Petrochemical Outlook for Latin America June 2014 - Polymers & Aromatics

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Petrochemical Outlook for Latin America June 2014 - Polymers & Aromatics

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Surf’s up: Riding the petrochemical revival wave in North America

Surf’s up: Riding the petrochemical revival wave in North America
by Bernardo Fallas, Managing Editor, Americas Petrochemicals – Platts
June 5, 2014

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  • 1. © 2013 Platts, McGraw Hill Financial. All rights reserved. Surf’s up: Riding the petrochemical revival wave in North America Bernardo Fallas, Managing Editor, Americas Petrochemicals – Platts June 5, 2014
  • 2. On the agenda… 2 • The ethylene boom – US projects at a glance • Cheap feedstock and its effect on olefins pricing • Cashing in through exports of polymer resin • The propylene dilemma – is propane the savior? • Other products being squeezed – butadiene, benzene • Short-term implications for Mexico
  • 3. The resurgence of US petchems 3 • The North American petrochemical industry is bullish about the future thanks to the shale gas boom • Olefins, in particular, are undergoing a renaissance – and dreaming big – less than 7 years after being left for dead Ethylene – In the US alone, more than 11.5 million mt/year in announced greenfield expansions – Up to 2.45 million mt/year in brownfield Propylene – Up to 4.1 million mt/year (greenfield) Butadiene – TPC Group to expand on-purpose production • Methanol production in North America is staging an impressive comeback after years of exile
  • 4. Shale gas & petchems– the link 4 Source: BENTEK/Platts
  • 5. 5 Olefins are key building blocks Steam crackerNGLs Naphtha Gas Oil HDPE LDPE LLDPE PP PVC PET PS MEG ABS SBR Ethylene Propylene Butadiene Benzene Methane Hydrogen Heavy Oil FCC, PDH, CTO/MTO, metathesis BDH CTO/MTO, others Source: BENTEK/Platts
  • 6. 6
  • 7. NGL growth driven by crude/gas ratio 7 • The delta between feedstocks is dictating ethane profitability • Crude-to-gas ratio has more than doubled since 2008 0 20 40 60 80 100 120 140 160 180 0 100 200 300 400 500 600 700 800 900 1000 Ethane vs. Naphtha price Naphtha Index Purity Ethane Mt Belvieu $/mt Cents/gal
  • 8. Ethane yielding record margins 8 -$1,000 -$500 $0 $500 $1,000 $1,500 03/01/2011 03/02/2011 03/03/2011 03/04/2011 03/05/2011 03/06/2011 03/07/2011 03/08/2011 03/09/2011 03/10/2011 03/11/2011 03/12/2011 03/01/2012 03/02/2012 03/03/2012 03/04/2012 03/05/2012 03/06/2012 03/07/2012 03/08/2012 03/09/2012 03/10/2012 03/11/2012 03/12/2012 03/01/2013 03/02/2013 03/03/2013 03/04/2013 03/05/2013 03/06/2013 03/07/2013 03/08/2013 03/09/2013 03/10/2013 03/11/2013 03/12/2013 03/01/2014 03/02/2014 03/03/2014 US cracker margins Ethane Cracker Margin Ethane/Propane Mix Cracker Margin Naphtha Cracker Margin Propane Cracker Margin Since early 2011, margins for US ethane and E/P Mix have climbed from $500/mt to $1,000/mt; naphtha margins fluctuate $/mt Source: Platts
  • 9. Shift to lighter feeds in full effect 9 • Ethane consumption in US crackers has climbed from 41% of total feedstock in 2005 to 58% of total feedstock in 2013 • Ethane is expected to account for 76% of US cracker feedstock by 2024 – Cut in propane use is necessitating PDH development – Aromatics output at the cracker has diminished, contributing to a tighter benzene market
  • 10. 10
  • 11. North American ethylene at a glance Cheap feedstock, projected PE demand drive expansions
  • 12. Spot is becoming indifferent to ethane 12 $- $150 $300 $450 $600 $750 $900 $1,050 $1,200 $1,350 $1,500 $1,650 $1,800 Dec-07 Mar-… Jun-08 Sep-08 Dec-08 Mar-… Jun-09 Sep-09 Dec-09 Mar-… Jun-10 Sep-10 Dec-10 Mar-… Jun-11 Sep-11 Dec-11 Mar-… Jun-12 Sep-12 Dec-12 Mar-… Jun-13 Sep-13 Dec-13 Mar-… Ethylene contract vs. spot price vs. ethane Ethylene FD USG MAvg $/mt Ethylene USG Net CP $/mt Ethane non-LST Mt Belvieu pipe MAvg $/mt $/mt Source: Platts
