Asian Aromatics Market Outlook Webinar 01 August 2012 Hosted by - - PowerPoint PPT Presentation

WELCOME Asian Aromatics Market Outlook Webinar

01 August 2012 Hosted by ICIS

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Mr Thomas Driesen, Commodity Manager, OXEA GmbH

Asia’s aromatics: Trends and directions

Mahua Chakravarty Senior Editor, ICIS Pricing 2012

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Key recent trends for benzene and toluene

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Volatility and macroeconomic slowdown: impact on benzene and toluene

• Upstream volatility and economic crisis caused slow demand from the

downstream markets and liquidity drops

• High PX prices through 2011 resulted in high production of benzene and

stronger demand for toluene

• Benzene influenced by supply glitches in Asia and uncertainty in US and EU

markets

• China’s downstream industries struggle with low credit liquidity and slower

economy

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BTX production high through 2011, but poor olefins affect crackers in Q2 2012

• BTX supply from crackers high in 2011, supported by positive margins,

but supply tightened from Q2 2012

• High PX prices through 2011 supported reforming margins and
• perating rates, but PX softens in 2012
• TDP margins thin due to narrow benzene/toluene spread, but gains

support from firm MX

• Benzene production from HDA minimal due to negative margins, but

impact on market limited

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Naphtha to BTX spread

• 200
• 100

100 200 300 400 500 04/01/2008 04/04/2008 04/07/2008 04/10/2008 04/01/2009 04/04/2009 04/07/2009 04/10/2009 04/01/2010 04/04/2010 04/07/2010 04/10/2010 04/01/2011 04/04/2011 04/07/2011 04/10/2011 04/01/2012 04/04/2012 04/07/2012 2008 to July 2012 USD/tonne BZ-Naphtha TOL-Naphtha MX-Naphtha

2011-2012 BTX margins held up by strong MX-PX chain & steady toluene

Source: ICIS

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BTX margins up from 2011 on strong MX-PX chain & steady toluene

134 154.12 151.1 190.6 226.6 200 400 600 800 1000 1200 1400 2008 2009 2010 2011 2012 50 100 150 200 250 BTX Naphtha Spread

Source: ICIS

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BENZENE

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Arbitrage to remain key outlet for benzene in Asia

• Exports from Asia to the US rise in 2012 despite the slow

economic climate in the US

• Coal benzene supply continues to increase in China, adding to

the regional high balance

• But SM capacity growth slows to 3 new plants in 2012
• Bulk of the growth in benzene demand in 2012-14 is expected to

come from the phenol and caprolactam segments

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China continues to lead Asia’s capacity growth in 2012

Company Country/Location Benzene (kt/yr) Start-up Gaoqiao PC Shanghai, China 120 Jan 2012 Jiujiang PC Jiujiang, China 80 H2 2012 Jilin PC Jilin, China 110 Q2 2012 Daqing PC Daqing, China 120 Q4 2012 Dragon Aromatics (Xiamen) Zhangzhou, China 240 Early Q3 2012 Petrochina Sichuan PC Pengzhou, China 150 Late 2012- H1 2013 Fushun PC Fushun, China 160 Q4 2012 Huachen Energy Pinghu, China 30 Q3 2012 Fujian R & P Fujian, China 40 Late 2012- 2013 ExxonMobil Singapore 340 H2 2012

Source: ICIS & Chemease

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China will continue to add capacity in 2013

Company Country/Location Benzene (kt/yr) Start-up Sinopec Quanzhou, China 250 2013 Sinopec Wuhan Wuhan, China 160 2013

Source: Chemease

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China’s coal benzene capacity additions in 2012-2013

Company Benzene (kt/yr) Shandong Jinneng 100 Shandong Lumei 80 Jiangsu Meiya 80 Jiangsu Gelanchunpu 50 Jiangsu Dinghe 100 Jiangsu Shatong 100 Neimenggu Baotou 100 Hebei Dahua 50 Hebei Wangbaixing 100 Ningxia Baofeng 80 Henan Shouchuang 100 Henan Shoushan 50 Henan Jinma 100 Henan Zhongchuang 55 Total 1,145

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Coal benzene being used for cyclohexanone and SM production

Demand by downstream sectors- 2011

Styrene 10% Cyclohexanone 46% Aniline 21% Phenol 7% Maleic Anhydride 12% Others 4% Styrene Cyclohexanone Aniline Phenol Maleic Anhydride Others

