MEG & Paraxylene to Polyester - An Integrated Approach Madhu Suthanan Business Analyst Executive Director's Office Reliance Industries Limited
MEG & Paraxylene to Polyester An Integrated Approach Madhu Suthanan Reliance Industries Limited 8 th China International Polyester and Intermediate Forum Shanghai Contents 2 31
Polyester Growth 2 Polyester Growth = 2.3*GDP Growth 16 Polyester Growth (%) 12 8 4-4 -1 1 2 3 4 5 6 GDP Growth (%) Source: IMF Robust economy augurs well for polyester growth Polyester Dominance to Continue Fibre Consumption 1% Others 8% 6% Natural 4% 2% Polyeste r % 199 1995 2 25 21 215 22 Versatile properties aiding polyester growth Polyester to cater to 7% of incremental demand 4 32
Global Trade: Volatility More Intense than GDP % Change Source: IMF, WTO Cautious approach during uncertain times 5 Asia Leadership to Stay 6 33
Asia: Clothiers to the World Fibre Consumption N America Consumption 1 5 Yr Growth 3% 7 MMT Import Export L America Consumption 4 MMT 5 Yr Growth 2% W Europe Consumption 1 MMT 5 Yr Growth 1% 5 MMT Africa/M East Consumption 5 MMT 5 Yr Growth 5% 3 MMT 3 MMT E Europe Consumption 5 MMT 5 Yr Growth 6% 15 MMT China Consumption 25 MMT 5 Yr Growth 3% India Consumption6 MMT Other Asia 5 Yr Growth 6% Consumption 1 MMT 5 Yr Growth 1% 2 MMT 2 MMT Economical raw materials and labour cost aids growth 7 Textile Demand aiding Polyester Growth Polyester Production E Europe W Europe Production.5 MMT Production 3 MMT 5 Yr Growth 16% N America 5 Yr Growth 4% China Production 5 MMT 5 Yr Growth 3% Production 25 MMT 5 Yr Growth 7% Africa/M East India Production 2 MMT Production 4 MMT Other Asia 5 Yr Growth 1% 5 Yr Growth 12% Production 1 5 Yr Growth 3% L America Production 5 Yr Growth 16% Asia constitutes 8% of polyester production India and China to drive growth 8 34
PTA: Asia Centric Growth PTA Capacity N America Capacity 6 MMT 5 Yr Growth 4% Import Export L America Capacity MMT 5 Yr Growth High W Europe Capacity 3 MMT 5 Yr Growth 9% Africa/M East Capacity 5 Yr Growth 14% MMT. E Europe Capacity.3 MMT 5 Yr Growth 19% 7 MMT China Capacity 16 MMT India 5 Yr Growth 19% Capacity 4 MMT Other Asia 5 Yr Growth 11% Capacity 19 MMT 5 Yr Growth 2% 8 MMT Proximity to consumption centre Deciding factor MEG: Feedstock Availability Vital Factor MEG Capacity E Europe Capacity.5 MMT W Europe 5 Yr Growth % Capacity 2 MMT MMT N America 5 Yr Growth -1% 6 MMT China Capacity 5 MMT 5 Yr Growth -2% Capacity 4 MMT 5 Yr Growth 15% Africa/M East India Capacity 9 MMT Capacity Other Asia 5 Yr Growth 2% 5 Yr Growth 11% Capacity 7 MMT 5 Yr Growth %.4 MMT.2 MMT Import Export L America Capacity.4 MMT 5 Yr Growth % 7 MMT Emergence of new sources Changing dynamics? 35
PX: Asia Major Growth Centre PX Capacity N America Capacity 5 MMT 5 Yr Growth %..2 MMT Import Export L America Capacity.3 MMT 5 Yr Growth % W Europe Capacity 2 MMT 5 Yr Growth 5% Africa/M East Capacity 4 MMT 5 Yr Growth 8% 2 MMT MMT India Capacity 2 MMT 5 Yr Growth 21% MMT E Europe Capacity.5 MMT 5 Yr Growth 13%. 3 MMT China Capacity 8 MMT 5 Yr Growth 7% Other Asia Capacity 15 MMT 5 Yr Growth 6% China to remain net importer 11 Integrated Business Model 12 36
