FOURTH ANNUAL ASIA CHEMICAL CONFERENCE 216 Global Propylene Market Outlook: In Excess for How Long? Presentation 1 November 216 ihsmarkit.com Jinsu Yim, Director, +65 6439 615, jinsu.yim@ihsmarkit.com
Steam Cracker Contents 216 Refinery 58 Million tons 38 Million tons Metathesis 5 Million tons Others 1 Million tons PDH 119 Million tons CTO/MTO 11Million tons 6 Million tons 2
P/E Ratio Historical Low Propylene/Ethylene Ratio Global P/E Ratio 1.5 Propylene Tighter than Ethylene 1..5 Ethylene Tighter than Propylene 5 6 7 8 9 1 11 12 13 14 15 16 17 18 NAM Contract Price NEA Spot Price SEA Spot Price WEP Contract Price 3
PDH and CTO lead unconventional production World: 216 PG/CG Propylene Prod. by Feedstock FCC Splitters 29% Dehydro 9% Metathesis 4% Olefin Cracking.4% World: 221 PG/CG Propylene Prod. by Feedstock FCC Splitters 25% Dehydro 13% Metathesis 4% Olefin Cracking 1% Stm. Crackers 5% Methanol to Olefins 2% 22 MM tons 36 MM tons Methanol to Propylene.2% 216 On-Purpose Capacity 221 Others On- Purpose.5% Coal to Olefins 2% Coal to Propylene 1% HS FCC 3% Production = 98.1 Million Metric Tons Stm. Crackers 44% Others On- Purpose 1% Production = 119.9 Million Metric Tons Methanol to Olefins 2% Methanol to Propylene 1% Coal to Olefins 4% Coal to Propylene 1% HS FCC 4% 4
Million Metric Tons Per Year Slower Growth From Conventional Production 8 216 221 6 4 Others 18% Metathes is 19% CTO/ CTP 13% MTO/ MTP 9% PDH 41% Others 15% Metathes is 15% PDH 42% CTO/ CTP 19% MTO/ MTP 9% 2 211 213 215 217 219 221 Total Propylene Capacity = 22 Million Metric Tons Per Year Total Propylene Capacity = 36 Million Metric Tons Per Year Refinery/ FCC Steam Cracker 5
Dollars Per Metric Ton Propylene prices to stay close for all regions Global Propylene Spot Prices 2,5 2, 1,5 1, 5 Jan-8 Jan-9 Jan-1 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 NEA CFR NAM Pipeline WEP CIF 6
Million Metric Tons Operating Rate World Propylene Supply Remains Long World: PG/CG Propylene Supply & Demand 16 12 8 4 1% 9% 8% 7% 6% 5% 11 12 13 14 15 16 17 18 19 2 21 Demand Production Total Capacity Operating Rate (% AAGR = 1-15/15-25) @216 IHS Markit
Million Metric Tons Operating Rate Asia Propylene Supply Changes Short to Balance Asia Propylene Supply/Demand Balance 1 1% 8 6 4 2 9% 8% 7% 6% 5% 11 12 13 14 15 16 17 18 19 2 21 Production Demand Total Capacity Operating Rate 8
Million Metric Tons Per Year On-purpose Capacity Dependence on On-Purpose Production Increase Total NE Asia Propylene Capacity 75 55% 6 45 3 15 44% 33% 22% 11% % 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17 18 19 2 21 NEA On-purpose CHI On-purpose KOS On-purpose Total Capacity 9
12 13 14 15 16 21 12 13 14 15 16 21 12 13 14 15 16 21 12 13 14 15 16 21 Million Metric Tons NE Asia Will Be Self-sufficient for Propylene Monomer Propylene Monomer Trade 2 1-1 -2-3 -4 JAP SKOR TAI CHI Export Import 1
Propylene Equivalent Trade Flow West Europe 1,142 748-44 1,72 89 1,95 3,813 3,681 Northeast Asia -156 North America 2,366-3,62-2,262 211 216 221 South America -367-465 -71-1,432 Middle East Others* -2,413 Southeast Asia -35-228 -231 *Others: Africa, Indian Sub., CIS & Baltic, Central Europe -4,8 11
China Propylene Rapidly Changes 12
More Private Company Owns Propylene Capacities China C3 Ownership Changes from 21 to 216 216 Shenhua 1% Others 25% Sinopec 45% Others 52% Sinopec 24% CNOOC 2% PetroChina 18% PetroChina 27% Shenhua 4% CNOOC 2% 13
Million Metric Tons Percentage Dependence on Alternate Technologies for Propylene Production to Increase China s Million Metric Propylene Tons Capacity Percent, % 5 1 4 3 2 1 8 6 4 2 11 12 13 14 15 16 17 18 19 2 21 Steam Crackers Refinery On Purpose On Purpose % of Total Capacity 14
US Dollar Per metric Ton Abundant Shale Gas In North America Boost PDH in Asia Propane FOB Mont Belview vs CFR NEA 1,2 1, 8 6 4 2 75 6 45 3 15-15 US Dollar Per metric Ton Gap Propane CFR NEA Propane FOB Mont Belview 15
Million Metric Tons Propane import increased in line with PDH Propane import in China 1 8 6 4 2 Total import US 16
Million Metric Tons Coal/Methanol based Propylene Will Contribute More Than 25 Percent in China CTO/MTO Projects in China 14 12 1 8 6 4 2 Completed Projects (by end 216) CTO/CTP: 11 MTO/MTP: 15 Upcoming Projects (by end 221) CTO/CTP: 1 MTO/MTP: 3 11 12 13 14 15 16 17 18 19 2 21 CTO CTP MTO MTP 17
