Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Appe Presentation

750 views

Published on

Presentation by John Baker of ICIS to the 2009 annual meetign of APPE and PlasticsEurope in Brussel son 28 May

Published in: Business, Education
  • Be the first to comment

Appe Presentation

  1. 1. <ul><li>Impact of the crisis on petrochemicals and derivatives </li></ul><ul><li>John Baker </li></ul><ul><li>Global editor </li></ul><ul><li>ICIS </li></ul>APPE/PlasticsEurope General Assembly 28 May 2009
  2. 2. <ul><li>Topics today </li></ul><ul><li>Economic and market conditions </li></ul><ul><li>Industry reaction </li></ul><ul><li>Slight recovery? </li></ul><ul><li>Restructuring/M&A </li></ul><ul><li>Capacity developments </li></ul><ul><li>European strategies </li></ul>APPE/PlasticsEurope General Assembly 28 May 2009
  3. 3. APPE/PlasticsEurope General Assembly 28 May 2009 <ul><li>Economic and market conditions </li></ul><ul><li>Petrochemicals sector had enjoyed extended peak of cycle performance for several years – high oil prices/tight supply </li></ul><ul><li>Was expecting supply-led downturn into 2009-10 – added Middle East capacity </li></ul><ul><li>BUT – severe demand-led slump in December 2008 and Q1 2009 </li></ul><ul><li>The result of financial crisis and ensuing economic slowdown </li></ul><ul><li>Driven by automotive, construction and electronic goods sectors… </li></ul><ul><li>Food, agchems, personal care, etc… much less impacted </li></ul>
  4. 4. APPE/PlasticsEurope General Assembly 28 May 2009 <ul><li>Global demand declines </li></ul><ul><li>European car production expected to fall 25% in 2009 – EU projection </li></ul><ul><li>German construction output down 26% in January 2009, y-on-y; euro zone activity down by 9.1% - Eurostat </li></ul><ul><li>Japan’s export value shrinks by 50% in February 2009 </li></ul><ul><li>Global trade to fall by 9% in 2009 – WTO forecast </li></ul><ul><li>Global GDP to contract by up to 1.0% in 2009 - IMF </li></ul><ul><li>European petrochemicals output drops 40% in December 2008, polymers by 33% - Cefic/Eurostat </li></ul>
  5. 5. APPE/PlasticsEurope General Assembly 28 May 2009
  6. 6. APPE/PlasticsEurope General Assembly 28 May 2009
  7. 7. APPE/PlasticsEurope General Assembly 28 May 2009
  8. 8. APPE/PlasticsEurope General Assembly 28 May 2009
  9. 9. APPE/PlasticsEurope General Assembly 28 May 2009 <ul><li>Industry reaction </li></ul><ul><li>Reaction was rapid and largely effective </li></ul><ul><li>Plant idling and closures; reduced working, job cuts… “flexibilisation” of the workforce </li></ul><ul><li>Intense focus on cash flow and reducing working capital </li></ul><ul><li>Reduction of inventory at the producer </li></ul><ul><li>Reductions in capital expenditure – project delays… Repsol YPF at Sines, for example </li></ul><ul><li>Cut backs in discretionary spend – travel, etc… </li></ul>
  10. 10. APPE/PlasticsEurope General Assembly 28 May 2009 Main metrics being used at present
  11. 11. APPE/PlasticsEurope General Assembly 28 May 2009 Most common actions in the crisis - production
  12. 12. APPE/PlasticsEurope General Assembly 28 May 2009 Most common actions in the crisis – workforce
