Market Analytics: Acrylic Acid and Super Absorbent Polymers

MARKETS & PROFITABILITY Market Analytics: Acrylic Acid and Super Absorbent Polymers - 2018 May 2018

MARKETS & PROFITABILITY Market Analytics: Acrylic Acid and Super Absorbent Polymers - 2018 May 2018 1 King's Arms Yard, London EC2R 7AF, UK Tel: +44 20 7950 1600 Fax: +44 20 7950 1550 This Report was prepared by Nexant, Inc. ( Nexant ). Except where specifically stated otherwise in this Report, the information contained herein is prepared on the basis of information that is publicly available, and contains no confidential third party technical information to the best knowledge of Nexant. Aforesaid information has not been independently verified or otherwise examined to determine its accuracy, completeness or financial feasibility. Neither Nexant, Subscriber nor any person acting on behalf of either assumes any liabilities with respect to the use of or for damages resulting from the use of any information contained in this Report. Nexant does not represent or warrant that any assumed conditions will come to pass. The Report is submitted on the understanding that the Subscriber will maintain the contents confidential except for the Subscriber s internal use. The Report should not be reproduced, distributed or used without first obtaining prior written consent by Nexant. Each Subscriber agrees to use reasonable effort to protect the confidential nature of the Report. Copyright by Nexant Inc. 2018. All rights reserved.

Contents page 1 2 3 Executive Summary... 1 1.1 Introduction... 2 1.2 Propylene Market Outlook... 5 1.3 Acrylic Acid... 12 1.4 Super Absorbent Polymers Market Outlook... 16 The Propylene and Derivatives Industry... 20 2.1 Olefins Overview... 20 2.2 Current Performance of the Propylene Market... 22 2.2.1 2.2.2 2.2.3 2.2.4 Consumption... 22 Supply... 26 Supply, Demand and Trade... 31 Acrylic Acid Chain... 33 2.3 Market Coverage... 35 Acrylic Acid... 36 3.1 Global... 36 3.1.1 3.1.2 3.1.3 Key Developments... 36 Consumption... 36 Supply... 40 3.1.4 Supply, Demand and Trade... 43 3.2 North America... 46 3.2.1 3.2.2 3.2.3 3.2.4 Key Developments... 46 Consumption... 46 Supply... 50 Supply, Demand and Trade... 53 3.3 South America... 56 3.3.1 Key Developments... 56 3.3.2 3.3.3 3.3.4 Consumption... 56 Supply... 59 Supply, Demand and Trade... 61 3.4 Western Europe... 63 3.4.1 Key Developments... 63 3.4.2 3.4.3 3.4.4 Consumption... 63 Supply... 66 Supply, Demand and Trade... 69 3.5 Central Europe... 71 3.5.1 Key Developments... 71 3.5.2 Consumption... 71 3.5.3 3.5.4 Supply... 73 Supply, Demand and Trade... 75 3.6 Eastern Europe... 76 MARKETS & PROFITABILITY i

3.6.1 Key Developments... 76 3.6.2 Consumption... 76 3.6.3 Supply... 78 3.6.4 Supply, Demand and Trade... 80 3.7 Middle East... 84 3.7.1 Key Developments... 84 3.7.2 Consumption... 84 3.7.3 Supply... 87 3.7.4 Supply, Demand and Trade... 88 3.8 Africa... 90 3.8.1 Key Developments... 90 3.8.2 Consumption... 90 3.8.3 Supply... 92 3.8.4 Supply, Demand and Trade... 93 3.9 Asia Pacific... 94 3.9.1 Key Developments... 94 3.9.2 Consumption... 94 3.9.3 Supply... 103 3.9.4 Supply, Demand and Trade... 111 4 Super Absorbent Polymers... 115 4.1 Global... 115 4.1.1 4.1.2 Key Developments... 115 Consumption... 115 4.1.3 Supply... 121 4.1.4 Supply, Demand and Trade... 123 4.2 North America... 126 4.2.1 4.2.2 4.2.3 Key Developments... 126 Consumption... 126 Supply... 130 4.2.4 Supply, Demand and Trade... 132 4.3 South America... 135 4.3.1 4.3.2 4.3.3 Key Developments... 135 Consumption... 135 Supply... 137 4.3.4 Supply, Demand and Trade... 139 4.4 Western Europe... 140 4.4.1 4.4.2 4.4.3 4.4.4 Key Developments... 140 Consumption... 140 Supply... 144 Supply, Demand and Trade... 147 4.5 Central Europe... 149 4.5.1 Key Developments... 149 4.5.2 Consumption... 149 4.5.3 Supply... 150 MARKETS & PROFITABILITY ii

4.5.4 Supply, Demand and Trade... 150 4.6 Eastern Europe... 152 4.6.1 4.6.2 4.6.3 4.6.4 Key Developments... 152 Consumption... 152 Supply... 155 Supply, Demand and Trade... 155 4.7 Middle East... 159 4.7.1 Key Developments... 159 4.7.2 4.7.3 4.7.4 Consumption... 159 Supply... 162 Supply, Demand and Trade... 164 4.8 Africa... 166 Key Developments... 166 4.8.1 4.8.2 4.8.3 4.8.4 Consumption... 166 Supply... 167 Supply, Demand and Trade... 168 4.9 Asia Pacific... 169 4.9.1 Key Developments... 169 4.9.2 Consumption... 169 4.9.3 4.9.4 Supply... 176 Supply, Demand and Trade... 184 A Methodology... 189 A.1 Market Dynamics Forecasting Methodology... 189 A.1.1 Capacity Availability and Forecasting... 189 A.1.2 End-Use Consumption Forecasting... 189 A.1.3 Production and Trade Forecasting... 193 B Acrylic Acid Value Chain Technology... 194 B.1 Propylene... 194 B.1.1 Technology... 194 B.2 Acrylic Acid... 198 B.2.1 Acrylic Acid Technology... 198 B.2.2 Petrochemical-Based Acrylic Acid... 198 B.2.3 Alternative and Bio-based Routes to Acrylic Acid... 200 B.3 Super Absorbent Polymers... 201 B.3.1 Routes to Production... 201 B.3.2 Process Technology... 202 Figures Figure 1 Global Propylene Demand, 2017-e 24 Figure 2 Global GDP Growth vs Propylene Consumption Growth 24 Figure 3 Global Combined Propylene Consumption 26 Figure 4 Global Propylene Capacity Share by Marketer in 2017-e 29 Figure 5 Regional Propylene Capacity Addition 30 Figure 6 Regional Propylene Capacity 30 MARKETS & PROFITABILITY iii

