PEMEX PETROQUIMICA 2013 ANNUAL CONFERENCE. PCI Xylenes & Polyester Doug Rightler

Transcription

1 PEMEX PETROQUIMICA 2013 ANNUAL CONFERENCE PCI Xylenes & Polyester Doug Rightler

2 Discussion Points» MEG demand growth by region.» MEG supply - China is in control or is it?» Price drivers - the Chinese trader and speculation. Can there be effective forecasting?» Impact of shale gas and cheap ethane on US MEG production.» US PEO getting dangerously close to a major supply problem.

3 MEG Overview» The global MEG market continues to be spooked by uncertainties in demand and downstream markets, as well as economic woes around the world.» Demand growth in 2012 was forecast at 1.5 million tonnes came in at 1.0 million tonnes final. China on target nearly ROW did not deliver.» Initial demand forecast 2013 was also 1.5 million tonnes but GDP rates have been cut so forecast cut to 1.35 million tonnes. Likely result growth forecast of 1.1 to 1.2 million tonnes MEG.

4 MEG Overview» From late last year gambling mentality in China having huge impact on spot pricing in MEG => pricing in all regions affected (US??) as everyone looks to China spot.» MTO up and running no surprise was expected.» China is investing in MEG or trying too as it did in PTA => issue who will really build or not.» What is the threat from coal based MEG?

5 Million Tonnes Growth Rates World Fiber & PET MEG Growth EGAF PET Fiber Fiber Rate PET Rate 35% 30% 25% 20% 15% 10% 5% 0% -5%

6 Million Tonnes Global EO Demand by End Use: Total Glycols Ethanolamines Ethoxylates Glycol Ethers Polyols PEGs Other/Inventory

7 Million Tonnes New EO China North America Middle East/Africa Other Asia

8 Million Tonnes New MEG China North America Middle East/Africa Other Asia

9 Million Tonnes World MEG Capacity vs Demand Increase 5 The missing years Capacity Increase Demand Increase

10 Million Tonnes MEG Demand by Region North America South America Europe Middle East/Africa Asia

11 Million Tonnes MEG Production by Region North America South America Europe Middle East/Africa Asia

12 Million Tonnes Surpluses and Deficits of MEG NAFTA Latin America Europe MEA China Other Asia

13 MEG Production (Thousand Tonnes) Country vs 13 Saudi Arabia 6,250 6,232 5,994 6,452 6,486 6, China 2,976 4,607 5,864 6,799 8,306 8,328 1,631 Taiwan 1,941 2,073 2,428 2,402 2,253 1, USA 1,648 1,562 1,753 1,749 2,108 3, Canada 1,463 1,517 1,533 1,528 1,520 1, Kuwait 1,061 1,221 1,168 1,168 1,168 1, Korea 1,181 1,146 1,135 1,245 1,166 1, India 1,080 1,082 1,111 1,250 1,717 1,706 1 Singapore Iran Japan Belgium Russia ,075-6 Thailand Malaysia Mexico Germany Indonesia Brazil

14 MEG Demand (Thousand Tonnes) Country vs 13 China 11,140 11,690 12,429 13,157 14,128 14, USA 2,227 2,273 2,272 2,300 2,409 2, India 1,674 1,810 2,036 2,320 2,509 2, Korea 1,199 1,189 1,177 1,201 1,236 1, Taiwan , Indonesia Thailand Mexico Japan Germany Russia Pakistan Turkey Brazil

15 Million Tonnes World MEG Balance 45 90% 40 89% 35 88% 30 87% 25 86% 85% 20 84% 15 83% 10 82% 5 81% 0 80% MEG Capacity MEG Production MEG Consumption EO Utilisation Rate» MEG consumption expected to rebound following poor 2012.» Supply just barely keeps pace with demand but the DMO is now critical.» Middle East not until 2017 or later.» EO utilization rates have to hit near max every year through 2015.» Next wave of surplus projected for 2016 with maximum surplus » U.S. and China lead the way

16 Million Tonnes Million Tonnes China MEG Production Surges Ahead Inventory (RHS) Production Imports Demand

17 000 Tonnes MEG Sourcing based on Raw Materials 40,000 35,000 30,000 More DMO plants or MTO plants would put pressure on the producers: but not advantaged feedstocks. 25,000 20,000 15,000 10,000 5, Advantaged Napthta Ethanol MTO DMO Others

18 China DMO production Possible Outcome Capacity 1, , , , ,190.0 Base Case Production , , ,806.0 Base Case Rate 36.8% 47.8% 53.3% 56.5% 56.6% at 80% 986 1,546 2,392 2,559 2,552 inc prodn at 80% cum inc production 533 1,156 1,953 2,706 3,452

19 000 Tonnes China DMO MEG impact on China inventory if it works at 80% vs 50% base case 2,800 2,300 1,800 1, inv demand adj inv with DMO at 80%

20 Million Tonnes What About The Sleeper Projects?

21 Million Tonnes # new China plants The Nightmare! China does to MEG what they did to polyester and PTA cum world demand cum world supply # of new China MEG