  13. 13. APPE/PlasticsEurope General Assembly 28 May 2009 <ul><li>Slight recovery – or just stabilisation? </li></ul><ul><li>Volumes and prices recovering a little in Europe </li></ul><ul><li>Excess inventory in supply chain being worked off </li></ul><ul><li>Signs of slight pick up in Latin America and Asia - but Japan suffering badly – trade down 25%, GDP down 4% in Q1 </li></ul><ul><li>Europe expected to recover more slowly </li></ul><ul><li>Most producers expecting rest of 2009 to be flat and 2010 difficult </li></ul><ul><li>Even with demand recovery, 2011-12 will be difficult as supply-side effects finally kick in – new Middle East capacity comes onstream after delays </li></ul><ul><li>2013-14 could be good times – for those that pull through </li></ul>
  14. 14. APPE/PlasticsEurope General Assembly 28 May 2009 190
  15. 15. APPE/PlasticsEurope General Assembly 28 May 2009
  16. 16. APPE/PlasticsEurope General Assembly 28 May 2009 <ul><li>Restructuring/M&A </li></ul><ul><li>Most agree downturn will prompt restructuring in European petrochemical base </li></ul><ul><li>Already Total, LyondellBasell and SABIC have said they will close units in Europe (LDPE); Rhodia (nylon), Total (PS)… PVC in Italy, Ineos (chlorinated solvents…) </li></ul><ul><li>More plant closures to come – old and underperforming units </li></ul><ul><li>Difficult decisions due to integrated nature of the sector </li></ul><ul><li>Only two ethylene units closed since Baglan Bay in 1994 – Gela (2007) and Carling (2009) </li></ul><ul><li>Now is an ideal time to act </li></ul>
  17. 17. APPE/PlasticsEurope General Assembly 28 May 2009 <ul><li>Restructuring/M&A </li></ul><ul><li>M&A activity depressed - but companies will be looking to sell non-core assets – to focus on core activities and raise cash </li></ul><ul><li>Producers focusing on cash conservation </li></ul><ul><li>Private equity out of the market as debt financing has disappeared </li></ul><ul><li>Sovereign wealth funds one possible source of funds – IPIC and Nova Chemicals </li></ul><ul><li>But some deals possible – Dow Chemical/Rohm and Haas – leading petchem asset divestments; Mitsubishi Rayon/Lucite; Rhodia/McIntyre </li></ul><ul><li>Debt-laden companies suffering – LyondellBasell in Chapter 11, Ineos renegotiating covenants…. </li></ul><ul><li>Cash-rich and oil-backed may emerge as stronger players </li></ul>
  18. 18. APPE/PlasticsEurope General Assembly 28 May 2009 <ul><li>Capacity developments </li></ul><ul><li>This year and next sees large amounts of petrochemicals capacity coming onstream in China and the Middle East </li></ul>
  19. 19. APPE/PlasticsEurope General Assembly 28 May 2009 <ul><li>Capacity developments </li></ul><ul><li>More capacity due 2010-12 – but timing of many projects is uncertain </li></ul><ul><li>New crackers and major expansions in planning 2010-2015: </li></ul><ul><li> China (20) </li></ul><ul><li> India (8 ) </li></ul><ul><li> Saudi Arabia (9) </li></ul><ul><li> Oman, Qatar and Abu Dhabi (7) </li></ul><ul><li> Iran (5) </li></ul><ul><li> Singapore (2) </li></ul><ul><li> Taiwan (2) </li></ul><ul><li> Thailand (2) </li></ul><ul><li> </li></ul>
  20. 20. APPE/PlasticsEurope General Assembly 28 May 2009 <ul><li>European strategy </li></ul><ul><li>Closure of laggard plants and restructuring of asset base </li></ul><ul><li>Focus on R&D and innovation for lower-volume, higher added-value products </li></ul><ul><li>Optimise supply chain operations and customer closeness </li></ul><ul><li>Establish or maintain production base in Middle East – for standard and high volume grades </li></ul>
  21. 21. <ul><li>Impact of the crisis on petrochemicals and derivatives </li></ul><ul><li>John Baker </li></ul><ul><li>Global editor </li></ul><ul><li>ICIS </li></ul>APPE/PlasticsEurope General Assembly 28 May 2009

×