Source: Chemease

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China is a balanced market now

Source: China Customs

200,000 400,000 600,000 Tonnes Imports Exports 2 per. Mov. Avg. (Imports) Imports 248,735 327,981 621,839 197,232 185,685 157,096 Exports 56,129 69,410 278,111 119,714 110,349 19,180 2007 2008 2009 2010 2011 Jan-June 2012 x

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Growth in new SM production slows down from 2012

Company Location Product Capacity (tonnes/yr) Start-up status Yanshan Beijing, China SM 270,000 2012 Baling Hunan, China SM 120,000 Aug 2012 PetroChina Jilin Jilin, China SM 320,000 Oct 2012 SP Chemical Jiangsu, China SM 320,000 Delayed to late 2013 PetroChina Taizhou Zhejiang, China SM 600,000 2015

Source: ICIS & Chemease

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Rapid phenol expansions in 2012-14 maintain demand for benzene

Company Location Product Capacity (tonnes/yr) Start-up status Kingboard Jiangsu, China Phenol 200,000 2012 Sinopec Yanshan Beijing, China Phenol 137,500 2012-2013 Sinopec Mitsui Caojing, China Phenol 250,000 2013 Shandong Lihuayi Shandong, China Phenol 220,000 2013 LG Chem South Korea Phenol 300,000 2013 FCFC Ningbo, China Phenol 300,000 2013-2014 Ineos Zhangjiagang Nanjing, China Phenol 400,000 2014 Changchun Jiangsu, China Phenol 200,000 2014 CEPSA Shanghai, China Phenol 250,000 2014

Source: ICIS & Chemease

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Exporting to US remains key for Asia

2010 42% 30% 12% 2% 3% 6% 5%

US Taiwan China Singapore Saudi Arabia Japan Netherland

2009 23% 23% 25% 5% 2% 21% 1%

US Taiwan China Singapore Saudi Arabia Japan Netherland

Source: KITA

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South Korean exports to US rise in 2011-2012

2011 47% 24% 11% 0% 7% 8% 3%

US Taiwan China Singapore Saudi Arabia Japan Netherland

2012 43% 25% 8% 9% 7% 6% 2%

US Taiwan China Singapore Saudi Arabia Japan Netherland

Source: KITA

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South Korean exports to US regular in 2012

354,714 374,513 483,435 446,158 518,518 282,965 531,858 670,248 315,280 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 2004 2005 2006 2007 2008 2009 2010 2011 Jan-June 2012

Source: Korea International Trade Association (KITA)

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TOLUENE

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Asia desperately looks for outlets other than China

• Demand from China mired in uncertainty and depends on local

production, demand, inventory level

• Gasoline blending is emerging as a key outlet within Asia, especially

China, and is driven by economic growth

• Simultaneously, there is a race to export to southeast Asia, India and
• ther regions

Average monthly imports to China in 2011 was 50,000-60,000 tonnes, which dips in 2012

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Uncertainty in Chinese imports amid rapid capacity growth

China's total imports

567,136 444,637 273583 790932 829337 655090 201900 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000 2006 2007 2008 2009 2010 Jan-Nov 2011 Jan-April 2012 2008-April 2012 Tonnes

Source: China Customs

Imports down in 2011 & 2012 on economic slowdown and cash flow issues

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2012 imports fall although inventory dips

50000 100000 150000 200000 250000 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12

East China inventory at historical high in 2010

Source: Chemease

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South Korea spreads its wings beyond China to southeast Asia and India

2011 China 60% Japan 8% India 11% Indonesia 3% Vietnam 3% US 10% Singapore 3% Australia 2%

Source: KITA

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42% 21% 12% 10% 5% 3% 4% 1% 1% 1% China Taiwan India US Indonesia Vietnam Japan Malaysia Philippines Singapore

India emerges as key export destination for South Korea, after China & Taiwan

Source: KITA Jan-June 2012

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South Korean supply finds outlet in southeast Asia

Source: KITA

10,000 20,000 30,000 40,000 50,000 Indonesia Vietnam 2 per. Mov. Avg. (Vietnam) 2 per. Mov. Avg. (Indonesia) Indonesia 6,005 965 1,918 5 3,001 33,738 21,169 26,314 28,908 Vietnam 2,477 9,740 6,803 19,903 41,455 25,931 18,783 2004 2005 2006 2007 2008 2009 2010 2011 2012