22 $/tonne Comparative Cash Cost Economics: Integrated EO from Cash Cost C2 1,600 1,400 1,200 Brent at $120 Naphtha - Asia & Europe Green EO in India and Taiwan from ethanol near $1650/tonne cash cost 1, U.S./Mexico ethane Canada China DMO,MTO integrated to coal Middle East 0

23 Regional Ethylene ($ tonne) del 2,000 1,800 1,600 1,400 1,200 1, Asia spot Europe cnt U.S. cnt

24 $/Tonne Asia MEG Volatility 1,600 1,400 1,200 1, C2 Margin MEG Margin Integrated Cost Spot Price

25 Million Tonnes $/Tonne World & China MEG Inventory MMT demand increase in ,400 1, Projected Inventory MEG demand China MEG Inv Asia Spot Price 1,

26 AMERICAS

27 New Americas Investments Polyester Industry (units kt)» Petroquimica Suape, Brazil 540 polymer late 2013» Indorama Decatur, Alabama 500 polymer 2016» M&G, Corpus Christie, Tx 1000 polymer late 2016» Ineos, LaPorte, TX 700 MEG Q3 2016» Sasol, Lk. Charles, La, 300,240 EO/MEG 2017» MEGlobal 600 MEG 2017» M& G, Corpus Christie, TX 1200 PTA late 2016» Petroquimica Suape, Brazil 700 PTA Q1 2013

28 000 Tonnes Americas Polyester Production 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, USA Mexico Brazil Argentina Canada

29 North America MEG issues» MEGlobal expands Fort Saskatchewan in Q by substantial amount.» Shell to add a 200,000 tonnes EO reactor to allow max 375,000 tonnes MEG production at Geismar in Now estimated to be 170,000 tonnes.» Huntsman has moved the 115,000 tonnes used EO reactor from PDGlycol site to its location for feed to PEO and MEG.» How much PEO is Ineos planning to use which would limit MEG?» Up to four other EO/MEG plants soon appear, other than Shell and Ineos.» US will become net exporter putting MEG prices at a minimum of Asia spot less freight, but low cost ethylene makes this a good strategy.» Still just a handful of very big buyers: DAK, M&G, Indorama, Old World, Prestone - so competition remains keen.

30 New EO MEG U.S. (kt)» Ineos 550 EO, 700 MEG PEO? Q3 2016» Sasol 300 EO, PEO, MEG 2017» MEGlobal 450 EO, 600 MEG 2017» Formosa 640 EO, 800 MEG 2017?» Shell 540 EO, 750 MEG no PEO 2020» Other 592 EO 740 MEG ?» Alpek? Indorama? Mitsubishi? Westlake? Aither Chem? Ethanol to EO?

31 Billion Pounds U.S. Ethylene new max capacity and max use for EO Ethylene C2 for EO

32 Million Tonnes US MEG Balance % % % % % % % % MEG Capacity MEG Production MEG Consumption EO Utilisation Rate» MEG turnarounds are significant in 2013, especially first half of the year.» Imports may increase from Canada as some Saudi Arabia imports appear to be redirecting to South America.» EO for EODs continues to grow, taking EO from MEG.» Ineos still planning new 750,000 tonnes plant by Q » Shell Northeast, maybe 2020.» At least three other real prospects for new MEG plants in US by 2017.» Mitsubishi Corp MEG, in Trinidad.» Shell and Huntsman add crude EO capacity in to use existing MEG capacity.

33 Million Tonnes U.S. MEG Production vs Demand 3.5 MEGlobal Huntsman Shell Ineos Production Demand

34 Million Tonnes U.S. Crude EO Production Huntsman Ineos Shell Sasol MEGlobal

35 000 Tonnes US PEO Merchant Sellers 1, Demand Effective Capacity

36 U.S. EO vs MEG margin ($/Tonne) MEG EO

37 ene-11 mar-11 may-11 jul-11 sep-11 nov-11 ene-12 mar-12 may-12 jul-12 sep-12 nov-12 ene-13 mar-13 $/Tonne Regional PEO pricing vs PEO value as MEG 2,000 1,900 1,800 1,700 1,600 1,500 1,400 1,300 1,200 1,100 1,000 Ethylene Oxide Prices (incl Freight) West Europe United States Far East (China) China EO as MEG

38 Conclusions» World is in balance for EO and MEG through 2015.» Expect surplus EO and MEG to start in 2016 with lower prices with stable oil values.» Oil sets the cost curve floor for Asia and Europe while the US will have a huge advantage using abundant ethane from growing shale gas supply.» US will have lowest EO derivative costs and scale and is in perfect position to dominate global growth for commodity type EODs, i.e. alcohol ethoxylates, ethanolamines, ethers.» Specialty ethoxylates to remain regional supply to meet regional demand.» U.S. PEO merchant EO values rising to match MEG margins and supply should be a concern until new capacity arrives.