Volatile Standalone Delta Coefficient of Variation measures fluctuation of delta US$/MT PX/Naphtha Coefficient of Variation 39% US$/MT PTA/PX Coefficient of Variation 31% US$/MT MEG/Naphtha Coefficient of Variation 36% US$/MT PSF/PTA-MEG Coefficient of Variation 36% High vulnerability leads to uncertain profits 13 Integrated Chain Delta US$/MT 125 PX delta for PES PTA delta for PES MEG delta for PES Delta (PSF) Avg Chain Delta 1 75 Avg Delta: $732/MT Coefficient of Variation 19% 5 25 Q1 ' Q3 ' Q1 '1 Q3 '1 Q1 '2 Q3 '2 Q1 '3 Q3 '3 Q1 '4 Q3 '4 Q1 '5 Q3 '5 Q1 '6 Q3 '6 Q1 '7 Q3 '7 Q1 '8 Q3 '8 Q1 '9 Q3 '9 Q1 '1 Q3 '1 Q1 '11 Q3 '11 Logistic advantage, Lower fixed cost, Lower conversion & packing costs 14 37
Polyester & Feedstock Prices US$/MT Integration captures maximum value addition Feedstock: Going Green Bio based Paraxylene (PX) Bio based Terepthalic Acid (PTA) Bio based Monoethylene Glycol (MEG) Bio based Polyester Reliability & commercial feasibility Deciding factor 38
Surplus Capacity to Impact Margins 1 MMT PX 2 MMT PTA 8 16 6 12 4 1 Yr Average 8 2 8 21 211 212 213 214 215 MMT MEG 4 1 Yr Average 21 211 212 213 214 215 6 4 2 1 Yr Average 21 211 212 213 214 215 MEG capacities to normalise in short term PTA capacities to be impacted by PX shortage Indian Polyester Markets Fortifying 18 39
India Feedstock Scenario 65 KT PX 8 KT PTA 52 39 26 Demand 6 4 Demand 13 Capacity 2 Capacity 3 21 211 212 213 214 215 KT MEG 21 211 212 213 214 215 25 2 Demand 15 1 5 Capacity 21 211 212 213 214 215 New capacity envisaged in PX, PTA, MEG India- Backward Integration Degree of Backward Integration Polyester Capacity 5.5 MMT Reliance Degree of Integration PTA 32% 1% MEG 32% 1% PX 68% 1% Integration forms keystone of growth for Reliance 4
Reliance Story Retail 27 Exploration & Production Post 2 Crude Oil Refining 2s Petrochemicals 199s Fibre Intermediates 199s Polyester 198s Competitive strength lies in integration Reliance Polyester Story Feedstock Integration Acquired Indian Petrochemicals PX MEG 22 27 26 Acquired Hualon, Malaysia 23 Reinvestments CP at Hazira (POY / PSF) 21 Acquired Jagatjit Cotton & Textile Mills 2 Acquired Raymond Synthetics/Central India Polyester 1999 Acquired Orissa Synthetics PTA, MEG PX 1988 1998 Polyester Facility at Hazira, Acquired IPL 1993 Acquired Terene Fibres Polyester Growth PTA 1986 PSF Facility at Patalganga 1982 First POY Plant at Patalganga Early foresight gives advantage 41
Reliance Expansions PX: 1.8 MMT PTA: 2.3 MMT MEG:.7 MMT PFY:.4 MMT PTY:.14 MMT PSF:.3 MMT PET:.65 MMT RIL continues its growth in the integrated approach Reliance Vision: Pillars of Success Cost Leadership Innovation Leadership Captive Availability of PX, PTA & MEG R&D Product / Technology Leadership To continuously Grow on a sustainable basis and be the Largest, the most Innovative, and the most Admired Polyester Producer in the world Green Field Expansions / Acquisition Market Leadership Best Practices Six Sigma, ISO 91, 14 Global Acceptance Growth is Life 24 42
Summary Versatility in applications accelerates polyester demand Asia to be center of growth for polyester chain Feedstock overcapacity to impact margins and operations Integrated operations insulates profitability shocks Integrated capacity addition across polyester chain will continue to be the growth model for Reliance 43