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South Korea & southeast Asia dominate exports to India

20,000 40,000 60,000 80,000 100,000 India 2 per. Mov. Avg. (India) India 18,831 18,761 3,276 42,456 51,170 88,795 69,302 2006 2007 2008 2009 2010 2011 2012

Source: KITA

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India emerges as key import market in Asia

• India has emerged as an important export destination in the past few

years

• Expected growth at 6% and above in the next few years, driven by

economic growth

• Net importer of toluene from southeast Asia, South Korea, the

Philippines, Thailand and Iran

• Net annual deficit of more than 150,000 tonnes. Key producer is

Reliance

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OUTLOOK

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Looking ahead…benzene

• Benzene prices may fall sharply in second-half 2012 as the US and EU markets

may correct

• Limited growth in downstream SM capacity, beyond China
• Demand from key downstream sectors like SM and phenol may remain weak on

poor economic conditions

• Supply in southeast Asia may rise if Exxon starts production and when TPPI

restart plant

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Looking ahead…toluene

• Toluene demand to remain key factor driving prices in Asia
• Demand from China to be affected by slow downstream solvents and blending

markets

• Imports into India could be affected due to currency-related losses

Asia Styrene Monomer: Key Trends and Outlook

Clive Ong Senior Editor, ICIS Pricing 2012

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Asia SM in second half of 2012

• Sentiment in Q3 turning bullish on expectations of stronger

demand from China

• Traditional manufacturing for exports season
• Kicking off from low base in Q2
• Weak global economic conditions resulting in continued

stimulus by governments

• Overall demand to be slower than 2011 ?

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SM spot prices in first half of 2012

Source: ICIS

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SM inventories in east China 2012

20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 200 400 600 800 1000 1200 1400 1600 Inventories Spot Price

Source: ICIS

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SM inventories in east China 2012

20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1250 1300 1350 1400 1450 1500 Inventories Spot Price

Source: ICIS

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SM inventories in east China 2011 vs 2012

20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Months Tonnes 2012 2011

Source: ICIS

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SM prices in 2011 vs 2012 Jan-Jun

1100 1200 1300 1400 1500 1600 2011 Price 2012 Price

Source: ICIS

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SM prices in 2007-2012

Spot Price 2007-2012 200 400 600 800 1000 1200 1400 1600 1800 1 14 27 40 53 66 79 92 105 118 131 144 157 170 183 196 209 222 235 248 261 274 Spot Price 2007-2012

Source: ICIS

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SM demand in 2011 vs 2012

100 200 300 400 500 600 700 800 Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec

2011 2012

Source: ICIS

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Styrenic Resins

• Downstream demand mostly weak for first half of 2012
• Key export destinations of Europe and the US facing weak economic

conditions

• Slowing Chinese economic growth
• Elevated resins prices
• Low operating rates in China

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China ABS demand in 2011 vs 2012

50 100 150 200 250 300 350 400 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2011 2012

Source: ICIS

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China PS demand in 2011 vs 2012

50 100 150 200 250 300 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2011 2012

Source: ICIS

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China EPS demand in 2011 vs 2012

50 100 150 200 250 300 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2011 2012

Source: ICIS

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Macro-events

• The 2008 mortgage & financial crisis
• Governments and central banks intervene in their economies
• Liquidity flood and asset prices
• 2011: End of Stimulus
• 2012: More Stimulus?

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Crude futures from 2007 onwards

20 40 60 80 100 120 140 160 2007 2010 WTI Crude 2008 2008 2011 2011 2009 2009

Japan Rate falls to 0.1% Fed Funds Rate falls to 0.25% UK Rate falls to 0.5% ECB Rate falls to 1% Japan Rate falls to 0% QE1 QE Lite QE2

Source: ICIS

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Government Intervention and Crude Oil

60 70 80 90 100 110 120 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12

WTI Crude

End of QE2 Operation Twist II €1 T ESFS Fed $500B swaps with ECB 6 central banks $swaps US keep low rates to 2014 UK raises QE to £325B Fed/China supports EU bailout Japan ¥1 T QE Operation Twist UK raises QE to £375B Spanish bank bailout Bank of Japan negative rates ECB cut rates to 0.75% Source: ICIS

Thank you

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