Figure 7 Global Propylene Supply and Demand 32 Figure 8 Regional Propylene Net Exports/(Imports) 32 Figure 9 Global Acrylic Acid Consumption by End-Use, 2017-e 39 Figure 10 Global GDP Growth vs Acrylic Acid by Region 39 Figure 11 Global Acrylic Acid Consumption by Region 40 Figure 12 Global Acrylic Acid Capacity Share by Marketer in 2017-e 42 Figure 13 Global Acrylic Acid Capacity Addition 42 Figure 14 Global Acrylic Acid Capacity 42 Figure 15 Global Acrylic Acid Supply, Demand and Trade 44 Figure 16 Global Acrylic Acid Net Exports (Imports) 45 Figure 17 North America Acrylic Acid Demand, 2017-e 49 Figure 18 Location of Acrylic Acid Plants in North America 52 Figure 19 North America Acrylic Acid Supply, Demand and Trade 54 Figure 20 United States Acrylic Acid Supply, Demand and Trade 55 Figure 21 South America Acrylic Acid Demand, 2017-e 58 Figure 22 Location of Acrylic Acid Plants in South America 60 Figure 23 South America Acrylic Acid Supply, Demand and Trade 62 Figure 24 Western Europe Acrylic Acid Demand, 2017-e 65 Figure 25 Location of Acrylic Acid Plants in Western Europe 68 Figure 26 Western Europe Acrylic Acid Supply, Demand and Trade 70 Figure 27 Central Europe Acrylic Acid Consumption, 2017-e 72 Figure 28 Location of Acrylic Acid Plants in Central Europe 74 Figure 29 Central Europe Acrylic Acid Supply, Demand and Trade 75 Figure 30 Russian Acrylic Acid Consumption, 2017-e 77 Figure 31 Location of Acrylic Acid Plants in Eastern Europe 79 Figure 32 Russia Acrylic Acid Supply, Demand and Trade 81 Figure 33 Total Eastern Europe Acrylic Acid Supply, Demand and Trade 83 Figure 34 Middle East Acrylic Acid Demand, 2017-e 86 Figure 35 Location of Acrylic Acid Plants in the Middle East 88 Figure 36 Middle East Acrylic Acid Supply, Demand and Trade 89 Figure 37 Africa Acrylic Acid Demand, 2017-e 91 Figure 38 Location of Acrylic Acid Plants in Africa 92 Figure 39 Africa Acrylic Acid Supply, Demand and Trade 93 Figure 40 Asia Pacific Acrylic Acid Demand, 2016-e 102 Figure 41 Location of Acrylic Acid Plants in China 109 Figure 42 Location of Acrylic Acid Plants in Japan and South Korea 109 Figure 43 Location of Acrylic Acid Plants in South-East Asia 110 Figure 44 Location of Acrylic Acid Plants in India 110 Figure 45 Asia Pacific Acrylic Acid Supply, Demand and Trade 113 Figure 46 China Acrylic Acid Supply, Demand and Trade 114 Figure 47 Global Super Absorbent Polymers Demand by End-Use-2017-e 119 Figure 48 Global GDP Growth vs Super Absorbent Polymers by Region 119 Figure 49 Global Super Absorbent Polymers Consumption by Region 120 Figure 50 Global Super Absorbent Polymers Capacity Share by Marketer in 2017-e 122 MARKETS & PROFITABILITY iv

Figure 51 Global Super Absorbent Polymers Capacity Addition 122 Figure 52 Global Super Absorbent Polymers Capacity 122 Figure 53 Global Super Absorbent Polymers Supply, Demand and Trade 124 Figure 54 Global Super Absorbent Polymers Net Exports (Imports) 125 Figure 55 North America Super Absorbent Polymers Demand, 2017-e 129 Figure 56 Location of Super Absorbent Polymers Plants in North America 131 Figure 57 North America Super Absorbent Polymers Supply, Demand and Trade 133 Figure 58 United States Super Absorbent Polymers Supply, Demand and Trade 134 Figure 59 South America Super Absorbent Polymers Demand, 2017-e 136 Figure 60 Location of Super Absorbent Polymers Plants in South America 138 Figure 61 South America Super Absorbent Polymers Supply, Demand and Trade 139 Figure 62 Western Europe Super Absorbent Polymers Demand, 2017-e 143 Figure 63 Location of Super Absorbent Polymers Plants in Western Europe 146 Figure 64 Western Europe Super Absorbent Polymers Supply, Demand and Trade 148 Figure 65 Central Europe Super Absorbent Polymers Consumption, 2017-e 150 Figure 66 Central Europe Super Absorbent Polymers Supply, Demand and Trade 151 Figure 67 Russia Super Absorbent Polymers Consumption, 2017-e 153 Figure 68 Other Eastern Europe Super Absorbent Polymers Consumption, 2017-e 154 Figure 69 Russia Super Absorbent Polymers Supply, Demand and Trade 156 Figure 70 Other Eastern Europe Super Absorbent Polymers Supply, Demand and Trade 157 Figure 71 Total Eastern Europe Super Absorbent Polymers Supply, Demand and Trade 158 Figure 72 Middle East Super Absorbent Polymers Demand, 2017-e 161 Figure 73 Location of Super Absorbent Polymers Plants in the Middle East 163 Figure 74 Middle East Super Absorbent Polymers Supply, Demand and Trade 165 Figure 75 Africa Super Absorbent Polymers Demand, 2017-e 167 Figure 76 Africa Super Absorbent Polymers Supply, Demand and Trade 168 Figure 77 Asia Pacific Super Absorbent Polymers Demand, 2017-e 175 Figure 78 Location of Super Absorbent Polymers Plants in China 182 Figure 79 Location of Super Absorbent Polymers Plants in Japan and South Korea 183 Figure 80 Location of Super Absorbent Polymers Plants in South-East Asia 183 Figure 81 Asia Pacific Super Absorbent Polymers Supply, Demand and Trade 186 Figure 82 China Super Absorbent Polymers Supply, Demand and Trade 187 Figure 83 End-Use Consumption Drivers 190 Figure 84 Monomer Consumption Drivers 192 Figure 85 Trade Considerations 193 Figure 86 Global Olefins Production by Process 2013 195 Figure 87 Global Propylene Capacity Additions 196 Figure 88 Petrochemical-based Routes to Acrylic Acid 199 Figure 89 Generic Flow Diagram for Solution Polymerization 201 Figure 90 Generic Flow Diagram for Suspension Polymerization 202 MARKETS & PROFITABILITY v

