1) Benzene prices spiked late in 2012 due to unexpected high demand from China but have since corrected in Q1 2013 as Chinese imports have stabilized. 2) Styrene prices reached record highs in January 2013 supported by the Chinese domestic market but have fallen as the price gap between imported and domestic Chinese styrene has widened. 3) Paraxylene prices continue to surge despite struggles in the PTA downstream market, though prices are expected to decline in mid-2013 with new paraxylene capacities coming online.

1. Asian Aromatics 2013
CHUA Sok Peng,
Managing Editor, Asia Petrochemicals | Feb 2013

2. Agenda
• Benzene: Late spike in 2012, correction in Q1 2013
• Styrene: Are current prices sustainable?
• Paraxylene: Surging despite downstream struggles
• Isomer-MX: Mixed signals
• Toluene: Still a gamble
2

3. Asian Benzene-Naphtha spread
3

4. US demand drives BZ price in Asia, Europe
4

5. Benzene spiked in late 2012: China factor
New/Expansion of downstream capacities in China
• H2 2012 - Bullish caprolactam and phenol markets in 2010/11 resulted
in a boom
• Supported by expanding nylon capacities
• Increase in demand of benzene/cyclohexane in China
• Increase in Chinese demand of benzene was unexpected
• Chinese imports of benzene increase from 12,000 mt in Aug to 40,000
mt in Sep and 76,000-78,000 mt in Oct/Nov and 64,000 mt in Dec
Now, China was expected to import more benzene in 2013. But buying
appetite curbed by huge price gap of more than $70/mt between domestic
and imported cargoes. Industry expects Chinese imports for benzene to
stabilize at around 30,000 mt/month
Sinopec domestic benzene price stabilized at Yuan 10,600/mt ($1,415/mt)
for the past few months. Chinese buyers will only buy if FOB K is not more
than $1,400/mt or around $1,430/mt CFR China.

6. Benzene spiked late 2012: China factor
Low inventories of SM and benzene in China
• Styrene surge in Dec supported benzene market
• Long styrene Chinese traders like Caphill/Kyetong are supporting the
SM market.
Aggressive short covering by traders
• Market structure flip into backwardation in June, market participants did
not expect it to last so long
• Cargoes rolled over as traders expected prices of benzene to increase
later but that did not materialize.
• Chinese traders continued to support the prompt prices as they sought
to cover short aggressively. Buy prompt at high.
• Now, short traders have covered their positions by Dec at high prices.
No support now from traders for short covering.

7. Reverse trade flow: ME BZ heads to Asia
• Middle East typically supply benzene to US, but due to
spate of turnarounds at styrene plants there, cargoes
are making their way to Asia instead.
• Between January and March, around 30,000-50,000
mt of Middle East benzene moving to Asia as US
prices falls on high inventory level.
• Most of the Middle East cargoes sold to China.
• China import just 8,800 mt of benzene from South
Korea in Jan 2013, compared with 32,000 mt in Dec
2012.
7

8. Agenda
• Benzene: Late spike in 2012, correction in Q1 2013
• Styrene: Are current prices sustainable?
• Paraxylene: Surging despite downstream struggles
• Isomer-MX: Mixed signals
• Toluene: Still a gamble
8

9. Styrene at record high on Jan 7, 2013
9

10. China domestic price contributes to surge
10

11. Fall in China domestic price caps imports
Price gap between imported and domestically produced styrene
monomer in China hit 11-month-high on Feb 18, dampening
demand for imports and potentially restrict buoyant global SM
prices.
Spread between the two prices hit $67.70/mt on Monday -- the
highest since March 29, 2012, when it was at $79.1/mt.
The wide gap could potentially reduce demand for spot cargoes
on a CFR China basis as it would be cheaper to buy from the
domestic market.
East China inventory level reached a low of 35,900 mt in the last
week of September 2012, when the domestic price of SM was
almost $130/mt above the CFR China price. The reverse price
spread widened to as much as $259/mt on October 29, 2012. The
CFR China price rose to become higher than the domestic price
again only in late December 2012.
11

12. East China SM inventory, domestic price
12

13. Agenda
• Benzene: Late spike in 2012, correction in Q1 2013
• Styrene: Are current prices sustainable?
• Paraxylene: Surging despite downstream struggles
• Isomer-MX: Mixed signals
• Toluene: Still a gamble
13

14. PX continues to rise on strong demand
14

15. PX surge shows little regard for PTA
15

16. PX ACP no longer a safe haven for PTA
16

17. New PX capacities in Asia/Middle East
NEW PX CAPACITIES IN ASIA/Middle East
Dragon Aromatics Fujian 800 Jan-Mar
HC Petrochem Daesan 800 Jan-13
Fujia Dahua Dalian 750 SU in 2012?
PetroChina Sichuan 650 SU late 2012
Ulsan Aromatics Ulsan 1,000 May-14
Shell/Taiyo/GS Caltex Yeosu 1,000 end-2014
SK Innovation Incheon 1,300 late 2014
Samsung Total Daesan 1,600 Sep-14
SATORP Jubail 700 H2 2013
ONGC Mangalore Mangalore 920 2013 Apr
Jurong Aromatics Singapore 800 2014 June
Zhejiang Hengyi Brunei 1,500 2015 17

