Polyethylene Market Review. Esteban Sagel Director Polyolefins and Polystyrene North America

Transcription

1 Polyethylene Market Review Esteban Sagel Director Polyolefins and Polystyrene North America Pemex June 2010 Singapore Shanghai Houston New York London Düsseldorf Dubai

2 The PE Story Strategic Issues : Demand turned down(with a notable exception) Asia (or better China): The bright spot in global markets Middle East: Failing to Deliver North America: The advantage of the feedstock Even with demand recovering from 2010 on, overcapacity to ensue

3 The PE Story Tactic Issues Prices in North America: from high to higher and back down to just high Supply tightness trumping low cost structure Mexico: competitive prices from a regional perspective Etileno XXI a positive development for the country

4 Total PE Global Demand Growth Million Metric Tons World, Million Metric Tons %AAGR World = North America West Europe Northeast Asia World %AAGR NAM = 3.1 WEP = 3.3 NEA =

5 World PE Demand Year Over Year World Polyethylene Demand Percent Change, Year over Year %AAGR %AAGR End Use '04-'09 '09-'14 Film & Sheet Injection Molding Pipe & Profile Extrusion Coating Blow Molding Wire & Cable Rotomolding Demand

6 PE Demand Year Over Year Mexico Polyethylene Demand Percent Change, Year over Year %AAGR %AAGR End Use '04-'09 '09-'14 Film & Sheet Injection Molding Pipe & Profile Extrusion Coating Blow Molding Wire & Cable Rotomolding Domestic Demand

7 China Stimulus Plan Worked! $586 billion for 2009 & 10 roughly 7 percent of its gross domestic product each year

8 China: Record PE Imports in 2009 Thousand Metric Tons 1, Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

9 Northeast Asia PE Imports 20% 9% 3% 1% 4% 4% 2% 1% 20% 4% 1% 3% 13% 31% 24% 59% 1% 2009 Total PE Imports = 6.52 MMT 2014 Total PE Imports = 8.25 MMT United States Canada Mexico S. America West Europe Central Europe & CIS Africa Middle East Indian Sub. NE Asia SE Asia

10 Middle East: Failing to Deliver MDE PE Capacity Additions, Million Metric Tons Delays helped keep the market tight in mar-08 sep-08 mar-09 sep-09 mar-10 sep View Current View

11 North America: Relatively Good Operating Rate, % 95 Operating Rates World WEP MDE NEA NAM

12 U.S. - The Difference is on the Feedstock Others 9% Naphtha 17% Natural Gas Liquids 74% Others 7% Natural Gas 20% Naphtha 73% Natural Gas Liquids 5% Others 8% Naphtha 87% Naphtha 16% Natural Gas Liquids 84% Naphtha 62% Natural Gas Liquids 38% Natural Gas Liquids 36% Naphtha 61% Others 3%

13 U.S. PE Exports Raise Thousand Metric Tons M M J S N 08 M M J S N 09 M M J S N 10 M Total Selected Regions N.America S.America Europe Far East Other

14 Compensating for Shrinking Domestic Market Demand and Exports, Million Pounds 3900 Production, Million Pounds Average Domestic Demand = Average Domestic Demand = Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan Domestic Demand Exports Production

15 U.S. Exports Remain Viable Dollars Per Metric Ton Forecast Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 NAM HD Disc. Price WEP HD Disc. Price NEA HD Spot NAM HD Spot Export

16 North America Total PE Trade Forecast Million Metric Tons Exports Forecast Imports Total PE Imports Total PE Exports Total PE Net Trade

17 China Quarterly Production Plus Imports Thousand Metric Tons 5,000 4,500 Forecast 4,000 3,500 3,000 2,500 2,000 1,500 1, Q3 08 Q3 09 Q3 10 Q3 11 Q3 Production Imports Total Demand (7.8 %AAGR )

18 PE Capacity Being Built In The Middle East & Asia Will Outstrip Demand Growth Million Metric Tons North America West Europe Africa/M. East Avg. Demand Growth: 3.2 Million Metric Tons Per Year South America Central Europe/CIS & Baltic States Asia/Pacific

