Asian Olefins Amidst Changing Landscape

Transcription

1 PLATTS OLEFINS ASIA Shanghai, 6 th March 2014 Asian Olefins Amidst Changing Landscape Mazlan Razak Managing Consultant Nexant Asia Limited mrazak@nexant.com

2 Nexant Introduction Nexant s business model is geared towards end-to-end servicing of the complete energy value chain OIL AND GAS CHEMICALS AND CLEANTECH UPSTREAM MIDSTREAM DOWNSTREAM CHEMICALS GREEN CHEMICALS RENEWABLE ENERGY Oil & Gas Service - Sector Planning - Shale Gas & Oil - Coal Processing LNG Liquefaction LNG Shipping & Regasification Oil & Gas Pipelines - Gas Processing - Gas Distribution Petroleum Refining Product Market Assessment - Coal to Liquids - Gas to Liquids Gas & Naphtha Based Petrochemicals Olefins & Aromatics Polymers Fertilizers Specialty Chemicals and Advanced material Syngas Biopolymers Olefins Alcohols Aromatics Sourced from Biomass, Algae, Wastes, and Agricultural Sources Biomass Gasification Solar (Thermal & PV) Wind Power Clean Coal CO 2 Capture and Sequestration Fuel Cells & Hydrogen Geothermal NEXANT CAPABILITY 1

3 Cash Cost Percent Low High MARKET GROWTH RATE Nexant Introduction Nexant undertakes a variety of consulting assignments, using actionable solutions and a timeto-value approach drawn from industry expertise and well-established methodologies INDUSTRY AND MARKET EXPERTISE AND NEXANT THINKING TM DATABASES STRATEGY EXPERIENCE AND METHODOLOGY Supply, Demand and Market Dynamics Competitor Analysis Business Attractiveness 0.15 Market growth and size Ability to differentiate Supply 0.1 Competitive pressures Consider: Cost, Technology and Competitive Position Cost position Technology Size Integration Differentiation Demand COST CURVE Capacity Financial Performance and Benchmarks Target ROCE ROCE CFROA STRATEGIC DEVELOPMENT AND PERFORMANCE Customer pressures Entry barriers Threat of substitutes Strategic Position INVEST OR FIX REINVEST SPECIAL RESINS COMPOUNDS PP OLEFINS HDPE AROMATICS FILM PIPE FIX CASH Low PROFITABILITY (ROCE, %) High 2

4 Agenda 1. Ethylene and Propylene Demand Outlook 2. Olefins Supply and Feedstock Developments 3

5 Part 1 Ethylene and Propylene Demand Outlook 4

6 Ethylene and Propylene Demand Outlook Ethylene consumption and demand growth are largely associated with the packaging, automotive, construction and manufacturing sectors; PE is the main driver GLOBAL ETHYLENE CONSUMPTION, 2013 EDC 10% Styrene 6% Others 8% HDPE 28% GLOBAL ETHYLENE DEMAND GROWTH, (million tons) CAGR (%) Others Styrene EDC Overall CAGR: : 4.1% : 4.6% EO 15% LDPE 15% LLDPE 18% EO LDPE LLDPE HDPE Total Demand = 133 million tons PE Contribution = 61% Global ethylene demand is forecast to grow at CAGR of 4.6% in , which is above GDP growth (CAGR of 3.5% in ) and represents an improvement over Others mainly include alpha olefins, propylene, VAM, PP, EP rubber, acetaldehyde and ethanol 5

7 Demand Growth CAGR in (%) Ethylene and Propylene Demand Outlook Global ethylene demand will continue to be driven by uses in HDPE and LLDPE, which represent both the largest and fastest growing applications 8 GLOBAL ETHYLENE DEMAND GROWTH, LLDPE 4 Styrene Others EDC LDPE EO Market Drivers HDPE 2 0 Bubble size indicates demand in ,000 1,500 2,000 2,500 Average Annual Demand Growth Volume in (thousand tons) 20 million tons PE will continue to be the main demand driver for the ethylene market, accounting for almost two-thirds of global incremental ethylene demand in

8 million tons Ethylene and Propylene Demand Outlook Regional ethylene demand growth trends closely correlate with ethylene plant investment patterns, with ethylene typically being consumed captively GLOBAL ETHYLENE DEMAND BY REGION, % CAGR in % CAGR in Financial Crisis & Economic Recession Regional Ethylene Demand CAGR in : Americas: 3.4% Europe: 2.6% Middle East & Africa: 5.0% Asia excl. China: 3.2% China: 7.5% Americas Europe Middle East & Africa Asia excl. China China Ethylene demand growth in Asia excl. China is projected to rise (2.3% CAGR in vs. 3.2% CAGR in ) 7