PDH Projects in China Project Owner Location Capacity kt/a Start Up Operating 1 Bohai Chemical Tianjin 5,8 Oct/213 2 Zhejiang Satellite PC I Pinghu, Zhejiang Aug/214 3 Ningbo Haiyue Ningbo, Zhejiang Sep/214 4 Shaoxing Sanjin Shaoxing, Zhejiang Sept/214 5 Shandong Chambroad Binzhou, Shandong April/215 6 Donghua Energy Co., Ltd-Yangzijiang I Zhangjiagang, Jiangsu May/215 7 Yantai Wanhua Yantai, Shandong Aug/215 8 Shandong Shenchi Dongying, Shandong Sep/215 9 Hebei Haiwei Jingxiam, Hebei Jul/216 1 Ningbo Fuji 1 Ningbo, Zhejiang Oct/216 11 Qixiang Tengda Zibo, Shandong Aug/216 Under Construction 12 Fujian Meide PC I Fuzhou, Fujian 66 mid/217 Under Planning 13 Zhejiang Satellite PC II Pinghu, Zhejiang 6 221 14 Hebei Haiwei II Jingxian, Hebei 5 221 15 Fujian Meide PC II Fuzhou, Fujian 66 221 3,8 16 Donghua Energy Co., Ltd-Yangzijiang II Zhangjiagang, Zhejiang 66 219 17 Donghua Energy Co., Ltd-Ningbo Fuji II Ningbo, Zhejiang 66 Unknown 18 Jiangsu Weiming Dafeng, Jiangsu 66 Unknown Operating Under construction Planning
Million Metric Tons China Move Towards Self-Sufficiency China s Propylene Capacity 5 12 4 1 3 2 8 6 Percentage 1 4 211 212 213 214 215 216 217 218 219 22 221 2 Net Equivalent Import Domestic Derivative Equivalent Demand Self-sufficiency 19
Adding Too Much Capacities In Asia? 2
221 Propylene Capacity for Major Asia Country 1,28 11,484 9,748 8,188 4674 245 14 576 945 657 3657 1679 58 Cracker Refinery Metathesis 2,34 Cracker 4, Refinery 562 277 79 865 Cracker Refinery PDH Metathesis 21
Million Metric Tons Operating Rate Oversupply Increasing in Korea 1 14% 8 11% 6 97% 4 94% 2 9% 86% 11 12 13 14 15 16 17 18 19 2 21 Production Demand Total Capacity Operating Rate 22
Million Metric Tons Per Year Million Metric Tons Per Year South Korea Propylene & Derivatives S. Korea Propylene Capacity 12 S. Korea Propylene Equivalent Trade 6 1 8 6 4 2 11 12 13 14 15 16 17 18 19 2 21 26 Steam Crackers Refinery/ FCC On-Purpose 5 4 3 2 1 11 12 13 14 15 16 17 18 19 2 21 26-1 Propylene Acrylonitrile Polypropylene Others Net Trade 23
Million Metric Tons New Derivatives Focus on PP & PO Asia Propylene Derivative Capacity Addition 6 4 2-2 211 212 213 214 215 216 217 218 219 22 221 AN Acrylic Acid Phenol Oxo-Alcohol PP Propylene Oxide Others Notes: All capacities in per ton propylene basis 24
Propylene Cost Competitiveness 25
Dollars Per Metric Ton NEA Propylene Production Technology Breakdown of Cost Structure for 216 1,2 8 874 4 531 582 493 411-4 -8 Naphtha Cracker* CTO* MTO* PDH FCC Splitter Feedstock Co-Credits Variable Fixed Total Notes: *Per Ton Light Olefins Basis 26
Dollars Per Metric Ton Crackers become more competitive in a low crude oil environment NEA On-Purpose Propylene Production Cost 2, 1,5 1, 5 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Non-Integrated Naphtha Cracker* Integrated (BDE/BTX) Naphtha Cracker* Metathesis PDH MTO* (Basis: Shanghai, E China) CTO* (Basis: Inner Mongolia, NW China) Notes: *Per Metric Ton Light Olefins 27
Dollars Per Metric Ton Coal-based Economics still Attractive in the Long-term NEA On-Purpose Propylene Production Cost 1,6 1,2 8 4 11 12 13 14 15 16 17 18 19 2 21 Non-Integrated Naphtha Cracker* Integrated Naphtha Cracker* Metathesis FCC Splitter PDH MTO* (Basis: Shanghai, E China) CTO* (Basis: Inner Mongolia, NW China) Notes: *Per Metric Ton Light Olefins 28
Dollars Per MT PDH is propylene price setter in Asia PDH vs Naphtha cracker cost 2, 1.6 1.4 1,5 1.2 1 1,.8.6 5.4.2 Jan 5 Jan 6 Jan 7 Jan 8 Jan 9 Jan 1 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 PDH Cost Naphtha cracker Cost Propylene, CFR NEA P/E Ratio P/E Ratio 29
Key takeaway box Aggressive investment in on-purpose propylene and short ethylene balance made historical low P/E ratio. China PDH feedstock exposure to US propane increases. NE Asia PDH producers will set propylene floor and ceiling prices in Asia Asia moves towards self-sufficient propylene and derivatives in the future Prices more dependent on economics of alternate routes - Seasonal propane price - Ethylene margin for naphtha cracker 3
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