Economy, Energy,
       Feedstocks, Polymers
            & Markets

          Howard Rappaport
        Global Business Dir...
CMAI - A Global Organization Of Over
   150 Full -Time Associates…


                       Dusseldorf
     New York      ...
What Drives Polymer Prices?
               Cost / Feedstocks
                  Raw Material Prices
                  Opera...
Plastics Compete with Other Plastics &
         Traditional Materials…
                    PET           PS

             ...
Global Plastics Consumption 2008
                       PC
               PET                  HDPE
                      ...
ECONOMY
& ENERGY
      NPE – June, 2009
Economic Growth Comparison
                        (Constant 2007 U.S. Dollars)
Percent Change
8.0


6.0


4.0


2.0


0.0...
Reality Check-
                             When the
                          Consumer stops…
        Consumer




      ...
Industrial Production – 2008 / 09
Percent (%) Year/Year Change
                                     China   India   Japan ...
2008 / 09 Retail Sales
Percent (%) Annual Change      Source: OECD & Nat'l Bureau of Statistics of China
25.0


20.0
     ...
Current $
                      World Crude Oil Price Trends
140

120

100

 80

 60

 40

 20

  0
      04    Q3   05   ...
Current $
                    U.S. Natural Gas Liquids Prices
  Gas Liquids                                               ...
Current $
                  North America Energy Price Trends as % of Crude
                                              ...
Economy and Energy Summary
• Polymer demand influenced by GDP – Global
  recession (negative GDP) in 09 with recovery in
 ...
Volatile Energy Prices Impact The Chain
 Consumers                      Retail   Non-
                                    ...
How Recent Changes Affected The
             Resin Markets…
Prices, Cents Per Pound (Discounted and Spot)            Dolla...
At The Peak, Converters & Consumer Product
     Companies “Downsized” Packaging




•Source:
Mouseprint.org
              ...
Energy        Feedstocks         Petrochemicals
 Crude Oil                                 Ethylene
                      ...
Middle East Ethylene Capacity Additions
                             2008-09
 Ethylene Equivalent, Thousand Metric Tons
10...
INVESTMENTS IN NEW
POLYOLEFINS CAPACITY

         NPE – June, 2009
Global GDP vs. PE Demand
 Percent Change
  8
  6
  4
  2
  0
 -2
 -4
 -6
 -8
-10   R² = 0.883
-12   R² = 0.741
-14
       ...
World Polyethylene
                      Net Capacity Additions
Million Metric Tons
 8
 7
 6
 5
 4
 3
 2
 1
 0
-1
        ...
Polyethylene Capacity Changes
                        NAM                         WEP                          MDE        ...
World Total PE Demand Growth By
                  Region
     N America                                                 1....
World Polypropylene
                       Net Capacity Additions
Million Metric Tons
 7
 6
 5
 4
 3
 2
 1
 0
-1
        2...
POLYPROPYLENE CAPACITY CHANGES
                 NAM                       WEP                        MDE                  ...
World Polypropylene Demand by Region
    N America                              1.5%
                                     ...
PP and Propylene Have Moved Hand In Hand
                    15
                              Δ PP
      R² = 0.8995   10
...
Excessive Investment Means…

                  • Resin prices are expected
                    to fall (globally) but will...
Reality Check – Some Good News

• “Lower” energy prices “released” beneficial spending

• Consumers saw prices fall for fo...
CMAI Plastics Conferences: 2009


Plastics Processors Conference &
Polyolefins Industry Workshop:
 * Chicago / September 2...
Npe 06 09
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Npe 06 09

  1. 1. Economy, Energy, Feedstocks, Polymers & Markets Howard Rappaport Global Business Director – Plastics hrappaport@cmaiglobal.com CMAI H. Rappaport
  2. 2. CMAI - A Global Organization Of Over 150 Full -Time Associates… Dusseldorf New York LONDON HOUSTON Dubai Shanghai SINGAPORE NPE – June, 2009
  3. 3. What Drives Polymer Prices? Cost / Feedstocks Raw Material Prices Operating Costs Supply/Demand Economy Any of these Utilization Rates factors can, Loss of Available Capacity (outages) and will Inventory Trends (resin, finished goods, etc.) influence Exports / Imports price… Other Dynamics Perception / Anticipation of New Capacity Desire for Market Share Prices of Competitive Materials Market Leadership Market Momentum Natural Disasters / Political Turmoil NPE – June, 2009
  4. 4. Plastics Compete with Other Plastics & Traditional Materials… PET PS LL/LDPE Wood Glass Paper PP Aluminum PVC ABS Concrete Steel HDPE NPE – June, 2009
  5. 5. Global Plastics Consumption 2008 PC PET HDPE 2% 8% 17% PVC 19% LLDPE 10% ABS 4% LDPE PS 10% 6% PP 24% World Polymer Demand = 190 Million Metric Tons NPE – June, 2009
  6. 6. ECONOMY & ENERGY NPE – June, 2009
  7. 7. Economic Growth Comparison (Constant 2007 U.S. Dollars) Percent Change 8.0 6.0 4.0 2.0 0.0 -2.0 -4.0 90 92 94 96 98 00 02 04 06 08 10 12 14 World N. America S. America W. Europe SE Asia NE Asia NPE – June, 2009
  8. 8. Reality Check- When the Consumer stops… Consumer Compounds Retail Finished Petrochems Goods Energy … it all grinds to a halt! NPE – June, 2009
  9. 9. Industrial Production – 2008 / 09 Percent (%) Year/Year Change China India Japan S. Korea 20.0 U.S. EU Brazil Russia 10.0 0.0 -10.0 -20.0 -30.0 -40.0 08 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 09 Feb Mar NPE – June, 2009
  10. 10. 2008 / 09 Retail Sales Percent (%) Annual Change Source: OECD & Nat'l Bureau of Statistics of China 25.0 20.0 China 15.0 10.0 5.0 Brazil EU Russia 0.0 Japan -5.0 S. Korea U.S. -10.0 08 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 09 Feb Mar NPE – June, 2009
  11. 11. Current $ World Crude Oil Price Trends 140 120 100 80 60 40 20 0 04 Q3 05 Q3 06 Q3 07 Q3 08 Q3 09 Q3 10 Q3 WTI Brent Dubai NPE – June, 2009
  12. 12. Current $ U.S. Natural Gas Liquids Prices Gas Liquids Natural Gas Cents Per Gallon $/ MMBtu 250 14 12 200 10 150 8 6 100 4 50 2 0 0 04 Q3 05 Q3 06 Q3 07 Q3 08 Q3 09 Q3 10 Q3 Natural Gas Ethane Propane N-Butane NPE – June, 2009
  13. 13. Current $ North America Energy Price Trends as % of Crude Gas $ / MM Btu BTU Basis 25 140% 120% 20 100% 15 80% 60% 10 40% 5 20% 0 0% 04 Q3 05 Q3 06 Q3 07 Q3 08 Q3 09 Q3 10 Q3 Crude (WTI) Natural Gas Gas as % of Crude NPE – June, 2009
  14. 14. Economy and Energy Summary • Polymer demand influenced by GDP – Global recession (negative GDP) in 09 with recovery in 2010 • Mature economies lag, developing world recovers sooner • Annualized energy prices bottom out in 2009, prices recover in 2010+ but remain below 2008 record highs • Natural Gas remains favored versus Naphtha as an ethylene feedstock NPE – June, 2009
  15. 15. Volatile Energy Prices Impact The Chain Consumers Retail Non- Durables Energy Base Chemicals Plastics Energy Price Fluctuations NPE – June, 2009
  16. 16. How Recent Changes Affected The Resin Markets… Prices, Cents Per Pound (Discounted and Spot) Dollars Per Metric Ton 110 100 Record High Prices 2,241 Stifled Demand 2,041 90 1,841 80 1,641 70 1,441 60 Record Drop 1,241 50 1,041 40 841 30 641 20 441 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 NAM HDPE WEP HDPE China HDPE (Spot) NAM PP WEP PP China PP (Spot) NPE – June, 2009
  17. 17. At The Peak, Converters & Consumer Product Companies “Downsized” Packaging •Source: Mouseprint.org NPE – June, 2009
  18. 18. Energy Feedstocks Petrochemicals Crude Oil Ethylene Propylene Naphtha Methane/Hydrogen Refinery Gas Oil Crude C4 Ethane Ethylene Butadiene Propane Mixed Butylenes Butanes Unit Pygas Gas Field Benzene Separation Condensates Toluene/Xylene Unit Heavy Aromatics C5/C6 Non Aromatics Fuel Oil Natural Gas Olefins Flow Diagram NPE – June, 2009
  19. 19. Middle East Ethylene Capacity Additions 2008-09 Ethylene Equivalent, Thousand Metric Tons 10,000 Sharq 9,000 RLOC 8,000 Yansab 7,000 6,000 Petro-Rabigh 5,000 TKOC SEPC 4,000 3,000 Jam JCP Arya 2,000 Sasol 1,000 0 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 New Ethylene Capacity Ethylene Consuming Capacity NPE – June, 2009
