Polyethylene
Global Overview
Esteban Sagel, Director Polypropylene
Foro Pemex
Junio 2012
Ciudad de Mexico
Today’s Presentation
• Global Overview
• Mexico In The Global Context
• Short Term Forecast & Dynamics
© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Today’s Presentation
• Global Overview
• Mexico In The Global Context
• Short Term Forecast & Dynamics
© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Polyethylene: Still The Largest Polymer
PET
9%
PC
2%
HDPE
17%
PVC
18%
LLDPE
11%
ABS
4%
PS
5%
LDPE
9%
PP
25%
2012 World Polymer Demand = 211 Million Metric Tons
© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Cost Position Beneficial for PE Growth
Delivered Discounted Basis
2007
LLDPE
2012
PVC
HDPE
LDPE
PP
PS
PET
ABS
0.0
1.0
2.0
3.0
U.S. Price, Cents Per Cubic Inch
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4.0
5.0
5
Growth Generalized, but Uneven
GDP Growth, %
5.0
Demand, Million Metric Tons
100
3.5
AAGR 06-11
LDPE 0.6%
HDPE 3.1%
LLDPE 4.5%
Tot PE 2.9%
GDP
2.1%
2.0
AAGR 11-16
3.5%
5.3%
5.8%
5.0%
5.7%
80
60
0.5
40
-1.0
20
-2.5
0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
World GDP Growth
Demand LLDPE
Demand TotPE
Demand HDPE
Demand LDPE
© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Developing World Driving Growth
Northeast
Asia
31%
Other
28%
2006-2011 AAGR
West Europe = -2.1%
North America = -1.3%
South America = 4.4%
Northeast Asia = 6.4%
Global
West
Europe
15%
South
America
6%
North
America
20%
2011 Total Global Demand = 76 Million Metric Tons
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= 2.9%
Developing World Driving Growth
Northeast
Asia
33%
Other
29%
2011-2016 AAGR
West Europe = 1.7%
North America = 2.8%
South America = 5.8%
Northeast Asia = 6.5%
Global
West
Europe
13%
South
America
7%
= 5.0%
North
America
18%
2016 Total Global Demand = 97 Million Metric Tons
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8
Capacity Continues To Grow
Capacity, Million Metric Tons
10
Global Capacity AAGR 11-16: 4.0%
Global Demand AAGR 11-16: 5.0%
8
6
4
2
0
-2
-4
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Asia/Pacific
North America
Central Europe/ CIS
Global Demand Change
Africa/ Middle East
South America
West Europe
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In Spite of Growth, Global Market Oversupplied
Excess Capacity, Million Metric Tons
10.0
Excess Capacity as a % of Global Demand
14%
8.0
12%
6.0
10%
4.0
8%
2.0
6%
0.0
4%
-2.0
2%
-4.0
0%
2000
2002
2004
2006
2008
2010
2012
Global Excess Capacity
Cumulative Global Excess Capacity
Excess Capacity as a % of Global Demand
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2014
2016
In Spite of Growth, Global Market Oversupplied
Excess Capacity, Million Metric Tons
10.0
Global Operating Rate, %
90
89
8.0
88
6.0
87
4.0
86
2.0
85
0.0
84
-2.0
83
-4.0
82
2000
2002
2004
Global Excess Capacity
Global Operating Rate
2006
2008
2010
2012
2014
2016
Cumulative Global Excess Capacity
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Margins To Recover; Gas Based
Production Enjoys Higher Margins
Dollars Per Metric Ton
1,200
(Discounted Price, Integrated Producer)
1,000
800
600
400
200
0
-200
-400
-600
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
North America
West Europe
Asia
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12