19 Polyethylene Capacity Changes NAM WEP MDE NEA / SEA / ISC Net Increase Company kta Company kta Company kta Company kta 1Q-10 2Q-10 3Q-10 Borealis BEL HD (200) Yansab KSA HD 400 Tianjin PC CHI HD/LL 600 Borealis SWE HD/LL (90) Sharq KSA HD 400 PTT Chem THA LD 300 SABIC UK LD 400 Qatofin QAT LL 450 Bangkok PE THA HD LBI GFR HD 250 Zhenghai Ref. CC CHI HD/LL 450 Borealis SWE LD 350 MOC THA LL 300 SABIC NET LD (120) TPE THA HD Borouge UAE HD/LL 540 Gail IND LL 50 Q-Chem II QAT HD/LL 350 Haldia IND HD/LL x 120 Amir Kabir IRN LD 300 Baotou Shenhua CHI HD/LL 300 CNOOC & Shell CHI LD 75 CNOOC & Shell CHI HD 75 Indian Oil IND HD 300 Indian Oil IND HD/LL Q-10 x = capacity/expansion 0

20 20 Middle East Exports Will Need A Home Million Metric Tons 25 Average Annual Excess Of Middle East Net Exports In = 3.7 Million Metric Tons Domestic Demand Production Capacity MDE Net Exports Asia Net Imports

21 Polyethylene Exports & Imports Thousand Metric Tons

22 Excess PE Capacity Reaching Peak Levels Million Metric Tons Operating Rate, Percent Capacity Increase - Demand Increase Cummulative Delta Caps-Delta Dem Operating Rate

23 Not All Regional Margins Affected Equally Wtd. Avg. PE Margins, Dollars Per Ton NAM WEP SEA MDE (Sales to China) (Discounted Price, Integrated Producer,

24 Are Asian Prices An Indication of Things To Come? China Spot, Cents Per Pound Middle East Plants Start Up On HDPE Dollars Per Metric Ton ene-07 ene-08 ene-09 ene-10 ene LLDPE C4 HDPE BM LDPE GP

25 Ethylene Availability Pushing NAM Costs Higher Ethylene Price, Dollars Per Metric Ton 1,700 1,500 Forecast 1,300 1, A J O 09 A J O 10 A J O 11 A J O U.S. Large Buyer Contract Price

26 Cents Per Pound 100 Regional LLDPE Butene Prices (Discounted & Spot Prices) Dollars Per Metric Ton ene-07 sep-07 may-08 ene-09 sep-09 may-10 ene-11 sep-11 NAM LLDPE WEP LLDPE CHINA LLDPE (Spot)

27 U.S. Polyethylene Chain Margins Cents Per Pound Polyethylene Dollars Per Metric Ton 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

28 Mexico Relatively Better Prices Dollars Per Metric Ton 2300 Forecast Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 NAM HD Disc. Price WEP HD Disc. Price NEA HD Spot Mexico HD Spot Export

29 Relative Competitive Advantage May Remain LD/LLDPE Bags Cost of Production, Dollars Per Metric Ton (2009) 2,500 2,000 1,500 1, United States China Mexico Total Raw Materials Total Utilities Labor, Labor Related Overheads & Maint. General Overheads, Taxes & Ins. Transport to USGC

30 Mexico Attractive Polyolefins Thousand Metric Tons HDPE LDPE LLDPE 2010 Total Demand Market Imports No barriers to trade Sizable market Proximity to US consumers Reversal of trade patterns

31 Etileno XXI Mexico net importer of PE; Project will help reduce reliance on imports, keeping value added in Mexico Use of light feedstocks to provide cost advantage

32 Current $ $ / MM Btu 18 N. America Nat. Gas to Crude Ratio Gas as % of Crude BTU Basis 100% 16 90% 14 80% 12 70% 60% 10 50% 8 40% 6 30% 4 20% 2 10% 0 0% Crude (WTI) Natural Gas Gas as % of Crude

33 World Ethylene Cash Cost Comparison Dollars Per Metric Ton ,000 *MDE cash costs are average values of Iran and Saudi Arabia U.S. Ethane at Fuel Value + 5 Cents per gallon Canada Ethane NAM Ethane MDE LPG MDE Naphtha NEA LPG WEP Naphtha NAM Naphtha NEA Naphtha SEA Naphtha 33

34 PE Take-Aways Ethylene shortage drove PE price increases: April = price peak Price / margin correction begins in May Export volumes expected to increase through Q2: should coincide with increasing domestic demand to keep supplies somewhat tight US resin and film imports should be minimized in due to relatively low NAM production costs New capacity in MDE and China will keep pressure on resin producer prices and margins in 2 nd half 2010 and 2011.

35 Thank You! Hope to see you at Plastics Processors Conference & Workshops September 20-21, 2010 The Westin Chicago 909 North Michigan Avenue Chicago, IL USA More information at