Tables Table 1 Global Acrylic Acid Consumption by End-Use 39 Table 2 Global Acrylic Acid Consumption by Region 40 Table 3 Global Acrylic Acid Supply, Demand and Trade 44 Table 4 North America Acrylic Acid Consumption by End-Use 49 Table 5 North America Acrylic Acid Consumption by Country 49 Table 6 Acrylic Acid Capacity in North America 51 Table 7 North America Acrylic Acid Supply, Demand and Trade 54 Table 8 United States Acrylic Acid Supply, Demand and Trade 55 Table 9 South America Acrylic Acid Consumption by End-Use 58 Table 10 South America Acrylic Acid Consumption by Country 58 Table 11 Acrylic Acid Capacity in South America 59 Table 12 South America Acrylic Acid Supply, Demand and Trade 62 Table 13 Western Europe Acrylic Acid Consumption by End-Use 65 Table 14 Acrylic Acid Capacity in Western Europe 67 Table 15 Western Europe Acrylic Acid Supply, Demand and Trade 70 Table 16 Central Europe Acrylic Acid Consumption by End-Use 72 Table 17 Acrylic Acid Capacity in Central Europe 73 Table 18 Central Europe Acrylic Acid Supply, Demand and Trade 75 Table 19 Russia Acrylic Acid Consumption by End-Use 77 Table 20 Acrylic Acid Capacity in Russia 79 Table 21 Russia Acrylic Acid Supply, Demand and Trade 81 Table 22 Other Eastern Europe Acrylic Acid Supply, Demand and Trade 82 Table 23 Total Eastern Europe Acrylic Acid Supply, Demand and Trade 83 Table 24 Middle East Acrylic Acid Consumption by End-Use 86 Table 25 Middle East Acrylic Acid Consumption by Country 86 Table 26 Acrylic Acid Capacity in the Middle East 87 Table 27 Middle East Acrylic Acid Supply, Demand and Trade 89 Table 28 Africa Acrylic Acid Consumption by End-Use 91 Table 29 Africa Acrylic Acid Consumption by Country 91 Table 30 Acrylic Acid Capacity in Africa 92 Table 31 Africa Acrylic Acid Supply, Demand and Trade 93 Table 32 Asia Pacific Acrylic Acid Consumption by End-Use 102 Table 33 Asia Pacific Acrylic Acid Consumption by Country 102 Table 34 Acrylic Acid Capacity in Asia Pacific 108 Table 35 Asia Pacific Acrylic Acid Supply, Demand and Trade 113 Table 36 China Acrylic Acid Supply, Demand and Trade 114 Table 37 Global Super Absorbent Polymers Consumption by Region 119 Table 38 Global Acrylic Acid Consumption by Region 120 Table 39 Global Super Absorbent Polymers Supply, Demand and Trade 124 Table 40 North America Super Absorbent Polymers Consumption by Country 129 Table 41 Super Absorbent Polymers Capacity in North America 131 Table 42 North America Super Absorbent Polymers Supply, Demand and Trade 133 Table 43 United States Super Absorbent Polymers Supply, Demand and Trade 134 MARKETS & PROFITABILITY vi

Table 44 South America Super Absorbent Polymers Consumption by Country 136 Table 45 Super Absorbent Polymers Capacity in South America 137 Table 46 South America Super Absorbent Polymers Supply, Demand and Trade 139 Table 47 Western Europe Super Absorbent Polymers Consumption 143 Table 48 Super Absorbent Polymers Capacity in Western Europe 145 Table 49 Western Europe Super Absorbent Polymers Supply, Demand and Trade 148 Table 50 Central Europe Super Absorbent Polymers Consumption 150 Table 51 Central Europe Super Absorbent Polymers Supply, Demand and Trade 151 Table 52 Russia Super Absorbent Polymers Consumption 153 Table 53 Other Eastern Europe Super Absorbent Polymers Consumption 154 Table 54 Russia Super Absorbent Polymers Supply, Demand and Trade 156 Table 55 Other Eastern Europe Super Absorbent Polymers Supply, Demand and Trade 157 Table 56 Total Eastern Europe Super Absorbent Polymers Supply, Demand and Trade 158 Table 57 Middle East Super Absorbent Polymers Consumption by Country 161 Table 58 Super Absorbent Polymers Capacity in the Middle East 163 Table 59 Middle East Super Absorbent Polymers Supply, Demand and Trade 165 Table 60 Africa Super Absorbent Polymers Consumption by Country 167 Table 61 Africa Super Absorbent Polymers Supply, Demand and Trade 168 Table 62 Asia Pacific Super Absorbent Polymers Consumption by Country 175 Table 63 Super Absorbent Polymers Capacity in Asia Pacific 181 Table 64 Asia Pacific Super Absorbent Polymers Supply, Demand and Trade 186 Table 65 China Super Absorbent Polymers Supply, Demand and Trade 187 MARKETS & PROFITABILITY vii

1 Executive Summary Agenda 1. Introduction 2. Propylene Market Outlook 3. Acrylic Acid 4. Super Absorbent Polymers MARKETS & PROFITABILITY 1

1.1 Introduction Analysis and forecast of supply and demand of the global acrylic acid and super absorbent polymers market Report Scope Product Scope: This report provides an overview of the propylene industry, with detailed analysis of the acrylic acid and super absorbent polymers markets Geographic Scope: Global North America South America Western Europe Central Europe Eastern Europe Middle East Africa Asia Pacific Report Contents Section 1: Executive Summary Section 2: The Propylene and Derivatives Industry 1.1. Olefins Overview 1.2. Current Performance of the Propylene Market Section 3: Propylene Section 4: Acrylic Acid Section 5: Super Absorbent Polymers Note: Sections 4-5 are segmented by geographic region and have the following outline 4.1.1. Consumption 4.1.2. Supply 4.1.3. Supply, Demand and Trade Markets and prices are inherently linked. Economic growth shapes markets via consumption. Crude oil drives costs Scenario Definition Nexant Petrochemical Simulator CAPACITY SUPPLY DEMAND MODEL Primary Energy Prices (Crude Oil, Gas & derived feedstock) CONSUMPTION SCENARIO INPUTS OPERATING RATES Economic Growth Inflation Rates Exchange Rates Petrochemical Asset Investment Profiles PRICE COMPETITION PRODUCT PRICES ECONOMIC GROWTH CRUDE OIL INFLATION EXCHANGE RATE PLANT MARGINS PROFITABILITY CORRELATION COST MODELS Nexant's Petrochemical Simulator tests assumptions of volatile operating environments with proven methodology. MARKETS & PROFITABILITY 2

