 3% NE Asia 43% Other 22% Brazil 39% Europe 16% Latin America 6% N. America 13% 2010 World Demand = 34.8 Million Metric Tons SE Asia 5% Mexico 15% Chile 3% Venezuela 4% Argentina 6% Colombia 6% Peru 5% 2010 Latin America Domestic Demand = 2.4 Million Metric Tons 10

11 Latin America Less PVC Self Sufficient Over Time Million Metric Tons 3.5 Production (1.8/2.3) 3.0 Domestic Demand (6.8/4.6) 2.5 Total Capacity (1.6/1.8) (% AAGR = 05-10/10-15) 11

12 Growing Vinyls Net Trade Thousand Metric Tons Net Exports ,200-1,500-1,800 Net Imports PVC VCM EDC 12

13 Who are the Players? 2011 Top PVC Producers Latin America* CAPACITY SHARE RANK COMPANY (-000- Metric Tons) % OF TOTAL 1 Mexichem % 2 Solvay Indupa % 3 Braskem % 4 Pequiven % Top 4 Total Latin America 2, % North America CAPACITY SHARE RANK COMPANY (-000- Metric Tons) % OF TOTAL 1 SHINTECH 2, % 2 Oxy Vinyls LP 1, % 3 FPC USA 1, % 4 Georgia Gulf 1, % Top 4 Total North America 6, % * Includes capacity in Mexico. 13

14 Energy Flows Most of the World Oil Naphtha Ethylene EDC VCM PVC Oil Electricity Chlor-Alkali North America & Middle East Natural Gas Ethane Ethylene EDC VCM PVC Natural Gas Electricity Chlor-Alkali China Coal Carbide Acetylene VCM PVC Coal Electricity Chlor-Alkali Pipe & Other Fabricated Products 14

15 Average 2010 Feedstock Slates Percent 100% Source: CMAI 2010 World Ethylene Cost Study 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% North America South America Europe CIS & Baltic States Middle East/Africa Northeast Asia Southeast Asia Ethane Propane N-Butane Naphtha Gasoil Other 15

16 North America Energy Price Trends Dollars Per MM Btu Gas as % of Crude, BTU Basis 120% 100% 80% 60% 40% 20% Crude (WTI) Natural Gas Gas as % of Crude 0%

17 U.S. Ethylene Cash Cost Trends Cents Per Pound Dollars Per Ton Wt. Average Propane Butane Lt. Naphtha Purity Ethane 0

18 PVC Production Costs Advantage: North America! Dollars Per Metric Ton 1,300 Integrated - Asset Sharing Method 1,200 1,100 1, NAM WEP NEA * China Cash Cost (Acetylene based) * NEA excludes China 18

19 U.S. PVC Export Forecast % of Total Production Billion Pounds Exports % of Total Production = = = Forecast = Q2 Q3 Q4 08 Q2 Q3 Q4 09 Q2 Q3 Q4 10 Q2 Q3 Q4 11 Q2 Q3 Q4 Total Exports China 19

20 Accelerating Toward a Global Price Crude to gas ratio makes U.S. producers very competitive Export sales provide strong returns Japan effect expedites shift towards greater reliance on the export market U.S. producer pricing leverage increased When producers have options they raise prices 20

21 Higher PVC Prices Ahead! Regional Netback Comparison After Discounts & Freight Dollars Per Metric Ton 1,500 1,300 1, Higher Energy Higher Ethylene Increased Global Demand NAM Contract-Market WEP Contract-Market NEA Spot 21

22 World PVC Capacity Additions Million Metric Tons World China

23 How The Chinese Do It Feedstock Products CO Calcium Hydroxide(Waste) Cement Limestone Coke Calcium Carbide Acetylene VCM PVC H O 2 H 2 Salt Chlorine HCl (Anhyd.) Power (Coal) Caustic Soda 23

24 PVC Carbide-Based Economics U.S. Dollars Per Metric Ton 1,600 1,400 1,200 1, Asset Share Acetylene Methodology Membrane Cell Technology Q2 Q3 Q4 08 Q2 Q3 Q4 09 Q2 Q3 Q4 10 Q2 Q3 Q4 11 Q2 Q3 Q4 12 Q2 Q3 Q4 24 PVC Price, Integrated PVC Cash Cost PVC Margin * Prices are on delivered basis, including VAT.