9 Ethylene and Propylene Demand Outlook In the global propylene market, demand has been increasingly driven by the PP sector; this is highly influenced by the packaging, automotive and construction industries GLOBAL PROPYLENE CONSUMPTION, 2013 Isopropanol 1% Acrylic Acid 4% Cumene 4% Acrylonitrile 7% PO 8% Others 11% PP 65% GLOBAL PROPYLENE DEMAND GROWTH, (million tons) CAGR (%) Others Isopropanol Acrylic Acid Cumene Acrylonitrile PO Overall CAGR: : 4.0% : 4.8% 2.2 (2.8) Total Demand = 83 million tons PP Global propylene demand is forecast to grow at CAGR of 4.8% in , and high-growth applications include cumene, acrylic acid and PO Others mainly include n-butanol, 2-EH and i-butanol 8

10 Demand Growth CAGR in (%) Ethylene and Propylene Demand Outlook The PP sector strongly influences propylene demand in terms of both volume and growth; however, high demand growth is also expected in some other applications 8 GLOBAL PROPYLENE DEMAND GROWTH, PO Acrylic Acid Acrylonitrile Others Isopropanol Cumene Non-PP Uses of Propylene Bubble size indicates demand in ,000 1,500 2,000 2,500 3,000 3,500 Average Annual Demand Growth Volume in (thousand tons) PP 10 million tons PP production will continue to drive propylene consumption, representing around 70% of global incremental propylene demand in

11 million tons Ethylene and Propylene Demand Outlook Over one-half of global incremental propylene demand over the coming five years will be in China GLOBAL PROPYLENE DEMAND BY REGION, % CAGR in % CAGR in Financial Crisis & Economic Recession Regional Propylene Demand CAGR in : Americas: 2.2% Europe: 2.3% Middle East & Africa: 6.1% Asia excl. China: 2.6% China: 9.3% Americas Europe Middle East & Africa Asia excl. China China Relatively high propylene demand growth is forecast in China, driven by PP 10

12 Part 2 Olefins Supply and Feedstock Developments 11

13 Olefins Supply and Feedstock Developments Each region has its own unique feedstock position in terms of cost, type and accessibility, which presents a host of opportunities and challenges for the olefins industry GLOBAL OVERVIEW OF FEEDSTOCK SLATES AND RELATIVE INVESTMENT ACTIVITIES FOR OLEFINS NORTH AMERICA Investment Activity: Moderate Feedstock Slate: Ethane/NGLs New activity driven by shale gas EUROPE Investment Activity: Low/Moderate Feedstock Slate: Naphtha/Ethane Selective investments in FSU/EE, further rationalisation in WE CHINA Investment Activity: High Feedstock Slate: Naphtha/Coal Refinery integrated projects with further expansions in CTO/MTO SOUTH AMERICA Investment Activity: Low/Moderate Feedstock Slate: Mixed Potential for ethane-, naphtha- and biobased projects MIDDLE EAST & AFRICA Investment Activity: Moderate/High Feedstock Slate: Ethane/NGLs Further utilisation of ethane/ngls, selective refinery integrated projects SOUTH-EAST ASIA & INDIA Investment Activity: Moderate Feedstock Slate: Naphtha Refinery integrated projects in selected markets by NOCs 12

14 Olefins Supply and Feedstock Developments The availability of low-cost ethane, propane and coal continues to drive selected ethylene investments, yet naphtha remains being the predominant feedstock for global ethylene capacity ETHYLENE CAPACITY BY FEEDSTOCK SLATE (global capacity in million tons per year of ethylene) 100% 75% ETHYLENE CAPACITY BY FEEDSTOCK SLATE (percentages represent share of global ethylene capacity) 25% 29% 30% 32% FEEDSTOCK 50% TRENDS 25% 75% 71% 70% 68% % Mixed Feed Naphtha Ethane Ethane/Propane Other Mixed Feed & Naphtha Ethane, Ethane/Propane & Other Mixed feed crackers include naphtha/ngl crackers in North America, naphtha/lpg crackers in Europe, naphtha/ngl crackers in the Middle East, and naphtha/gas oil and naphtha/lpg crackers in Asia around 50% of ethylene capacity today is ultimately based on naphtha feedstock Other ethylene capacity includes MTO plants (China), bio-ethylene capacity (Brazil using ethanol from sugarcane), and FCC offgas recovery units (mainly the US and China) 13

15 Olefins Supply and Feedstock Developments The locations chosen for new ethylene investments are increasingly being polarised between the feedstock advantaged regions, such as the Middle East, and the growing end-use markets, such as China 200 ETHYLENE CAPACITY BY REGION (global capacity in million tons per year of ethylene) 100% ETHYLENE CAPACITY BY REGION (percentages represent share of global ethylene capacity) % 43% 52% 54% 56% 100 REGIONAL TRENDS 50% 50 25% 57% 48% 46% 44% % N America S America Europe ME/A Asia Americas & Europe ME/A & Asia Middle East: During the last decade, the Middle East s share of global ethylene capacity has significantly increased, with ethane, ethane/propane, and mixed feed crackers being added in Saudi Arabia and Iran, and ethane crackers starting up in Qatar, the UAE and Kuwait Asia: Over the next several years, Asia s share of global ethylene capacity will increase, with naphtha and mixed feed crackers, as well as MTO units, starting up in China 14

