Information Analytics Expertise GLOBAL POLYESTER OVERVIEW Mumbai, India Aug. 214 SUPPLY EXPLOSION IN CHINA Wei Ding, Director (Aromatics & Fibers ) Wei.Ding@ihs.com 214 IHS / ALL RIGHTS RESERVED
Agenda Demand Overview Supply Explosion Feedstock -- The Tale of PTA 214 IHS 2
Polyester Demand Outpaces GDP Polyester, Million Metric Tons 9 8 7 6 5 4 211 212 21 218 217 216 215 214 213 3 2 2 1 Polyester Growth = 2.6 X GDP Growth 38, 42, 46, 5, 54, 58, 62, 66, GDP (Billion 25 $) 214 IHS 3
Regional Disparity In Derivatives Distribution PET TEXTILE FIBER INDUSTRIAL USE FILM OTHERS 214 IHS
Polyester Captures the Bulk of Fiber Demand Growth Fibers, Million Metric Tons GDP Growth (%) 8, 6, 4, 2, -2, 5 4 3 2 1-1 -2-4, 2 22 24 26 28 21 212 214 216 218 Growth of Cotton Growth of Polyester Growth of Other Fibers GDP Growth -3 214 IHS 5
PET Still Has a Great Potential 1 Per Capita Demand, KG 8 6 4 World Average = 2.6 KG 2 Per Capita GDP, USD -5 5 15 25 35 45-2 CHI ISC SEA KOR NAM SAM WEP CEP FSU AFR MDE JAP 214 IHS 6
Fibers Are Leading the Way 8 All In Melt Equivalent, Million Metric Tons 6 AAGR: 4.4% 4 AAGR: 5.% 2 AAGR: 6.1% 28 21 212 214 216 218 Polyester Fiber PET Resin Others 214 IHS
Asia Dominates Demand Growth Million Metric Tons 8 6 4 2 28 29 21 211 212 213 214 215 216 217 218 Americas Europe Africa & Middle East Asia (Exclude China) China 214 IHS 8
Demand Engines in China Have Been Slowing 32 YOY Growth, % 24 16 8-8 23 25 27 29 211 213 SOFT DRINK FABRIC GDP 214 IHS 9
Agenda Demand Overview Supply Explosion Feedstock -- The Tale of PTA 214 IHS 1
Overbuild is Intensifying Million Metric Tons 16 12 Polyester Poly Condensation Operating Rate (%) 1 Forecast 9 8 8 4 7 6-4 5 28 21 Demand Growth 212 214 Hypo Capacity Growth 216 China 218 Asia (Exclude China) Africa & Middle East CIS & Baltic States Europe Americas Operating Rates % 214 IHS 11
PSF Always Affected by Substitutes 25 Million Metric Tons Operating Operating Rate (%) Rate 1 2 9 15 8 1 7 5 6 28 29 21 211 212 213 214 215 216 217 218 World Capacity World Demand World Op Rate 5 214 IHS 12
Filament Investment Rush 6 Million Metric Tons Operating Operating Rate, Rate % 1 48 9 36 8 24 7 12 6 28 29 21 211 212 213 214 215 216 217 218 World Capacity World Demand World Op Rate 5 214 IHS 13
PET a Hard Time is Underway 4 Million Metric Tons Operating Rate (%) Operating Rate 1 32 9 24 8 16 7 8 6 28 29 21 211 212 213 214 215 216 217 218 World Capacity World Demand World Op Rate 5 214 IHS 14
PET Investments More Than The Market Can Handle Polyester Bottle Resin Million Metric Tons Operating Rate (%) 5 1 4 3 2 1-1 28 29 21 211 212 213 214 215 216 217 218 Demand Growth Americas Europe Africa & Middle East China Asia (exclude China) Operating Rate Effective Operating Rate 9 8 7 6 5 4 214 IHS
Radical Changes to Regional Export Landscape 4. Million Metric Tons 3. 2. 1.. 23 28 213 CHI KOS TAI 214 IHS 16
Overbuilds Depress Profitability 3 Domestic, CNY Export, USD 3 25 25 2 2 15 15 1 1 5 5 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 PET EXPORT PET POY PSF 214 IHS 17
Will Investor Fervor Cool Off? Positive Signs: Chemical Fiber Investment In China Major producers have almost 12 1 8 Billion CNY YOY Growth Rate 5. 4. 3. completed an aggressive expansion wave. NDRC s guideline has changed, no longer encouraging new 6 2. capacities in East China. 4 2 24 27 21 213 1.. (1.) Complexity: Local governments. Projects may move inland. Investment YOY Growth Rate Consumers desire to integrate upstream. 214 IHS 18
Agenda Demand Overview Supply Explosion Feedstock -- The Tale of PTA 214 IHS 19
Demand Capacity World PTA Capacity Versus Demand Million Metric Tons Operating Rate, % 1 1 75 75 5 5 25 25 28 213 218 223 China Asia-China EMEA Americas Operating Rate 214 IHS 2
Global PTA Capacity Growth Million Metric Tons Operating Rate (%) 12. 1 9. 9 6. 3.. -3. PQS 64 KTA Lotte UK DAK US M&G 1.2 MMT 8 7 6-6. 28 21 212 214 216 218 Global Demand Growth China India Subcontinent NEA net China SEA Europe Middle East & Africa N. America S. America Operating Rate 5 214 IHS 21
Diminishing PTA Trade NEA 1 NAM -1 SAM -1-2 -3 1-1 MEA Europe 1-1 -2 ISC -1-2 -3-4 -5-6 -7 7 6 5 4 3 2 1 China 2 1 SEA 21/213/218 NET IMPORT/EXPORT MILLION METRIC TONS 214 IHS 214 IHS, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Asia PTA Spreads 3 Dollars Per Metric Ton Operating Rate, % 1 2 85 $125 Per Ton Spread 1 7 28 21 212 214 216 218 PTA Spread Over PX PTA Global Operating Rate 55 214 IHS 23
Can the PTA Industry Realistically Rationalize? 213 218 Capacity (MMT): 67 95 Demand (MMT): 49 64 Number of Plants: 117 14 Average Plant Size (KMT): 567 675 Excess Capacity Rationalize Demand To Achieve 85% Industry Utilization Capacity to Rationalize (MMT): 9 2 Plants to Rationalize (#): 31 55 Plant Size (KMT): <= 38 <= 52 214 IHS 24
Can the PTA Industry Realistically Rationalize? 213 218 Capacity (MMT): 67 95 Demand (MMT): 49 64 Number of Plants: 117 14 Average Plant Size (KMT): 567 675 Excess Capacity Rationalize Demand To Achieve 85% Industry Utilization Capacity to Rationalize (MMT): 9 2 Plants to Rationalize (#): 31 55 Plant Size (KMT): <= 38 <= 52 214 IHS 25
Pricing Campaign -- Salvation or a Temporary Relief 12 Thousand Metric Tons CNY 12 9 9 6 6 3 3 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Capacity Lost PTA(contract)-PX 214 IHS 26
Conclusion PTA: A tough cycle remains on track until after expansions slow down. Proactive throughput management is much better than forced shutdowns. Polyester: The market will continue to be chronically oversupplied. Trade barriers are likely to further increase. Relative disadvantage in feedstock pricing negotiations may not substantively change. 214 IHS 27