Overcapacity in the Xylenes Chain

Transcription

1 Overcapacity in the Xylenes Chain Steve Jenkins PCI Xylenes & Polyesters Asia Sdn Bhd AUGUST 214, MUMBAI

2 Polyester Chain Vital Statistics Since 2, 669 million tonnes of polyester have been produced Polyester consumption growth averaged 6.3% globally, 9.3% in India and 14.7% in China from In 2, China accounted for 18.3% of global polyester production and 6.4% of consumption. India had 5.7% of global production. In 22, China is forecast to account for 53.9% of global polyester production and 32.3% of consumption. India is forecast to produce 11% of global polyester by this time. Estimated investment in the PX-PTA-Polyester chain since 2 is $77.4 bn, over $5bn per year on average.

3 Tonnes World Polyester Production Growth by Region 7, 6, 5, 4, 3, 1, -1, Staple Filament PET Film Others

4 Tonnes PTA Production Growth by Region 6, 5, 4, 3, 1, -1, - -3, North America South America Europe Middle East/Africa China Indian Subcontinent North East Asia South East Asia

5 Tonnes Paraxylene Production Growth by Region 4, 3, 1, -1, North America South America Europe Middle East/Africa China Indian Subcontinent North East Asia South East Asia

6 Tonnes Polyester Capacity Growth by Region 1, 8, 6, 4, North America South America Europe Middle East/Africa China Indian Subcontinent North East Asia South East Asia

7 Tonnes PTA Capacity Growth by Region 1 1, 8, 6, 4, - -4, North America South America Europe Middle East/Africa China Indian Subcontinent North East Asia South East Asia

8 Tonnes Paraxylene Capacity Growth by Region 7, 6, 5, 4, 3, 1, -1, North America South America Europe Middle East/Africa China Indian Subcontinent North East Asia South East Asia

9 Tonnes PX Tonnes PTA Tonnes Polyester Polyester/PTA/PX Capacity Growth , North America South America Europe Middle East/Africa China Indian Subcontinent North East Asia South East Asia 8, 6, 4, - 1 1, 8, 6, 4, - -4, 7, 6, 5, 4, 3, 1, -1,

10 Nameplate Utilisation Global Polyester Industry Utilisation 95% 9% 85% 8% 75% 7% PX PTA Polyester Polymer

11 USD/Tonne USD/Tonne USD/Tonne Value Chain for Polyester & Intermediates 2,5 1.5 den Polyester Staple Fibre 15 den Polyester Filament Fibre 2,5 1,5 1, Crude Oil Naphtha PX PTA PSF 1.5 den 1,5 1, Crude Oil Naphtha PX PTA POY 15 den 2,5 1,5 1, 5 PET Packaging Resin - (5) Crude Oil Naphtha PX PTA PET

12 USD/Tonne USD/Tonne USD/Tonne Polyester Fibre & Packaging Spreads den Polyester Staple Fibre 15 den Polyester Filament Fibre PSF 1.5 den POY 15 den 4 PET Packaging Resin (1) (2) PET

13 USD/Tonne USD/Tonne USD/Tonne Naphtha, Paraxylene & PTA Spreads Naphtha-Crude Spread Naphtha Paraxylene Naphtha Spread PX 6 PTA-Paraxylene Spread PTA

14 KT Polymer Utilisation India Polyester Market Outlook 1 1, 8, 6, 4, 115% 11% 15% 1% 95% 9% 85% 8% 75% 7% 65% Staple Filament PET Resin Film Polymer Capacity Polymer Utilisation Rate

15 Outlook for Polyester Margin cycle may have bottomed out for polyester, with prospect of increasingly competitive PX prices and ongoing margin squeeze for PTA giving some positive outlook. Inventory release from China s cotton stockpile may negatively impact PSF. Investment in new assets continues, although at reduced rate. Scale investment continues to drive the business cycle. Many polyester assets sit idle in China, Korea, and Taiwan but industry wide capacity rationalisation is not progressing. Idled plants are likely to be scrapped as M&A options are limited. Options for cost reduction through investment focused on scale of build, with less room to drive conversion efficiencies. Small old plants scrapped in favour of building large, new assets.

16 KT Utilisation Rate India PTA Market Outlook 1 1, 8, 6, 4, - PTA investments (RIL, JBF) wellbalanced with current demand outlook. Self-sufficiency in PTA % 95% 9% 85% 8% 75% 7% Production Consumption Capacity Net Trade Utilisation Rate

17 Outlook for Polyester & Intermediates Asia margins may stabilise if China s cartel are successful in holding lower production levels, but gross oversupply persists in N Asia Rate of investment is slowing, but capacity will continue to be added into 215, driving down overall industry utilization Plant closures have been carried out and more are planned, but are too small and too few to have any meaningful impact on utilisation and margin in the next months Asset renewal is one of the few options for survival, but this can lead to further unwanted capacity, keeping margins persistently low and extending to current downcycle for several more years to come.,

18 USD Per Tonne PTA Breakeven Cash Cost Curve Demand estimate 57.5 million tonnes annualised rate $12/te gap between leader and laggard Based on PX@$14/tonne Cumulative Capacity

19 KT Utilisation Rate India PX Market Outlook 8, 7, 6, 5, 4, 3, 1, PX investments (RIL, OMPL) push India slightly long on PX PX costs likely to remain highly competitive for downstream. 15% 1% 95% 9% 85% 8% 75% 7% Production Total Consumption Capacity Net Trade Utilisation Rate

20 Outlook for Paraxylene Margins set to fall as competition between integrated refiners and condensate-based operations intensifies. Role of gasoline and middle distillate fuel spreads may play larger role in determining PX production levels the next 2-3 years than previously seen Investments in PX will peak by 217/218 based on current project assessments Restructuring has already taken place, with non-integrated assets closed or under severe financial pressure Technology allows more PX to be made from limited supplies of feedstock naphtha, integrates refinery-based assets further and allowing for more energy efficient operations, driving down production costs/improving PX margins

21 PX Breakeven Cash Cost Curve $3/te gap between leaders and laggards

22 Any Questions? Thank You For Your Kind Attention