North America: Advantaged Production
PE Cash Cost, Cents Per Pound
80
(Integrated Producers)
75
70
65
60
55
50
45
40
35
30
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
North America
West Europe
Southeast Asia
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13
Driver of Advantage: Shale Gas
Dollars Per MMBtu
20
Gas -to-Crude-Ratio
110%
16
90%
12
70%
8
50%
4
30%
0
10%
90
92
94 96 98 00 02 04 06 08 10 12 14
Crude (WTI)
Natural Gas
Gas-to-Crude Ratio
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China Will Become Increasingly
Self Sufficient
Domestic Demand, Million Metric Tons
30
Imports as a % of Domestic Demand
55
25
50
20
45
15
40
10
35
5
0
30
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
China Domestic Demand
Imports as a % of Domestic Demand
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15
Trade Will Become Very Competitive
% of Middle East
40
Imports, Billion Metric Tons
2.5
2.0
35
1.5
30
1.0
25
0.5
20
0.0
15
Q1-09
Q3-09
Q1-10
China Imports
Q3-10
Q1-11
Q3-11
Q1-12
Middle East as a % of China Imports
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Trade Flows to Change
11377
2897
7664
2470
-1169
-2441
-552
-1153
-5261
-6235
-1906
-2691
-1444
2011 Net Trade
372
860
-2789
2016 Net Trade
(Thousand Metric Tons)
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17
Global Prices to Tighten Up
Cents Per Pound
90
Dollars Per Metric Ton
1,981
80
1,761
70
1,541
60
1,321
50
1,101
40
881
30
2006
2008
NAM LLDPE
2010
CHINA LLDPE (Spot)
2014
661
2016
Mexico LLDPE
WEP LLDPE
2012
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Today’s Presentation
• Global Overview
• Mexico In The Global Context
• Short Term Forecast & Dynamics
© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Mexican Petrochemical Demand and Production
Million Metric Tons
25
20
15
10
5
0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Domestic Demand
Production
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Polyethylene Demand in Mexico Growing
Rotomolding
Injection Molding
Wire & Cable
Blow Molding
Pipe & Profile
Film & Sheet
AAGR Domestic
Demand 11-16 = 5.5 %
Extrusion Coating
-6
-4
AAGR 06-11
-2
0
2
4
Mexico Growth Rate, Percent
Demand Change 10-11
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6
AAGR 11-16
8
Mexico: Net Polyethylene Importer
Net Trade, Million Metric Tons
6.0
4.0
2.0
0.0
-2.0
-4.0
-6.0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
South America
USA
Canada
Mexico
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Americas
22
Where is Material Going to Come From?
2011
Middle
East
1.0%
2016
Other
0.8%
Middle
East
6.8%
Other
3.2%
North
America
98.3%
2011 Total Imports 1.15 MMT
North
America
90.0%
2016 Total Imports 1.09 MMT
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23
Braskem Idesa: Will Help Trade Balance;
New Plants in U.S. Will Continue to Compete
Dow Canada
Westlake
Prentiss, Alta
Lake Charles, LA
Braskem Idesa
Nova
Formosa
Coatzacoalcos
Sarnia
Point Comfort, TX
Nova
Sarnia
Chevron Phillips
Dow
Nova
US Gulf Coast
US Gulf Coast
Prentiss, Alta
Shell
Northeast US
Thousand Metric Tons
HDPE
LDPE
2014
Canada
200
United States
2015
Mexico
750
300
Canada
100*
United States
2016
Canada
400*
2017
United States
500*
United States
300*
Canada
2018
United States
500*
LLDPE Startup
(200)