Consumption modelling separates end use and derivative consumption, ensuring latter is correlated with production assets Petrochemical Industry Forecast Methodology CAPACITY CONSUMPTION PRICE COMPETITION PRODUCT PRICES SUPPLY DEMAND MODEL COST MODELS OPERATING RATES PROFITABILITY CORRELATIONS PLANT MARGINS Petrochemical consumption modelling considers two distinct components: End-Use Consumption from purchasing by external players (plastic bag purchasing, window profiles, bottles) This marks interface between end of petrochemical value chains and the first level component manufacture in wider manufacturing supply chain Consumption by derivatives within the petrochemical industry, generated from flow of intermediates within petrochemical value chains. Complex petrochemical value chains such as polyester may require many chemical intermediates to yield final products. Production of the different intermediates may occur on many distinct production units in diverse geographies. Production of all ethylene derivatives causes consumption of ethylene. Market balance commences industry outlook, determining operating environment and projected demand Petrochemical Industry Forecast Methodology CAPACITY CONSUMPTION PRICE COMPETITION PRODUCT PRICES SUPPLY DEMAND MODEL COST MODELS OPERATING RATES PROFITABILITY CORRELATIONS PLANT MARGINS Supply modelling New project plans and feedstock opportunities Derivatives rely on feedstock and intermediate value chain needs modelling in detail. Capacity increases by new build and expansion of existing assets can be significant Where will new plants be built in 10 years? Demand modelling Economic outlook drives volumes (GDP or Industrial Production?) Regional processing developments moving consumption centres (migration to low cost manufacturing centres/re-shoring) Penetration into new markets (Improving product performance opens applications) Competition with other materials Legislation offers opportunity and threat Supply developments are controlled by the industry. Demand is largely beyond industry control, shaped by many external influences. MARKETS & PROFITABILITY 3

Global economic growth in 2017 increased to around three percent Regional GDP Outlook 15% 10% 5% 0% -5% 2000 2005 2010 2015 2020 2025 2030 2035 Global economic growth was close to three percent in in 2017, with a small increase in growth in Western Europe and the United States, China slowing but not crashing, and Brazil and Russia resuming positive growth. The sharp fall in crude oil prices offered little support to global economic activity in 2015 and 2016. Global GDP growth will strengthen to a peak but will remain depressed below previous upturns. The rate of decline in Chinese economic growth will ease to a soft landing as the economy matures. Confidence in the Euro zone economies will improve. Global United States Western Europe China Japan MARKETS & PROFITABILITY 4

1.2 Propylene Market Outlook Key themes influencing the propylene market New U.S. PDH plants overcame technical problems and contributed to a significant increase in propylene exports in 2017. India consumption growth also strong, despite growing concerns over bad debt. Methanol-to-Olefins (MTO) and Propane Dehydrogenation (PDH) are still competitive at lower propylene prices, and dominating supply growth, displacing metathesis. Metathesis challenged by low propylene prices, high ethylene prices and butene values. The proportion of propylene from steam cracker is in a short-term downtrend as several crackers were upgraded from naphtha-based to mixed-feed crackers. Several new liquids-based cracker projects in China to provide around 4 million tons per year of additional propylene by 2021. Major new refinery developments announced, although none include significant FCC propylene capacity. Crude oil import licenses for teapot refiners in China significantly increased in 2018, likely to provide additional FCC propylene at least until new refineries enter production. The surge in capacity growth in China has dominated the global market in recent years Global Propylene Capacity by Region 2017 = Approx. 118 million tons Global Propylene Capacity Growth by Region (Percent Volume Growth) Western Europe Central Eastern South Europe Europe America Middle East North America Source: Nexant Analysis Africa Asia Pacific ex-china China South America Eastern Europe Middle East Asia Pacific China Africa Central Europe North America Western Europe -0.1 1.1 0.2 2.1 2.6 2.4 3.5 4.4 3.9 4.5 2.0 2.8 6.2 6.2 7.1 11.3 10.3 11.9-2 0 2 4 6 8 10 12 14 2017-2025 2000-2017 PDH developments in North America have offset the loss of steam cracker propylene in recent years. MARKETS & PROFITABILITY 5

Million tons Market Analytics: Propylene can be produced cheaply enough to stimulate more demand than can be supplied from conventional sources Global Propylene Capacity by Feedstock/Technology (Million tons per year) Cracker: Global Propylene Production by Process (Percentage Share) 100% 75% 2010 2015 2022 Refinery: 50% 2010 2015 2022 25% On-Purpose 2010 2015 2022 0% 2010 2015 2022 Cracker Refinery On-Purpose PDH (in North America, China, Eastern Europe, and Middle East) and MTO/MTP (in China) have led to a sharp drop in propylene values. Steam cracking and refinery sources still dominate propylene supply Propylene Capacity by Region, 2017 (Million tons) 70 60 50 40 30 20 10 0 North America Western Europe Middle East Asia Pacific Steam cracker Refinery PDH MTO/MTP Others Propylene Capacity by Region, 2017 (Percentage Volume Basis) 100% 80% 60% 40% 20% 0% North America Western Europe Middle East Asia Pacific Steam cracker Refinery PDH MTO/MTP Others Propylene supply growth in the Middle East is currently low, but new capacity is planned in Iran Two major new PDH units in the United States are operational and providing for exports FCC propylene supply growth continues mostly in Asia-ex China None of the new oil refineries in China include FCC units. MARKETS & PROFITABILITY 6

2000.1 2001.1 2002.1 2003.1 2004.1 2005.1 2006.1 2007.1 2008.1 2009.1 2010.1 2011.1 2012.1 2013.1 2014.1 2015.1 2016.1 2017.1 US Dollars per ton Market Analytics: US propane prices have realigned with other regions due to increased export capacity... United States and Europe Propane Prices (US$ per ton) 1000 800 600 Prices in the US followed the uptick in other regions in 2017 Price in the US decouple from other regions in 2008, but since 2012, additional LPG terminal and shipping capacity has been added to transport excess propane away from the U.S. 400 200 0-200 2000 2005 2010 2015 US WE WE - US Prior to export terminal capacity coming online, propane prices were severely depressed due to lack of takeaway capacity Huge increases in LPG terminal and vessel capacity have allowed the US market to rebalance... However, the outlook for continued viability of propane exports hinges on the oil price outlook. PDH margins in the United States have halved but the business is still highly profitable PDH Margins in the United States (Dollars per ton) 1200 1000 800 600 400 200 0 PDH cash margins half halved from the recent peaks in the US for two main reasons: Rebalancing of propane prices with other regions Lower propylene prices due to increased supply in the US and Asia One major new PDH/PP project has been confirmed in Canada and another is likely to proceed. Three major projects; proposed second new lines for both Enterprise and Dow, and a plant proposed by Ascend Performance Materials have been indefinitely postponed or cancelled Variable Cost Margin Cash Cost Margin MARKETS & PROFITABILITY 7

Million Tons Market Analytics: Dow and Enterprise now operational after severe problems North America On-Purpose Propylene Projects: Company Location Process Status Propylene Capacity, kta Announced Derivative Capacity Dow Freeport, TX PDH Operating, 2015 750 Propylene oxide Enterprise Mont Belvieu, TX PDH Operating, 2017 750 Offtake - Braskem Formosa Plastics Point Comfort, TX PDH Delayed, 2021 545 Maybe Polypropylene Ascend Performance Materials Chocolate Bayou, TX PDH On Hold 1 000 Nylon chain, and offtake Inter Pipeline Redwater, Alberta PDH Planned, 2022 440 Polypropylene Pembina Alberta PDH Unclear 525 Polypropylene REXtac Odessa, TX PDH Cancelled 300 Enterprise II PDH Cancelled Dow II Freeport, TX PDH Unclear 750 Sunoco Logistics Marcus Hook, PA PDH Feasibility stage Offtake BASF Freeport, TX MTP FID Postponed 475 Acrylic acid/oxo-alcohols LyondellBasell Metathesis Feasibility stage Alpek Altamira, Mexico PDH/MTP Feasibility stage 400-500 Enterprise s operational problems may not yet be over, and serve as a warning to other potential entrants. China s CTO and PDH units are competitive despite the lower propylene prices China Propylene Capacity by Process (Million tons) 50 China Propylene Capacity Profile (Percentage Share) 100% 40 75% 30 50% 20 10 25% 0 2010 2015 2020 2025 0% 2010 2015 2020 2025 Refinery Cracker CTO/MTO On-Purpose Refinery Cracker CTO/MTO On-Purpose MARKETS & PROFITABILITY 8

Million tons Market Analytics: Polypropylene accounts two thirds of global propylene demand, and 75 percent of growth to 2025 Global Total Propylene Consumption by Derivative 2017-e = Approx. 106 million tons Oxo Alcohols Cumene Acrylonitrile Propylene Oxide Acrylic Acid Others Polypropylene Global Total Propylene Consumption Growth by Derivative (percent Volume Growth) Acrylic Acid 4.0 5.2 EPDM 3.0 3.4 Propylene Oxide 3.8 3.7 Polypropylene 4.4 4.9 Global Average 3.9 4.0 Butanols 3.7 2.8 Cumene 3.1 3.0 2-Ethylhexanol 2.7 2.7 Isopropanol -0.8 0.7 Acrylonitrile 1.0 2.8 Others 0.5 2.6-2 0 2 4 6 2017-2025 2000-2017 Global propylene consumption is forecast to grow at an average annual growth rate of 3.9% to 2025. Source: Nexant Analysis China will account for just over half of global polypropylene capacity addition over the next five years Global Polypropylene Capacity (Million tons per year) 120 100 80 60 40 20 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 North America South America Western Europe Central Europe Eastern Europe Middle East Africa China Asia Pacific ex-china MARKETS & PROFITABILITY 9

North America s position as a net exporter of propylene derivatives will strengthen in the long term North America Demand Key Propylene Demand (Million tons Propylene equivalent) 20 18 16 14 12 10 8 6 North America Propylene Derivatives Net Trade (Million tons Propylene equivalent) 2.0 1.5 1.0 0.5 0.0 4-0.5 2 0 2 010 2 015 2 020 2 025 PP ACN PO 2-EH -1.0 2010 2015 2020 2025 PP ACN PO 2-EH Butanols AA Cumene PHE Butanols AA Cumene PHE China s massive capacity build is dropping propylene derivative imports China Demand Key Propylene Demand (Million tons Propylene equivalent) 60 50 40 30 20 10 China Propylene Derivatives Net Trade (Million tons Propylene equivalent) 1.0 0.0-1.0-2.0-3.0-4.0-5.0-6.0 0 2010 2015 2020 2025-7.0 2010 2015 2020 2025 PP ACN PO 2-EH PP ACN PO 2-EH Butanols AA Cumene PHE Butanols AA Cumene PHE MARKETS & PROFITABILITY 10

Possible 1.5m tons per year of PDH/PP could reverse the decline in derivative net trade Western Europe Demand Key Propylene Demand (Million tons Propylene equivalent) 18 16 14 12 10 8 6 4 2 Western Europe Propylene Derivatives Net Trade (Million tons Propylene equivalent) 1.5 1.0 0.5 0.0-0.5 0 2010 2015 2020 2025-1.0 2010 2015 2020 2025 PP ACN PO 2-EH PP ACN PO 2-EH Butanols AA Cumene PHE Butanols AA Cumene PHE Middle East Demand Key Propylene Demand (Million tons Propylene equivalent) 10 9 8 7 6 5 4 3 2 1 0 2010 2015 2020 2025 PP ACN PO 2-EH Butanols AA Cumene PHE Middle East Propylene Derivatives Net Trade (Million tons Propylene equivalent) 6.0 5.0 4.0 3.0 2.0 1.0 0.0-1.0 2010 2015 2020 2025 PP ACN PO 2-EH Butanols AA Cumene PHE MARKETS & PROFITABILITY 11