16 Olefins Supply and Feedstock Developments Nevertheless, net ethylene capacities will of course increase in all regions; new firm investments are concentrated in the Middle East and China TOTAL ETHYLENE NET ANNUAL CAPACITY ADDITIONS (million tons per year of ethylene) Global Ethylene Capacity (million tons per year) Lighter Feeds in NA, EE & ME/A Heavier Feeds and Coal in Asia

17 Olefins Supply and Feedstock Developments In China, six MTO/MTP facilities are operating in 2013, and there are a number of new projects under various stages of planning and appraisal Shenhua Group MTO/MTP OPERATING PLANTS IN CHINA Shenhua Baotou Coal Chemical Datang Power 8 FIRM MTO/MTP PROJECTS (million tons per year of olefins) CTO/CTP economics impacted by: Xinjiang Coal price (mine-mouth) Plant scale (config.) & methanol transfer pricing (capital intensive coal gasification) Development of nearby Tibet end-use markets (north and east) Water availability (coal-rich areas) Zhongyuan Petrochemical Inner Mongolia Ningxia Henan Jiangsu Zhejiang Wison (Nanjing) Chemical Ningbo Heyuan Ethylene Propylene The main opportunities are in monetising stranded coal in relatively remote locations within China, and producing cost competitive ethylene, propylene and derivatives. However, some new projects are continuing to face key challenges. There could be up to 7.8 million tons per year of combined new ethylene and propylene capacities by 2016 if current firm projects are completed on schedule 16

18 Olefins Supply and Feedstock Developments Indeed, gas-based ethylene production in the Middle East and coal-based ethylene production in China offer highly competitive economics 1, Note: These representative ethylene production costs are for one scenario, with Brent crude oil at $90-100/bbl, USGC gas at 5-6/MMBtu, and China mine-mouth coal at 70-80/ton INDICATIVE ETHYLENE CASH COST FORECAST (US dollars per ton) Naphtha Crackers ME (Ethane) ME (E/P) China (MTO) US (Ethane) SEA (Naphtha) NEA (Naphtha) Europe (Naphtha) Net Raw Material Cost Utility Cost Fixed Cost Gas-based crackers in the Middle East and the US, as well as large-scale MTO facilities in China, are significantly more cost competitive than naphtha crackers in other locations around the world, based on ethylene production costs However, naphtha is still the predominant feedstock, currently accounting for around 50% of global ethylene capacity 17

19 Olefins Supply and Feedstock Developments In the propylene industry, steam cracking and refinery sources currently account for the majority of supply, and on-purpose production on a global absolute volume basis is still relatively modest PROPYLENE CAPACITY BY SOURCE, 2013 (regional capacity in million tons per year of propylene) 100% 75% 50% 25% PROPYLENE CAPACITY BY SOURCE, 2013 (percentages represent share of regional propylene capacity) 0 N America W Europe Middle East Asia Pacific 0% N America W Europe Middle East Asia Pacific Cracker Refinery Metathesis PDH Other Cracker Refinery Metathesis PDH Other Available propylene is increasing in the Middle East, due to increased LPG cracking and propane dehydrogenation projects In the US, the impact of shale gas has resulted in a move towards using lighter feedstocks in steam crackers, reducing propylene availability although new PDH capacities are expected to offset some of these losses 18

20 Olefins Supply and Feedstock Developments Propylene feedstock slates are set to transition further, as a greater need for on-purpose production capacity is required to meet future demand requirements Global Propylene Capacity Development: (million tons per year): Cracker: +3.1 GLOBAL PROPYLENE CAPACITY DEVELOPMENT BY FEEDSTOCK 100% % 33% 34% 33% 30% Refinery: % Increasing share of on-purpose production capacity % 62% 58% 55% 50% Metathesis, PDH & Other: +11 0% Cracker Refinery Metathesis PDH Other PDH (in N America, China, E Europe and Middle East) and MTO/MTP (in China) 19

21 Nexant Contacts For more information about Nexant, visit or contact us at: Nexant Asia 22 nd Floor, Rasa Tower Phahonyothin Road Kwaeng Chatuchak, Khet Chatuchak Bangkok 10900, Thailand Tel: Fax: mrazak@nexant.com Nexant Limited Griffin House 1st Floor South 161 Hammersmith Road London W6 8BS UK Tel: Fax: Nexant Inc 44 South Broadway White Plains NY USA Tel: Fax: