Platts Petrochemicals - Asian Olefins Outlook Feb 2013 - Chua Sok Peng

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Platts Petrochemicals - Asian Olefins Outlook Feb 2013 - Chua Sok Peng

  1. 1. Asian Olefins 2013: Changing LandscapesCHUA Sok Peng,Managing Editor, Asian Petrochemicals | February, 2013
  2. 2. Agenda Ethylene 2013: Rebound on naphtha, European demand Derivatives: PE demand weak, MEG faces challenge as MTO-based MEG starts up Propylene 2013: Prices rising but derivatives hurt Derivatives: PP still in the red, ACN struggling Butadiene 2013: A seemingly good year Derivatives: New synthetic rubber drives C4 demand 2
  3. 3. Ethylene prices rebound from on tight supply 3
  4. 4. Ethylene CFR SEA spread still negative 4
  5. 5. Ethythylene CFR NEA margin positive 5
  6. 6. European demand pushesAsian Ethylene to 4 ½- year- high Asian cargoes headed towards Europe since mid- December European demand unsustainable as downstream PE hurt by rising feedstock. PE producers cutting run rates will lead to excess ethylene being put back in the market Taiwan Formosa sells 6,000-10,000 mt of spot ethylene via tender MEG the only bright spark for ethylene but downstream polyester in a lull US ethylene weak, imports for 2012 at 3.27 million mt, down 783,430 mt or 19% from 2011 6
  7. 7. Europe, Asia arbitrage 7
  8. 8. PE prices climbing on cost push factors 8
  9. 9. Negative margins for LLDPE, LDPE, HDPE 9
  10. 10. MEG the only bright spark for ethylene 10
  11. 11. Agenda Ethylene 2013: Rebound on naphtha, European demand Derivatives: PE demand weak, MEG faces challenge as MTO-based MEG starts up Propylene 2013: Prices rising but derivatives hurt Derivatives: PP still in the red, ACN struggling Butadiene 2013: A seemingly good year Derivatives: New synthetic rubber drives C4 demand 11
  12. 12. Propylene: Positive margin on turnarounds 12
  13. 13. Propylene up on US arbitrage, SEA shortage 13
  14. 14. PP margins negative 14
  15. 15. Acrylonitrile rising on cost-push factors 15
  16. 16. Acrylonitrile: Dwindling demand South Koreas ACN January exports fell 32.8% month on month and 35.2% year on year to 13,453 mt. Exports to key destination China slid 23.7% month on month to 13,361 mt. Downstream acrylonitrile-butadiene-styrene producers were concerned about firm styrene monomer prices. ABS makes up 30% of ACN derivatives. Acrylic fiber makes up 50% of ACN derivatives. China is top spot buyer in Asia but demand will fall as new plants start up. Chinas textile and garment exports weakening as Europe/US demand falls. Exports rose a mere 3% year on year in 2012 to $260 billion, the second lowest level of growth in 20. 16
  17. 17. Chinese PP: Oversupply, low domestic price In China: Overcapacity continues to dampen demand. Total capacity 12.7 million mt/year, imports stabilize Six new PP plants started up in 2012, total capacity 1.55 million mt/year Structural problem: PP homo/raffia grade makes up 50% of Chinese market. Mainly produced by small-to-medium sized companies which lead to intense competition, oversupply. Run rates at less than 70% and losses intensify as propylene prices rise China domestic price more than Yuan 500/mt ($80/mt) cheaper than imports since November 2012, resulting in lower demand for imported PP. Market watchers expect similar price gap in 2013. East China: PP price fell 16.5% between September 2012 and January 2013, from Yuan 12,100/mt to Yuan 10,100/mt 17
  18. 18. Eurpean PP: Hanging on automobiles In Europe: PP market dragged down by a slump in automotive demand, which has fallen to its lowest level in 17 years. European new passenger car sales dropped 8.2% in 2012 to 12.05 million units, the lowest since 1995, latest data from European Automobile Manufacturers Association (ACEA) showed. The 8.2% contraction was the steepest fall on record since 1993 when car demand slumped 16.9%, with major markets Germany, France, Italy and Spain all reporting decreases. December saw sales plunge 16.3% year on year to 799,407 units, continuing the downward trend that started 15 months ago. Converters expect their deliveries to customers in the auto segment to weaken significantly this year as car manufacturers scale down operations in Europe amid shrinking demand and overcapacity. 18