1.3 Acrylic Acid There are two main commercialised routes to acrylic acid and acrylate ester (acrylate) production Acrylic Acid Production There are two main commercialised routes to acrylic acid and acrylate ester (acrylate) production: Propylene oxidation technology and Acetylene Reppe technology. Other routes including production direct from propane, and a biotech process based on lactic acid, which had not yet been commercialised. Propylene may be oxidised to acrylic acid in one stage using a cobalt molybdenum catalyst or in two stages through an intermediate, acrolein, based on complex multi-component catalysts. Single stage processes are problematic due to the proportion of recycle required and reactor size limitations. There is currently no Reppe process acrylic acid capacity still in commercial operation, as China appears to be favouring propylene-based routes.. Acrylate Esters e.g. Butyl acrylate or 2- ethyhexyl acrylate used in paints and coatings Propylene Acrylic Acid Superabsorbent Polymers (SAP) Used in consumer applications e.g. diapers Others Detergents Flocculants Acrylic acid has grown at 5.1% CAGR from 2000 to 2017; and now global demand exceeds 6 million tons Global Acrylic Acid Consumption by Region 2017-e = Approx. 6.3 million tons Global Acrylic Acid Consumption Growth by Region (Percent Volume Growth) South America 2% Western Europe 14% North America 19% Middle East 3% Eastern Europe 1% Africa 1% Central Europe 1% Asia Pacific 59% Middle East Africa Eastern Europe South America Asia Pacific Global Average Central Europe North America Western Europe 3.7 20.7 1.9 18.8 3.9 18.1 0.7 10.2 5.6 8.6 4.0 5.1 1.4 1.9 1.2 1.2 1.3 1.0 0 5 10 15 20 25 2017-2025 2000-2017 Acrylic acid is used in a diverse range of applications including construction, automotive, packaging, health and personal care products. This broad range of applications results in Source: Nexant Analysis demand growth at marginally higher than GDP. MARKETS & PROFITABILITY 12

Global acrylic acid consumption will be mainly driven by SAP for consumer hygiene Acrylic Acid Demand 2017-e = Approx. 6.3 million tons Acrylic Acid Demand Growth by End-Use (percent Volume Growth) Detergents, flocculants, others 16% Superabsorbent Polymers 4.6 6.2 Acrylate Esters 46% Global Average Acrylate Esters 4.0 5.1 3.9 4.3 Superabsor bent Polymers 38% Detergents, flocculants, others 3.0 5.0 0 2 4 6 8 10 2017-2025 2000-2017 Demand for SAP is heavily influenced by consumption into hygiene items which mainly consists of diapers, sanitary items and incontinence pads. The consumption of these products will reflect population increases, birth rates, ageing populations and wealth. Source: Nexant Analysis Super absorbent polymer production is concentrated in North America, Western Europe and Asia Pacific Acrylic Acid Demand by End Use, 2017-e 100% 80% 60% 40% 20% 0% Global North America South America Western Europe Central Europe Eastern Europe Middle East Africa Asia Pacific Acrylate Esters Super Absorbent Polymers Detergents, flocculants, others MARKETS & PROFITABILITY 13

Global acrylic acid capacity was estimated at 8.1 million tons in 2017; to 2020, most new capacity addition will be in China Global Acrylic Acid Capacity (Million tons) 16 14 12 10 8 6 4 2 0 2014 2015 2016 2017 2018 2020 2025 2030 2035 North America South America Western Europe Central Europe Eastern Europe Middle East Africa Asia Pacific Acrylic acid supply is concentrated with the top five producers including BASF, DowDuPont, Arkema, Nippon Shokubai, and LG Chem, accounting for 53 percent of the global capacity in 2017. All acrylic acid capacity is based on the twostage oxidation of propylene route. Acrylic acid technology was traditionally held by four companies globally, BASF, Nippon Shokubai, Dow Chemical and Mitsubishi Chemical. Chinese companies have developed their own technology, providing opportunity for Chinese locals to build new production facilities to meet domestic demand. Increased concern regarding the high crude oil price and environmental issues, had spurred the development of a bio-route to acrylic acid. These developments, however, are still at early stages and are expected to take some years before commercialisation. Operating rates in Asia Pacific fell to below 80 percent bring down the global average between 2014 and 2017 Global Acrylic Acid Supply, Demand and Trade (Thousand tons) 15000 100% 10000 50% 5000 0 2000 2005 2010 2015 2020 2025 2030 Consumption Total Capacity Production Operating Rate 0% Global operating rates are not expected to recover in the next five years, but will improve towards the end of the forecast period as investment slows and demand catches up. MARKETS & PROFITABILITY 14

Acrylic acid net trade accounts for only 2 to 3 percent of supply as the acid tends to self-polymerise Global Acrylic Acid Net Trade (Thousand Tons) Western Europe Positive Number = Net Export Negative Number = Net Import 2017 2025 North America -34-14 15 28 Asia Pacific Middle East 24 0 South America 7-19 -3-21 The inter-regional trade volume will remain at low levels during the forecast period as new acrylic acid capacity is built alongside derivatives, increasing captive consumption of acrylic acid for its derivative production. MARKETS & PROFITABILITY 15

1.4 Super Absorbent Polymers Market Outlook Super Absorbent Polymers (SAP) are water-absorbing polymers SAP can absorb and retain Polymer high backbonelevels of saline liquids A) A) 1) Initiator 2) Cross linker 1) Initiator 2) Cross linker Cross Polymer linker backbone Polymer Cross linker backbone Polymer backbone B) B) PP: 00101.0015.4113 Figures 1) Initiator 2) Cross linker 1) Initiator 2) Cross linker Schematic representation of the cross linked polymer in Scheme A Schematic representation of Schematic representation a cross linked polymer network found in an SAP Schematic representation a When cross linked, the acrylic homo-polymers the cross linked in are turned cross into linked polymer hydrogels. network The Scheme A found in an SAP absorbency PP: 00101.0015.4113 and Figures swelling capacity are monitored by the usage of the degree and type of cross linkers to turn it into gel. Demand from consumer hygiene products accounts for 96% of global super absorbent polymer demand in 2017 Global Super Absorbent Polymer Demand 2017-e = Approx. 2.8 million tons Adult Incontinence 19% Feminine Hygiene 5% Others 4% Diapers 72% Diapers SAP end use is largely mature in developed countries and is only growing rapidly in developing regions with rising disposable incomes and current low penetration of disposable diapers Incontinence SAP end use is exhibiting strong growth in all regions due to ageing populations Sanitary SAP end use is growing in developing markets with increased disposable income and hygiene awareness Other Applications include: Agriculture and Horticulture Applications used for hydroponics, seedling germination and transportation. Technical Applications used in electric cable wrap, underground telecommunications, liquid waste disposal and water removal in mining. Miscellaneous - include food packaging, waste treatment, fiber optic cables, artificial snow and as additives in lubricants, sealants and cosmetics. Super absorbent polymers demand into diapers is estimated at 72% in 2017, a slight increase from 71% in 2016, due to the intensive diaper manufacturing investment in developing regions. Source: Nexant Analysis MARKETS & PROFITABILITY 16