  20. 20. INVESTMENTS IN NEW POLYOLEFINS CAPACITY NPE – June, 2009
  21. 21. Global GDP vs. PE Demand Percent Change 8 6 4 2 0 -2 -4 -6 -8 -10 R² = 0.883 -12 R² = 0.741 -14 2003 2004 2005 2006 2007 2008 U.S. & Canada PE Dom. Demand % Change Global PE Dom. Demand % Change Global GDP % Change NPE – June, 2009
  22. 22. World Polyethylene Net Capacity Additions Million Metric Tons 8 7 6 5 4 3 2 1 0 -1 2008 2009 2010 2011 2012 2013 N. America S. America W. Europe C. Europe/CIS & Baltic States Africa/M. East Asia/Pacific NPE – June, 2009
  23. 23. Polyethylene Capacity Changes NAM WEP MDE NEA / SEA / ISC Net Company kta Company kta Company kta Company kta Increase 1Q-09 4Q-08 SEPC KSA HD 400 Arya Sasol IRN LD 300 700 LBI USA LD (68) SABIC GFR HD x 150 Jam PC IRN HD/LL 300 PT Titan INO HD/LL x 50 Honam KOS LLDPE x 70 502 Dow USA LD (100) SEPC KSA LD 400 Reliance IND HD 90 Petro-Rabigh KSA HD 300 2Q-09 Petro-Rabigh KSA LL 600 Arya Sasol IRN HD 300 TKOC KUW HD/LL 225 Yansab KSA LL 500 2315 LBI USA HD (181) LBI FRA LD (110) Mehr PC IRN HD 300 Dushanzi CHI HD 600 FPC USA HD x 42 SABIC UK LD 400 Dushanzi CHI LL 300 3Q-09 Flint Hills USA LL (150) Fujian CHI HD/LL 800 Flint Hills USA LD (194) Panjin Eth. CHI HD/LL 300 Secco CHI HD/LL x 150 2257 Total FRA LD (230) Qatofin QAT LL 450 PTT Chem THA HD x 50 Total FRA LD (160) Q-Chem II QAT HD 350 Bangkok PE THA HD 250 4Q-09 SABIC NET LD (120) SHARQ KSA HD 400 PTT Chem THA LL 400 BorealisSWE HD/LL (90) SHARQ KSA LL 400 Amir Kabir IRN LD 300 Laleh IRN LD 300 2300 NPE – June, 2009
  24. 24. World Total PE Demand Growth By Region N America 1.2% 2008 S America 5.1% 2013 W Europe 2.0% C Europe 2.8% CIS & Baltic… 4.9% 2008 Total Demand = 66.5 Million Metric Tons World AAGR 2008-2013 = 4.2% Africa 5.9% M East 6.7% NE Asia 5.7% SE Asia 5.3% Indian SC 9.6% 0 5 10 15 20 25 Million Metric Tons % AAGR 2008-13 NPE – June, 2009
  25. 25. World Polypropylene Net Capacity Additions Million Metric Tons 7 6 5 4 3 2 1 0 -1 2008 2009 2010 2011 2012 2013 N. America S. America W. Europe C. Europe/CIS & Baltic States Africa/M. East Asia/Pacific NPE – June, 2009
  26. 26. POLYPROPYLENE CAPACITY CHANGES NAM WEP MDE NEA / SEA / ISC Net Company kta Company kta Company kta Company kta Increase Indelpro MEX 400 Ineos NOR (175) Ibn Zahr SAR 500 4Q-08 Phillips S. USA (109) Ineos FRA (165) NATPET SAR 400 851 LBI CAN (150) Total PC BEL 50 Jam PC IRN 300 Honam PC KOS 170 1Q-09 Ineos USA (230) Borealis FIN 65 Petro-Rabigh SAR 700 PCAP PHL 160 LBI USA (135) 930 Sunoco USA (181) Al-Waha SAR 450 Reliance IND 900 2Q-09 Yansab SAR 400 Saudi PO Co. * SAR 270 1839 Flint Hills USA (55) Dagang PC CHI 100 Daqing Ref. CHI 300 Dushanzi PC CHI 550 Fujian CHI 400 3Q-09 Panjin Eth. CHI 250 Secco * CHI 100 Sinopec CHI 140 Yan'an Ref. * CHI 200 HMC Poly. THA 300 2285 Ineos FRA (50) 4Q-09 ExxonMobil FRA (170) (220) NPE – June, 2009
  27. 27. World Polypropylene Demand by Region N America 1.5% 2008 2013 S America 5.5% W Europe 1.8% C Europe 4.6% CIS & Baltic… 7.1% 2008 Total Demand = 44.1 Million Metric Tons World AAGR % 2008-2013 = 4.5% Africa 8.5% M East 6.3% 5.3% NE Asia SE Asia 5.0% Indian SC 8.7% 0 5 10 15 20 % AAGR, 08-13 Million Metric Tons NPE – June, 2009
  28. 28. PP and Propylene Have Moved Hand In Hand 15 Δ PP R² = 0.8995 10 5 Δ C3 0 -10 -5 0 5 10 15 -5 2000-2008 Price Changes -10 NPE – June, 2009
  29. 29. Excessive Investment Means… • Resin prices are expected to fall (globally) but will not fall below costs • Resin prices will also be lower… • New suppliers will vie for business • However… will typically match and not drive prices and may take some time to get here… NPE – June, 2009
  30. 30. Reality Check – Some Good News • “Lower” energy prices “released” beneficial spending • Consumers saw prices fall for food and other commodities • Unemployment benefits extended & foreclosures delayed • Construction costs declining; interests rates at low levels • Services remain strong – especially health care and “legal” • Perception is reality; all are engaged in fighting back • Trillions being poured into restarting economic growth • China has the cash (+$2 Trillion) and the labor to fight this • Global GDP growth will resume ~ back to trend rate by 2010 NPE – June, 2009
  31. 31. CMAI Plastics Conferences: 2009 Plastics Processors Conference & Polyolefins Industry Workshop: * Chicago / September 28 - 29 .. * Dusseldorf / November 11 - 12 NPE – June, 2009

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