  • 13. US olefins producers are “all in” 13 Source: Company announcements, Platts Company Location ,000 mt/yr ETA Formosa Plastics CUSA Texas 1,200-1,500 2017 ExxonMobil Chemical Texas 1,500 2017 Chevron Phillips Chemical Texas 1,500 2017 Dow Chemical Texas 1,500 2017 Sasol Louisiana 1,500 2017 Occidental/Mexichem Texas 550 2017 Appalachian Resin W. Virginia 250 2017 Aither Chemical/RMG W. Virginia 200-300 2017 Odebrecht (Braskem) W. Virginia 1,000-1,500 2018 Axiall Louisiana 1,000 2019 Shin-Etsu (Shintech) Louisiana 1,000 2019 Shell Chemical Pennsylvania 1,000-1,500 2019 news news news
  • 14. Brownfields: Good barometers 14 Source: Company announcements, Platts Company Location +,000 mt/yr ETA BASF-Total Texas 60 2012 Dow Chemical (restart) Louisiana 400 2012 Westlake Chemical Louisiana 110 2013 Williams Louisiana 230 2013 BASF-Total Texas 100 2014 Westlake Chemical Kentucky 80 2014 Ineos Texas 120 2014 Westlake Chemical Louisiana 110 2015 LyondellBasell Texas (3) 830 2014-16 Dow Chemical TX/LA (2) 400 2014-16
  • 15. North American PE expansions 15 Company Location ,000 mt/yr Grade(s) ETA Braskem/Grupo Idesa Coatza., MEX 1,000 HD, LD 2015 Nova Chemicals Joffre, CAN 450 LLD 2015 LyondellBasell Texas 450 LD, LLD 2016 Ineos/Sasol Texas 470 HD 2017 Sasol Louisiana 420 LD 2017 Dow Chemical Texas TBD LD, EPDM 2017 ChevronPhillips Texas 1,000 HD, LLD 2017 ExxonMobil Chemical Texas 1,300 HD, LLD 2017 Formosa Plastics CUSA Texas 300 LD 2018 Sasol Louisiana 450 HD, LLD 2018 Nova Chemicals Sarnia, CAN 500 TBD 2018+ Shell Chemical Pennsylvania 1,000 TBD 2018+ Odebrecht (Braskem) W. Virginia TBD TBD 2019
  • 16. 16
  • 17. Advantage through resin exports 17
  • 18. US product in Latin America 18 Country 2012 (MT) 2000-2012 (MT) Mexico 980,949 10,751,045 Canada 593,670 7,228,356 China 173,140 2,962,309 Colombia 138,962 1,067,259 Brazil 165,176 980,295 Belgium 85,228 930,664 Hong Kong 62,036 847,535 Peru 99,407 785,584 Guatemala 67,362 763,976 Ecuador 55,040 723,765 Source: U.S. Dept. of Commerce/US International Trade Commission Top US PE Export Destinations
  • 19. Export shows disconnect with C2 19 950 1050 1150 1250 1350 1450 1550 1650 Ethylene FD USG LDPE FAS Houston LLDPE Butene FAS Houston HDPE B/Mldg USGC Weekly $/mt
  • 20. US domestic contract PE prices 20 Source: Platts 55 60 65 70 75 80 85 90 95 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 HDPE B/Mldg HDPE Film LDPE LLDPE Cents/lb
  • 21. US PVC expansions limited so far 21 Source: Company announcements, Platts Company Location +,000 mt/yr ETA Westlake Chemical Kentucky 80 2014 Shintech Louisiana 300 2016 • Caustic, ethylene expansions have translated in additional PVC capacity projects, although scope is currently limited • However, cracker project announcements by Shintech, Axiall and Oxychem/Mexichem could signal expansions • Dow Chemical’s proposed divestment of its $5 billion chlor- alkali, chlor vinyls business adds new wrinkle to North American market
  • 22. 22
  • 23. North American propylene at a glance Shift to light feeds has diminished production, injecting volatility in pricing
  • 24. US propylene production sliding 24 0 1000 2000 3000 4000 5000 6000 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Propylene produced in US crackers, by feedstock Ethane Propane Butane Naphtha Full-range Naphtha Gas Oil During the next decade, propylene produced by US crackers will fall 30% to 3.5 million metric tons Source: Platts Thousandmt/yr
  • 25. Tightening supply yields volatility 25 30 40 50 60 70 80 Contract PGP cts/lb Monthly Spot PGP cts/lb Weekly Spot Ref- Grade Propylene FD USG cts/lb Weekly Cents/lb Source: Platts
  • 26. Propane: The propylene lifeline? 26 Source: Company announcements, Platts Company Location ,000 mt/yr ETA Dow Chemical (PDH) Freeport, TX 750 2015 Enterprise Products (PDH) Mt. Belvieu, TX 750 2015 C3 Petrochemicals (PDH) Alvin, TX 1,200 2015 Formosa Plastics CUSA (PDH) Point Comfort, TX 600-750 2016 Williams (PDH) Alberta, Canada 500 2016 REXTac (PDH) Odessa, TX 300 2016 Dow Chemical (PDH II) * TBD/USG TBD 2018 Enterprise Products (PDH II) * TBD/USG TBD TBD Williams (PDH II) * Alberta, Canada TBD TBD BASF (MTO) * TBD/USG TBD TBD PetroLogistics (PDH) Houston, TX Expansion --- LyondellBasell (metathesis) Texas Expansion --- news news news
  • 27. US PP: Wait-and-see approach 27 Company Location ,000 mt/yr ETA RexTac Odessa, TX 270 H2 2016 • Despite several on-purpose propylene projects, only one PP expansion has been announced • For the past few years, the business has looked unattractive, with the likes of Dow and Sunoco exiting it all together • In 2012, Chevron Phillips and Sumika ended a JV in Pasadena, Texas, taking 320,000 mt/year out of the market Source: Company announcements, Platts
  • 28. US PP uncompetitive globally 28 $1,200 $1,400 $1,600 $1,800 04/01/2012 04/02/2012 04/03/2012 04/04/2012 04/05/2012 04/06/2012 04/07/2012 04/08/2012 04/09/2012 04/10/2012 04/11/2012 04/12/2012 04/01/2013 04/02/2013 04/03/2013 04/04/2013 04/05/2013 04/06/2013 04/07/2013 04/08/2013 04/09/2013 04/10/2013 04/11/2013 04/12/2013 04/01/2014 04/02/2014 04/03/2014 04/04/2014 PP Homo CFR Peru PP Homo Inj CFR Brazil PP Inj CFR FE Asia PP Homo FAS Houston $/mt Source: Platts
  • 29. 29
  • 30. © 2013 Platts, McGraw Hill Financial. All rights reserved. North American butadiene at a glance Demand expected to outstrip supply globally, with the automotive sector the key driver; US expansions limited despite feedstock availability
  • 31. Butane: On-purpose butadiene 31 • Restart of dehydrogenation assets to provide isobutylene feedstock for MTBE, PIB, HP isobutylene and diisobutylene • Engineering design optimization for TPC OXO-D unit due late 2013 • Engineering also underway for PIB expansion Company Location ,000 mt/yr ETA TPC Group (BDH) Houston, TX 295 (isobutylene) 2014 TPC Group (OXO-D) Houston, TX 272 (butadiene) 2016
  • 32. Global butadiene comparison 32 $/mt Source: Platts
  • 33. © 2013 Platts, McGraw Hill Financial. All rights reserved. North American benzene at a glance The region, but especially the US, is net-short; dropping production at the cracker will only tighten supply and apply price pressure to downstream markets
  • 34. Shifts to lights also squeezes benzene 34 • Pygas to decrease 40% • Crude C4 to decrease 20% • Propylene to decrease 20% • 69% growth in ethane based output • 32% decrease in naphtha based output Source: Platts Petrochemical Analytics
  • 35. Ethane yields lowest amount of aromatics 35 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Ethane Propane Butane Light Naphtha Yields by feedstock Hydrogen/Fuel Gas Oil Aromatics Crude C4s Propylene Ethylene Source: Platts Petrochemical Analytics
  • 36. US benzene depends on Asia 36 1200 1250 1300 1350 1400 1450 1500 1550 1600 1650 1700 $/mt Global benzene prices Europe US Asia Europe at premium to US on limited supply US reaches record-high at $1,655/mt FOB basis
  • 37. 37
  • 38. © 2013 Platts, McGraw Hill Financial. All rights reserved. North American methanol at a glance Cheap natural gas could bring unprecedented capacity growth to the US Gulf Coast region and elsewhere, with Asia a likely importer
  • 39. US methanol – announced projects 3939Source: Platts and published releases
  • 40. China will be thirsty for methanol 40 • CTO and MTO projects in China could add up to 10 million mt of new PE capacity in the country by 2020 – nearly equal to China’s forecast demand growth
  • 41. © 2013 Platts, McGraw Hill Financial. All rights reserved. Implications for Mexico Major imports of polymers to continue despite new PE capacity coming online; production of basic petrochemicals to remain insufficient
  • 42. 42 Click here to download
  • 43. Tempered expectations 43 • Etileno XXI will be the first new steam cracker and polyethylene project in North America in over a decade, but… • Mexico is expected to remain an importer of PE, with the US as its main supplier • Polypropylene imports account for at least half of consumption, and a portion of the raw material is outsourced • Will remain net short butadiene, styrene, among others, which are key to a booming automotive industry • Energy reform will likely invite petrochemical investment, but realization of major petchem projects is easily 5-10 years away
  • 44. Muchas gracias! Preguntas? [bernardo.fallas@platts.com 713-655-2214 (Office) 281-536-7231 (Mobile)]