Units Sold (Billions) Market Analytics: Asia will account for three quarters of new diaper demand by 2020 driven by population growth and improving incomes Global Diaper Demand, 2010-2020 100 90 80 70 60 50 40 30 20 10 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 North America South America Europe Middle East Africa Asia Pacific Asia Pacific will continue to drive global SAP demand, driven by both current and developing end use markets Super Absorbent Polymer Demand 2017-e = Approx. 2.8 million tons Super Absorbent Polymer Demand Growth (percent Volume Growth) Middle East 5% South America 7% Western Europe 15% Africa 6% Central Europe 3% North America 21% Eastern Europe 2% Asia Pacific 41% Asia Pacific Global Average Middle East Africa Eastern Europe Central Europe South America North America Western Europe 7.6 10.8 4.7 6.5 4.4 7.1 4 9.5 3.3 2.8 4.9 2.4 7.3 1.8 3.8 1 2.7 15.4 0 5 10 15 20 There are currently no substitutes for super absorbent polymer; with the main competition in the finished product markets from cloth alternatives. MARKETS & PROFITABILITY 17

Asia Pacific SAP demand is concentrated in North-East Asia, although growth is driven by China Asia Pacific Super Absorbent Polymer Demand 2017-e = Approx. 1.2 million tons Australasia Malaysia 2% 2% Vietnam 2% Thailand 2% India 3% South Korea 5% Indonesia 8% Philippines 2% Taiwan 1% Japan 22% Singapore 1% Other Asia 2% China 48% Asia Pacific Super Absorbent Polymer Demand Growth, 2017-2025 (percent Volume Growth) India China Malaysia Indonesia Other Asia Philippines Thailand Japan South Korea Taiwan Singapore 0.9 0.5 1.5 2.9 4.6 7 6.8 6.6 9.8 9.6 13.1 0 5 10 15 In 2017, the diaper market represented 73% of demand in Asia Pacific, while adult incontinence was 16%, sanitary products 7% and other applications accounted for 4%. Penetration rates vary enormously across Asia Pacific, with culture, socio-economic structure, buying behaviour as well as price influencing uptake. Super absorbent polymers are manufactured by a handful of players, with capacity focused in their home countries Global Super Absorbent Polymer Capacity (Million tons) 8 7 6 5 4 3 2 1 0 2014 2015 2016 2017 2018 2020 2025 2030 2035 North America South America Western Europe Central Europe Eastern Europe Middle East Africa Asia Pacific Super absorbent polymer is largely manufactured by a handful of global players, the top ten producers accounted for 89% of global capacity in 2017. Nippon Shokubai, the largest producer in the world, has facilities in North America, Western Europe and Asia Pacific with the largest production site in its home country, Japan. The major global producers all have their own technologies which have been patented. The main barrier to entry of the super absorbent polymers industry is either obtaining or developing the technology. However, a number of smaller Chinese suppliers who have developed their own technology. The price of super absorbent polymer has been in a long downward decline due to capacity addition increasing faster than demand and more efficient and large-scale capacity coming onstream. MARKETS & PROFITABILITY 18

With global oversupply, operating rates are expected to remain at between 70 and 75% in the short term Global Super Absorbent Polymer Supply, Demand and Trade (Thousand tons) 10000 100% 8000 6000 4000 50% 2000 0 2000 2005 2010 2015 2020 2025 2030 Consumption Total Capacity Production Operating Rate 0% Global demand growth will outpace capacity addition and towards 2025 operating rates will begin to increase supporting new interest in investment. Asia Pacific (mainly North-East Asia) is the main exporter supplying to all other regions Global Super Absorbent Polymer Net Trade (Thousand Tons) Western Europe Positive Number = Net Export Negative Number = Net Import 2017 2025 North America -162-158 11 54 Asia Pacific Middle East South America -74-105 -154-201 681 762 There are no restrictions on transport of SAP and it can therefore be easily traded. They do however need to be stored in a dry atmosphere. MARKETS & PROFITABILITY 19

2 The Propylene and Derivatives Industry 2.1 Olefins Overview Olefins and aromatics are the basic building blocks for most of the petrochemical industry. The most commercially important olefins are ethylene, propylene and butadiene. Olefins are mainly produced by steam cracking hydrocarbon feedstocks, with additional production from oil refinery upgrading processes and by catalytic dehydrogenation of paraffins. Higher prices for conventional petrochemical feedstocks have driven technology development to exploit alternative feedstocks such as coal and methane. The development of methanol-based olefins production in China, in turn mainly based on coal, is one of the major developments in the global olefins markets. Following the first plant start-up in China in 2011, there are now 24 methanol-based plants operating in China, and more under development. The availability of low-priced gas created some interest in methanol-based olefins in the United States and Iran, but no projects have so far been pursued. There is also interest in producing methanol in the United States to supply olefins production in China. The proportion of ethylene, propylene and butadiene produced by a steam cracker depends on the feedstock used and the operating conditions. All feedstocks for steam cracking produce ethylene. Heavier feedstocks produce a greater proportion of propylene and butadiene, the heavier olefins, per unit of ethylene output while steam crackers using light feedstocks such as ethane produce almost exclusively ethylene. Recent feedstock price volatility has led to increased flexibility in feedstock selection by steam cracker operators. Numerous steam cracker operators in Europe and Asia have invested in modifications to permit increased cracking of LPG as its pricing has become increasingly attractive relative to naphtha. Notably Dow Chemical recently announced that its European crackers were consuming more LPG than liquid feed. The supply growth of ethane from shale exploitation has to date outpaced the growth in capacity to consume it in the United States, leading to very low prices and the emergence of ethane exports. Two pipelines have been built to supply around two million tons per year into petrochemical sites in Canada. Two cryogenic marine export facilities are also now operating, and have the combined capacity to ship around five million tons per year of ethane to destinations around the world. The price differential between U.S. ethane costs and those areas such as Western Europe, South America and Asia is sufficient to cover the relatively high cost of shipping. Some overseas ethane buyers have built naphthabased relationships into their pricing formulae to ensure that ethane imports remain competitive. The move to invest in ethane cracking overseas however covers an inherent risk as the United States is to date the only exporter of ethane, and its supply will be tested by the increased demand from new steam crackers there, as well as demand for exports. The fall in oil prices since late 2014 has been accompanied by a fall in the prices of LPG and indeed coal; and a subsequent recovery in 2017. The relative competitiveness of petrochemicals has changed surprisingly little. The main effect has been to significantly reduce the margins, which were being made by those olefin producers with access to low-priced ethane such as in the United States and parts of the Middle East. Well integrated coal-based methanol-to-olefins (MTO) in China has been surprisingly resilient, but non-integrated MTO has mostly been unworkable, and most of the few projects which were built have not operated. At the time that most of the operational MTO projects were initiated, inland coal prices were between 400-500 CNY per ton, but fell to around 125 CNY per ton by early 2016, then recovered and stabilised close to 400 CNY per ton since early 2017. Most new developments are built with coal economics in mind, and exploit low priced coal and coal-based utilities in coal mining areas. The cost of transporting coal to coastal markets is frequently greater the cost of extraction, and therefore mine-mouth coal prices can be less than half of coastal benchmark prices such as Bohai rim. MARKETS & PROFITABILITY 20