18. New PTA capacities in China
NEW PTA PLANT CAPACITIES IN CHINA
CAPACITY
COMPANY LOCATION (KT/YEAR) STARTUP
BP Zhuhai Zhuhai 200 Feb
Hengli Dalian 2,200 Sep-Oct
Hengli Dalian 2,200 Early 2013
Tongkun Zhejiang 1,500 Aug
Zhejiang Yisheng Hainan 1,800 Nov-Dec
Yisheng Dalian 1,500 Nov-Dec
Xianglu Xiamen 1,500 Q1 2013
Total 10,900 18

19. China PX, PTA imports
7000
6000
5000
4000
PX
PTA
3000
2000
1000
0
2008 2009 2010 2011 2012
19

20. Trend in 2013
• PX price moved up sharply 2012 on tight supplies after PTA plant
start ups. This trend will likely end in 2013 due to startups of new PX
plants (HC Petrochem, Dragon Aromatics). Price decline to likely start
from mid-2013.
• In addition, PTA plant runs lowered amid negative margins, creating
excess PX supplies in the market.
• The CFR China PTA price is relatively stable currently because of
lower plant runs. But in 2013, PTA price will plunge following a series
of startups of new PTA plants in 2012. Domestic PTA and imported
PTA price gap widens to $60/mt in 2013, compared to $30/mt in
2012.
• Textile sales remain bearish in China. Cotton prices artificially high.
Huge clothing inventory: Even if all of China’s clothing industry comes
to a halt for 1 year, there’ll still be enough clothes to house every
Chinese for 3 years – China National Garment Association

21. Agenda
• Benzene: Late spike in 2012, correction in Q1 2013
• Styrene: Are current prices sustainable?
• Paraxylene: Surging despite downstream struggles
• Isomer-MX: Mixed signals
• Toluene: Still a gamble
21

22. Isomer-MX-Naphtha spread grows
22

23. Isomer-MX: US arb closed since Q4 2012

24. PX-MX spread widening
24

25. Isomer-MX: Mixed signals
• Expectation: MX to be tight in 2013 due to start up of
HC Petrochem’s PX plant in South Korea and Tenglong
Aromatics in China.
• Reality: HC Petrochem operating at just 70%, Tenglong
still not started up due to feedstock, environmental
issues
• Expectation: Closure of US-Asia arbitrage will spur
demand
• Reality: Asian demand weakens. Taiwan not buying
MX as PX demand is weak due to poor PTA
25

26. Outlook: Isomer-MX Supply to remain tight
• Asia structurally short of MX
Around 800,000 mt to 1 million mt/year of MX supplied by the US
• ‘Shale gas boom’ in the US worsens Asian MX market
US/Asia isomer-MX arbitrage has shut since Nov 20 2012 until
now due to rising US MX prices
• Rising term contract prices – up $4-10/mt premium
FOB Korea: GS Caltex offer at $10/mt premium <Asia isomer-MX market size>
in 2013, compared to $5-6/mt in 2012 US/Asia MX
25%
SK Global Chemical offer at $6-9/mt premium 800,000
mt/year
CFR Taiwan: Formosa buys at about
discount $3-4/mt (2013), discount
$24-28/mt (2012)
Asia
capacity
75%
2,400,000
mt/year
26

27. Agenda
• Benzene: Late spike in 2012, correction in Q1 2013
• Styrene: Are current prices sustainable?
• Paraxylene: Surging despite downstream struggles
• Isomer-MX: Mixed signals
• Toluene: Still a gamble
27

28. Toluene: Price correction after end 2012 surge
28

29. China replenishing toluene
29

30. 30

31. Benzene-toluene spread encourages TDP
31

32. Southeast Asia and India toluene in 2013
• SEA already tighter in 2013 because of lesser Thai PX supply
• Exports to India may increase due to tax change, making SEA-origin volumes
more competitive to South Korea (on top of freight advantage) in Asia.
• Europe, which can also deliver volumes to India (and did so in December),
will also have to compete with this tax advantage.
India import tax 2012 2013
ASEAN (excl. Philippines) 2.00% 0.00%
South Korea 3.13% 2.50%
Example:
If FOB Korea and FOB SEA price is $1,300/mt,
2-3kt freight S. Korea to India: $72-78/mt (PC641 Jan 8 2013)
3kt freight SEA to India: $45-53/mt (PC642 Jan 8 2013)
CFR India (Korea-origin): 1,372*1.025= 1,406.30/mt
CFR India (SEA-origin) $1,345*1.000= 1,345/mt
32

33. Thank You!
CHUA Sok Peng
Managing Editor, Asian Petrochemicals