Global Propylene Market - PDF Free Download

Global Propylene Market Motivated to Change Chuck Carr, IHS Senior Director - Propylene September, 2014 IHS Asia Chemical Conference Singapore

Global Propylene Market The Big Picture and what is motivating the changes China continues to strive towards self sufficiency North America NGL s impact supply Overbuild on the horizon..prices forecast to weaken

Propylene Demand Growth Averages 4 mmt/yr Million Metric Tons 160 120 80 40 Operating Rate 90% 80% 70% 60% 0 08 09 10 11 12 13 14 15 16 17 18 23 Acrylic Acid Acrylonitrile Cumene Isopropanol 2-Ethyl Hexanol Butanols Polypropylene Propylene Oxide Others Operating Rate 50%

Capacity Additions.PDH and CTO Lead the On-Purpose Wave FCC Splitters 31% FCC Splitters 25% Dehydro 13% Metathesis 4% Stm. Crackers 55% Others On- Purpose 1% Dehydro 5% Metathesis 4% HS FCC 3% Coal /Methanol To Olefins 1% Stm. Crackers 46% Others On- Purpose 1% Methanol to Olefins 2% Coal to Olefins 5% Coal to Propylene 1% HS FCC 3% Doubling On-Purpose Capacity 2013 2018

Global On Purpose Production/Demand Million Metric Tons 40 30 Big Ramp in Capacity Op. Rate, Percent 90 80 20 70 10 60 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Production Capacity Operating Rate 50

Total World Propylene 2020+ Alkylation 50% LPG/Fuel 35% IPA 20% Cumene 40% Refinery FCC/Coker Steam Crackers 30% 35% 40% - 45% Polygas/ Dimersol 15% Others On- Purpose 1% HS FCC 14% Splitters 68% Fuels 24% Direct 8% Metathesis 11% Propylene Oxide 8% Oligomers 40% Others 2% Acrylic Acid 4% Acrylonitrile 6% Cumene 4% Isopropanol 1% 2-Ethyl Hexanol 3% Butanols 3% Polypropylene 69% On-Purpose 25% - 30% Via Methanol 30% Olefin Cracking 1% PDH 43%

Asia Leads Demand Growth.. Million Metric Tons 150 125 100 75 50 25 0 08 09 10 11 12 13 14 15 16 17 18 23 N. America S. America W. Europe C. Europe CIS & Baltics Africa Middle East Indian Subc. NE Asia SE Asia

China s Propylene Self-Sufficiency is Rapidly Improving Million Metric Tons Percent, % 50 100 90 40 80 70 30 60 50 20 40 30 10 20 10 0 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Production Net Equivalent Import (Export) Self-sufficiency

6 5 4 3 2 1 0-1 Not Surprising with All the New On- Purpose Capacity Asia Propylene Incremental Capacity, Million Metric Tons 7 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 China Coal/ Methanol China PDH China Crackers/ Refineries Other NE Asia

Propylene Derivative Capacity Additions Shift Away from PP Global Percentage 100% Propylene Equivalent Basis 80% 60% 40% 20% 0% PP 08 09 10 11 12 13 14 15 16 17 18 Polypropylene Acrylonitrile Acrylic Acid Cumene Oxo Alcohol Propylene Oxide Other

And Provides Abundance of Non-PP Derivative Capacity Mostly China Global, Million Metric Tons 7.0 Propylene Equivalent Basis 6.0 5.0 4.0 3.0 2.0 1.0 0.0 PP 08 09 10 11 12 13 14 15 16 17 18 Polypropylene Acrylonitrile Acrylic Acid Cumene Oxo Alcohol Propylene Oxide Other

NGL s Supplies: Effects on Propylene Ethane Propane Butanes Negative Positive Negative C5+ Provides alternatives for refiners and steam crackers

North America Propane Abundance Supports Global PDH Additions MBPD 2,500 2,000 1,500 1,000 500 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 Domestic Exports

World Propylene PG/CG Cost Curve 2018 $/Metric Ton 1800 MDE Avg MDE PDH US PDH SEA Avg NAM Avg SAM Avg China PDH NEA Avg WEP Avg 0 0 20 40 60 80 100 120 Cumulative Production - Million Metric Tons Demand US Price W Europe Price NE Asia Price 2018

US Propylene Prices Stay Discounted Versus Alky Alternatives Cents Per Pound 100 Dollars Per Metric Ton 2205 0 95 98 01 04 07 10 13 16 19 22 Alky Alternative Value Spot Refinery Grade Contract Polymer Grade 0

Propylene Splitter Margin More Motivation for Refiners Price, Cents Per Pound 100 Margin Gain by Splitters 80 60 40 20 Margin 25 20 15 10 5 0 02 J 03 J 04 J 05 J 06 J 07 J 08 J 09 J 10 J 11 J 12 J 13 J 14 J 15 J Margin RG Wtd Avg Acq (Estimated) PG Benchmark Contract 0

Propylene Alkylation Economics Revived Will Refiners Invest? Return on Investment for an Alky Unit in US + 0% _ 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 ROI @ $75 Million ROI @ $150 Million ROI @ $225 Million

Global Propylene Market The Big Picture and what is motivating the changes China continues to strive towards self sufficiency North America NGL s revive supply Overbuild on the horizon..price forecast weakens

12.0 8.0 4.0 0.0-4.0 Global Propylene Capacity Additions Versus Demand Growth Million Metric Tons Capacity Overwhelms Anticipated Demand Growth -8.0 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 North America Middle East China West Europe Others Other Asia Annual Demand Increase

Global Monthly Propylene Prices Dollars Per Metric Ton 2,200 2,000 1,800 Monthly Volatility Already Declining 1,600 1,400 1,200 1,000 10 A J O 11 A J O 12 A J O 13 A J O 14 A J O 15 A J O NAM Net Trans. Contract Price WEP Disc. Contract Price SEA CFR Spot Price

Global Propylene Net Equivalent Trade Contracts With the Overbuild Million Metric Tons 15.0 Net Exports 12.0 9.0 6.0 3.0 0.0-3.0-6.0-9.0-12.0 Net Imports -15.0 08 09 10 11 12 13 14 15 16 17 18 23 North America West Europe Middle East Asia (Ex China) China

Propylene to Ethylene Price Ratios Ratio 1.5 A Return to the 1990 s? Ratio 1.5 1.3 1.3 1.1 1.1 0.9 0.7? 0.9 0.7 0.5 More than 2X GDP Growth in 1990 s 90 93 96 99 02 05 08 11 14 17 20 23 Southeast Asia North America West Europe 0.5

World PG/CG Propylene GDP Elasticity 7.0 5.0 3.0 Average GDP Elasticity from 1990-99'= 2.14 Average GDP Elasticity from 2000-07 = 1.58 Forecast GDP Elasticity from 2010-17 = 1.55 Forecast GDP Elasticity from 2018-23=1.15 1.0-1.0-3.0-5.0 Could Get a Boost from Weaker Prices 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22

Global Annual Propylene Prices Dollars Per Metric Ton 1,800 NAM back to lowest Asia lowest price 0 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020 2023 NAM Net Trans. Contract Price WEP Disc. Contract Price SEA CFR Spot Price

Conclusions Propylene demand growth could get a boost if oversupply of propylene and propylene derivatives significantly weakens prices Abundance of North America NGL s will provide a mixed impact on propylene supply On-purpose will continue to be the growth engine for propylene supply. Could methane based propylene via methanol could be the next wave

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