Type
2Q 2014
3Q 2014
1Q 2015
1Q 2015
4Q 2015
hypo
hypo
4Q 2016
hypo
500*
300*
350*
3Q 2017
3Q 2017
3Q 2017
hypo
hypo
hypo
500*
2Q 2018
hypo
* No firm announcements, CMAI speculation
** Sasol announced a new cracker in Lake Charles, LA (1.4 million tons per year). The startup year was not released.
© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Mexico Prices To Be Competitive
Dollars Per Metric Ton
2205
Cents Per Pound
100
90
1984
80
1764
70
1543
60
1323
50
1102
40
882
30
Jan-08
661
Oct-08
NAM LLDPE
Jul-09
Apr-10
Jan-11
CHINA LLDPE (Spot)
Oct-11
Jul-12
Mexico LLDPE
© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Apr-13
WEP LLDPE
Today’s Presentation
• Global Overview
• Mexico In The Global Context
• Short Term Forecast & Dynamics
© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Polyethylene Current Situation: US
• Domestic Demand: -.05 %
•
•
•
•
•
•
through April
Export demand – 12.5 %
through April
April weakest demand month
of the year
Prices poised to decline
Buyers purchasing on as
needed basis only
ExxonMobil has announced a
4 cent drop for May
Further drops anticipated
Million Pounds
3.4
3.2
3.0
2.8
2.6
2.4
2.2
2.0
Apr-11
Jul-11
Oct-11
Domestic Demand
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Jan-12
Exports
Apr-12
PE: Europe
• Domestic sales down 2 percent in the first
•
•
•
•
•
quarter of this year compared to 2011
Most contract prices for commodity grades
ended April up by approximately the increase
of the ethylene contract price of €30 to €40 per
metric ton = best margins of 2012
An initial settlement was agreed upon for the
May ethylene contract price at €1,325 per
metric ton, a decrease of €20 per metric ton
compared to April.
Polyethylene prices are decreasing well
beyond the ethylene decrease of €20 per
metric ton.
June prices are forecast to go down strongly.
Middle Eastern producers are likely to increase
supplies to Europe as a reaction to the
continuing weak demand for imports from
China.
2011
(Q1)
2012
(Q1)
AAGR
11-12
Thousand Metric Tons
Production
2,937
2,841
0.2%
Blow Molding
376
341
-2.7%
Inj. Molding
424
384
-3.5%
Wire & Cable
88
81
-2.8%
Mono/Split
40
36
-3.7%
1,565
1,478
-1.3%
Pipe &
Conduit
290
263
-3.3%
Rotomolding
53
50
-2.2%
Coating
3
3
0.9%
Extrusion
111
103
-2.1%
Other
104
95
-3.1%
3,053
2,833
-2.1%
Imports
750
636
1.8%
Exports
599
614
4.0%
Film & Sheet
Dom. Demand
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28
WEP HDPE Integrated Margin
Cents Per Pound
25.0
• In 2012, the trade balance of
20.0
15.0
10.0
5.0
2006
2008
2010
2012
2014
2016
HDPE is likely to shift with the
start-up of Saudi Polymers’ HDPE
plants in Al-Jubail, Saudi Arabia
with a combined annual capacity
of 1.1 million metric tons.
• The output of these new plants is
expected to impact Europe as
shareholder Chevron Phillips
does not own polyethylene assets
in Europe.
• The first quarter price increases in
Europe, combined with continued
weakness in the Asian markets,
provide incentive for more imports
into Europe from the Middle East
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29
Asia HDPE Non-Integrated Margin
• Demand weakened in April and into May
• Market sentiment remains bearish and
•
•
•
•
•
•
•
Cents Per Pound
8.0
trading activities are thin
Sinopec and PetroChina continue
6.0
running at reduced rates due to weak
demand and negative margins
4.0
PE inventories are very high at both
producer and converter: Inventory at the
ports is at 95% of capacity
2.0
The agricultural peak season ended in a
disappointing fashion in mid April
0.0
Supplies from the Middle East are ample
Further price reductions appear likely
-2.0
Some converters are mixing in recycle
PE in order to lower production costs
-4.0
China’s Q1 PE imports reached 2.1
million metric tons, 6.5 percent higher
-6.0
than Q1 2011, but about 8.7 percent
2006
lower than Q1 2010.
2008
2010
© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
2012
2014
2016
30
Conclusions
• Polyethylene demand growing on global basis
• Low relative cost helping
• Industry globally oversupplied; demand growth and restrain in
investments will help improve supply and demand balance
• Light feedstock advantage will help Mexico and North America
• Trade to become challenging, as China increases self
sufficiency
• Mexico net importer of PE; situation to remain the same even
after Braskem Idesa starts up
• Mexican prices to remain competitive
• Global markets situation challenging in first half of 2012;
depressed market sentiment to prevail in future months
© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.