Overcapacity in the Xylenes Chain Steve Jenkins PCI Xylenes & Polyesters Asia Sdn Bhd AUGUST 214, MUMBAI
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 2-214 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.
Tonnes World Polyester Production Growth by Region 7, 6, 5, 4, 3, 1, -1, - 2 22 24 26 28 21 212 214 216 218 22 Staple Filament PET Film Others
Tonnes PTA Production Growth by Region 6, 5, 4, 3, 1, -1, - -3, 2 22 24 26 28 21 212 214 216 218 22 North America South America Europe Middle East/Africa China Indian Subcontinent North East Asia South East Asia
Tonnes Paraxylene Production Growth by Region 4, 3, 1, -1, - 2 22 24 26 28 21 212 214 216 218 22 North America South America Europe Middle East/Africa China Indian Subcontinent North East Asia South East Asia
Tonnes Polyester Capacity Growth by Region 1, 8, 6, 4, - 2 22 24 26 28 21 212 214 216 218 22 North America South America Europe Middle East/Africa China Indian Subcontinent North East Asia South East Asia
Tonnes PTA Capacity Growth by Region 1 1, 8, 6, 4, - -4, 2 22 24 26 28 21 212 214 216 218 22 North America South America Europe Middle East/Africa China Indian Subcontinent North East Asia South East Asia
Tonnes Paraxylene Capacity Growth by Region 7, 6, 5, 4, 3, 1, -1, 2 22 24 26 28 21 212 214 216 218 22 North America South America Europe Middle East/Africa China Indian Subcontinent North East Asia South East Asia
Tonnes PX Tonnes PTA Tonnes Polyester Polyester/PTA/PX Capacity Growth 21-22 1, 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, 21 212 214 216 218 22 21 212 214 216 218 22 21 212 214 216 218 22
Nameplate Utilisation Global Polyester Industry Utilisation 95% 9% 85% 8% 75% 7% PX PTA Polyester Polymer
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, 5-2 23 26 29 212 Crude Oil Naphtha PX PTA PSF 1.5 den 1,5 1, 5-2 23 26 29 212 Crude Oil Naphtha PX PTA POY 15 den 2,5 1,5 1, 5 PET Packaging Resin - (5) 2 23 26 29 212 Crude Oil Naphtha PX PTA PET
USD/Tonne USD/Tonne USD/Tonne Polyester Fibre & Packaging Spreads 5 4 3 2 1.5 den Polyester Staple Fibre 15 den Polyester Filament Fibre 6 5 4 3 2 1 1-2 23 26 29 212 PSF 1.5 den - 2 23 26 29 212 POY 15 den 4 PET Packaging Resin 3 2 1 - (1) 2 23 26 29 212 (2) PET
USD/Tonne USD/Tonne USD/Tonne Naphtha, Paraxylene & PTA Spreads 16 14 12 1 8 6 4 2 - Naphtha-Crude Spread 2 23 26 29 212 Naphtha 7 6 5 4 3 2 1 - Paraxylene Naphtha Spread 2 23 26 29 212 PX 6 PTA-Paraxylene Spread 5 4 3 2 1-2 23 26 29 212 PTA
KT Polymer Utilisation India Polyester Market Outlook 1 1, 8, 6, 4, 115% 11% 15% 1% 95% 9% 85% 8% 75% 7% 65% 21 211 212 213 214 215 216 217 218 219 22 Staple Filament PET Resin Film Polymer Capacity Polymer Utilisation Rate
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.
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 215-219 21 211 212 213 214 215 216 217 218 219 22 1% 95% 9% 85% 8% 75% 7% Production Consumption Capacity Net Trade Utilisation Rate
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 12-18 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.,
7 3935 665 9345 19195 2155 2428 2687 2955 3255 35855 42891 44681 47281 5431 53281 5681 57731 59681 61651 63246 64746 66836 68121 771 7146 USD Per Tonne PTA Breakeven Cash Cost Curve 125 12 Demand estimate 57.5 million tonnes annualised rate 115 11 $12/te gap between leader and laggard 15 1 95 Based on PX@$14/tonne Cumulative Capacity
KT Utilisation Rate India PX Market Outlook 8, 7, 6, 5, 4, 3, 1, PX investments (RIL, OMPL) push India slightly long on PX 215-22. PX costs likely to remain highly competitive for downstream. 15% 1% 95% 9% 85% 8% 75% 7% 21 211 212 213 214 215 216 217 218 219 22 Production Total Consumption Capacity Net Trade Utilisation Rate
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
PX Breakeven Cash Cost Curve $3/te gap between leaders and laggards
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