  19. 19. China demand stabilizes as production rises China PP Homo imports stabilizing (million mt) 2012 2011 2010 2009 2008 0.00 1.00 2.00 3.00 4.00 5.00 19
  20. 20. US PP homo exports falling US PP Homo Exports (million mt) 2012 2011 2010 2009 2008 0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 20
  21. 21. Agenda Ethylene 2013: Rebound on naphtha, European demand Derivatives: PE demand weak, MEG faces challenge as MTO-based MEG starts up Propylene 2013: Prices rising but derivatives hurt Derivatives: PP still in the red, ACN struggling Butadiene 2013: A seemingly good year Derivatives: New synthetic rubber drives C4 demand 21
  22. 22. Roller coaster ride for Butadiene 22
  23. 23. What drives Butadiene? Strong demand Feb 22: Asian butadiene at $2,100/mt FOB Korea Prices up 44% from 2012 low of $1,455/mt FOB Korea on Dec 7 China imports up 47% in 2012 to 344,828 mt Prices rally on start up of new butadiene rubber plants in China: 2012: Lanxess JV 30l000 mt/year nitrile butadiene rubber Keyuan Petrochemicals: 70,000 mt/year SBS Q1: Sinopec Maoming: 100,000 mt/year BR Zhejiang Transfar: 100,000 mt/year BR Q2: YPC-GPRO (Nanjing): 100,000 mt/year BR PetroChina Sichuan: 150,000 mt/year BR 23
  24. 24. What drives Butadiene? Tight supply South Korean producers using LGP for feed as naphtha surges Feb 1: Lotte Chemical using 10% LPG as feedstock for Daesan steam cracker to cope with rising naphtha costs. Cracker capacity: 1 million mt/year of ethylene, 500,000 mt/year of propylene, supplies crude C4 feedstock to a 150,000 mt/year butadiene extraction unit at the same location. The change in feedstock will lower production of butadiene. Loss of C4 = 600-800 mt/month March 1: YNCC to use 10% butane for No. 1 and No. 2 naphtha-fed steam crackers. No. 1: 860,000 mt/year of ethylene, 450,000 mt/year of propylene; No. 2: 580,000 mt/year of ethylene, 280,000 mt/year of propylene; No.: 3 470,000 mt/year of ethylene, 240,000 mt/year of propylene. No butane will be used in the No. 3 cracker. The three supply crude C4 feedstock to a 240,000 mt/year butadiene extraction unit. Loss of C4 = 600 mt/month March 1: Samsung Total to use 10% butane as feedstock for Daesan cracker, which can produce 1 million mt/year of ethylene, 600,000 mt/year of propylene and 114,000 mt/year of butadiene Thailand’s Bangkok Synthetics to cease butadiene supply (140,000 mt/year) as BSTE will start a new 50,000 mt/yar solution-SBR plant jointly with Japan’s JSR in 2013 , 24
  25. 25. Butane vs Naphtha 25
  26. 26. Butadiene tracks natural rubber 26
  27. 27. ABS margin hurt by rising SM 27
  28. 28. What’s ahead for Butadiene • The Bulls: Change to lighter feedstocks an unstoppable trend so butadiene will surge on tight supply, strong demand. China will continue to be biggest importer in the region as more synthetic rubber plants start up. • The Bears: Current prices unrealistic especially since natural rubber is on down trend. Prices will crash as China’s synthetic rubber plants will be delayed. US butadiene demand falling. 2012 total imports at 640,834 mt, down 142,000 mt or 18.2% from 2011. 28
  29. 29. China olefin imports 2010-2012 2500000 2000000 1500000 2010 2011 2012 1000000 500000 0 Ethylene Propylene Butadiene 29
  30. 30. US olefins imports 4500 4000 3500 3000 2500 2010 2011 2000 2012 1500 1000 500 0 Ethylene Propylene Butadiene 30
  31. 31. THANK YOU CHUA Sok PengManaging Editor, Asian Petrochemicals February 2013

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