25 Global Capacity Decelerates Chlorine Capacity, Million Metric Tons %AAGR: %AAGR: %AAGR: 1.9

26 Vinyls Summary Robust demand growth in Latin America exceeds capacity in the region Imports rise to meet growth Region needs competitive ethylene Low cost in North America accelerates exports Prices rise, as do U.S. margins Globe absorbs most overcapacity by

27 The Vinyls Chain- Caustic Caustic Salt Electricity Chlor-Alkali Chlorine EDC VCM PVC Ethylene 27

28 World Caustic Demand Inorganics 12% Water Treatment 5% Others 27% Pulp & Paper 13% Soaps/ Detergent s/textiles 15% Organics 17% Alumina 11% Other 15% Pulp 25% 2010 Global Demand = 61.1 Mil DMT Alumina 60% 2010 Global Net Exports = 4.5 Mil DMT 28

29 Co-Demand? Change in Demand & GDP, Year over Year 10% 8% 6% 4% 2% 0% -2% -4% -6% Difference 2.0% 1.6% 1.2% 0.8% 0.4% 0.0% -0.4% -0.8% -1.2% World Chlorine World Caustic World GDP Difference Between YOY Demand Change 29

30 Regional Production Cash Costs 2010 Operating Costs, Dollars Per ECU Metric Ton $ West Europe Membrane Asia Membrane North America Membrane Middle East Membrane 30

31 ECU Cash Costs New Rules Cash Costs, Dollars Per Metric Ton Middle East USGC ECU Cash Costs NEA ECU Cash Costs WEP ECU Cash Costs CHI ECU Cash Costs 31

32 North America Building New Puzzle Pieces Producer Timing Capacity (-000- DMT Caustic) ,549 Added Capacity Shintech Q FPC Mid Shintech Mid Dow/Mitsui Mid Westlake Others Various 129 Total Announced Additions 2, ,709 32

33 The Fragile Future: U.S. Caustic Production & Demand, Million DMT Net Exports, Million DMT Production Domestic Demand Net Exports

34 Latin America- More Caustic Needed Caustic Into, Million DMT Net Imports, Million DMT Caustic into Alumina Caustic into Pulp & Paper Caustic into All Other Net Caustic Imports Net Imports with Announced Pulp Capacity

35 Latin America Caustic Soda 2010 Top Producers by Technology Thousand Dry Metric Tons Diaphragm Membrane Mercury

36 Latin America Caustic Soda Million Dry Metric Tons 5.0 Production (1.0/3.0) Domestic Demand (3.5/5.5) 4.0 Total Capacity (1.5/1.2) Operating Rate 3.0 Operating Rate 95% 90% 85% % % % (% AAGR = 05-10/10-15) 36

37 Caustic Soda- Same as PVC? Latin America growing Imports rise to meet growth North America needs to accelerate exports Good fit! Prices increasingly globalized Trade drives price 37

38 Dollars Per Metric Ton Dollars Per Short Ton 1,210 1,100 1,100 Market Price Methodology 1, Contract Chlorine (Chem, FOB USGC) AAP Caustic (FOB USGC) ECU Value (AAP Cau) ECU Cash Margin 38 U.S. Chlor-Alkali Annual Economics

39 Conclusions Vinyls and caustic will move north to south Shale gas effect on both Latin America growth will outpace other regions Capacity won t keep pace Region awaits advantaged energy Prices increasingly globalized And rising with energy 39