China and the United States remain the two principal areas for olefins capacity development. Almost all of the new crackers in the United States are ethane-based, and their commissioning will place considerable strain on ethane supplies, necessitating transportation from increasingly distant shale plays to the USG areas where all but one of the new plants are located. Exports of ethane to Europe got underway in 2016, and reached well over one million tons in 2017. Reliance s ethane terminal and pipeline system in India is also now operational, is capable of handling around 1.5m tons per year of ethane. The development of export terminals and vessel capacity to ship propane and butane out of the United States is leading to a repeat of U.S. olefins industry trends in other regions, with operators replacing naphtha cracking furnaces with new equipment to crack NGLs. Capacity development in the Middle East has slowed dramatically as a result of limited availability of additional ethane for new projects. There were however some significant developments in gas separation capacity in both Saudi Arabia and Iran in 2016. Iran is also bringing several additional phases of its South Pars gas field development online over 2018-2019 which will further increase feedstock availability and olefins production. A new wave of naphtha/heavy gasoil crackers is being built in China, as part of a generation of new petrochemicals-focussed oil refineries which are being developed by several large private industrial groups. The refinery configurations are unusual, with some such as Hengli s crude-to-para-xylene complex using both atmospheric gasoil hydrocrackers and residue hydrocrackers, maximising naphtha production for aromatics, and also providing light naphtha and hydrocracker residue (hydrowax) for steam crackers. The preference for hydrocracking over fluid catalytic cracking (FCC) means there will be no FCC propylene, although the large steam cracker will itself produce over 800 000 tons per year of propylene. As gas feedstocks become more difficult to obtain in the Middle East, there is a renewed focus on export oriented refinery and petrochemicals complexes. Borealis and ADNOC are developing plans for Borouge 4, which is expected to include 2 large-scale liquids crackers and other petrochemicals over 2023-2030. Saudi Aramco and SABIC are cooperating to develop a new crude-to-chemicals technology, which is understood to be a system of catalytic processes which convert crude oil into a desirable steam cracker feed, as part of a world-scale oil refinery. While Saudi Aramco has developed refinery/chemicals complexes before such as Petro-Rabigh and Sadara, the crude-to-chemicals complex is a major development in terms of technology and engineering and will take several years to develop. It has proven to be extremely difficult to implement liquids-based or mixed-feed projects in the Middle East, due to the lack of fundamental competitive advantage in cracking naphtha in the Middle East, which has higher capital costs and labour costs compared to naphtha cracking in the derivativeconsuming regions such as China and many other parts of Asia. Several projects of this type have been proposed and subsequently abandoned. The Sadara Petrochemical complex in Saudi Arabia is a notable exception, having succeeded partly due to its focus on higher value-added derivatives. Liwa Plastics in Oman is to exploit NGLs from natural gas, as well as refinery off-gases. The shift to lighter cracker feedstocks is causing a shortfall in co-product supply, notably for propylene in some regions. The effect was however pre-empted by massive investment in PDH capacity in Asia, which led to very low propylene values in 2015 and 2016. The emerging supply gap in Western Europe also looks likely to filled in the same manner, with both INEOS and Borealis looking to develop large PDH/polypropylene complexes in Western Europe. After protracted commissioning problems, the two large PDH plants built by Dow and Enterprise in Texas are now operating and supporting rapid growth in US propylene exports. MARKETS & PROFITABILITY 21

2.2 Current Performance of the Propylene Market Propylene is used in the production of a wide range of chemical intermediates and polymers. Propylene is a gas at ambient temperature, and can be transported by pipeline, cryogenic tanker vessels or pressurised railcars. Major derivatives plants are frequently co-located with the refinery or steam cracker, with comparatively little propylene being shipped over long distances due to the high cost of transport. Propylene is however significantly easier to ship than ethylene, and can be moved inland in railcars. Propylene itself is mainly produced as a co-product of ethylene in steam crackers and of gasoline production in oil refinery operations, although on-purpose production is increasing. Demand growth for propylene has outpaced the supply from ethylene production and refinery sources, leading to a progressively shorter market in recent years. Furthermore the rapid development of ethane-based ethylene production in the Middle East and the switch to lighter steam cracker feedstock in the United States has been partly responsible for the shortfall in supply of propylene and C 4 s. Nevertheless, the tightness could be relieved in the longer term, following new development of on-purpose propylene production in China. Key global developments influencing the propylene market in the last 12 months include: New U.S. PDH plants overcame technical problems and contributed to a significant increase in propylene exports in 2017. India consumption growth was also strong, despite growing concerns over bad debt. MTO and PDH are still competitive at lower propylene prices, and dominating supply growth, displacing metathesis. Metathesis was challenged by low propylene prices, high ethylene prices and butene values. The proportion of propylene from steam cracker is in a short-term downturn as several crackers were upgraded from naphtha-based to mixed-feed crackers. Several new liquids-based cracker projects in China to provide around four million tons per year of additional propylene by 2021. Major new refinery developments announced, although none include significant FCC propylene capacity Crude oil import licenses for teapot refiners in China significantly increased in 2018, likely to provide additional FCC propylene at least until new refineries enter production. 2.2.1 Consumption Propylene consumption remained high at an estimated 4.7 percent in 2017. Polypropylene remains the main growth engine, and its market penetration continues to be aided by the prevailing low propylene prices relative to ethylene. Propylene oxide is the second largest propylene derivative, and continues to perform well, driven mainly by demand into polyols which in turn create polyurethanes for diverse applications ranging from furnishing to buildings insulation. Acrylonitrile and isopropanol have a relatively low growth outlook, while the cumene/phenol sector is recovering. The main dynamic in global propylene consumption is the massive polypropylene build currently underway in China. China s polypropylene capacity is set to rise from 24 million tons per year in 2017 to 34 million tons per year by 2021. Although growth has been very strong in recent years, the weight of new capacity addition is expected to be higher, and China s polypropylene imports are therefore forecast to decrease, leading exporters such as South Korea and Saudi Arabia to target other markets, and thus increasing competitive pressure globally. MARKETS & PROFITABILITY 22