PC & PP Market Update Media Tech Conference Europe 2012 Hamburg 22/23 May 2012 Martin Wiesweg Director Aromatics Polymers Europe, Middle East and Africa Martin.wiesweg@ihs.com
Polycarbonate Prices Peaked in 2010 and 2011 ~ Euros Per Metric Ton 3,000 2,500 2,000 1,500 1,000 500 0 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 PCB Cash Cost PCB Optical Media Margin PCB Optical Media Market Price 2
Polycarbonate Chain Review Structural changes in supply / demand Outlook for prices and margins
Crude - Expensive Relatively And Absolutely Dollars Per MMBtu 20 18 16 14 12 10 8 6 4 2 0 Gas as a% of Crude, BTU Basis 70% 06 07 08 09 10 11 12 13 14 15 16 Crude (WTI) Natural Gas Gas as % of Crude 60% 50% 40% 30% 20% 10% 0%
Global Benzene Prices Very High Cents Per Gallon Dollars Per Metric Ton 450 1,400 400 1,200 350 300 1,000 250 800 200 600 150 400 100 50 200 0 0 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Delta Benzene Spot Naphtha
Benzene Dictates Phenol Pricing Cents per Pound Dollars Per Metric Ton 90 2,000 80 1,800 70 1,600 60 1,400 1,200 50 1,000 40 800 30 600 20 400 10 200 0 Jan-09 Aug-09 Mar-10 Oct-10 May-11 Dec-11 Jul-12 0 Delta Phenol Avg Acquisition Benzene contract
Polycarbonate Chain Review Feedstock impact Structural changes in supply / demand
World 2012 Polycarbonate Demand By Region SE Asia 7% N. America 13% NE Asia 51% S. America 2% W. Europe 14% Indian Subc. 4% Middle East 3% Demand = 3.7 Million Metric Tons C. Europe 3% CIS & Baltics 2%
2012 World Polycarbonate Demand Electronics 21% Cons./Sports/ Rec. 3% Medical 3% Packaging 4% Other 8% Sheet/Film 18% Housewares 12% Optical Media 16% Auto (Non- Window) 12% Auto (Window) 2% Demand = 3.7 Million Metric Tons
Optical Media Demand Declining Million Units 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 1996 1998 2000 2002 2004 2006 2008 2010 CD-A (Audio) CD-ROM CD-R (Recordable) Blu-ray DVD DVD-R (Recordable) Blu-ray (Recordable) CD RW
World Polycarbonate Demand Forecast Million Metric Tons 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Sheet/Film Auto (Non-Window) Auto (Window) Optical Media Housewares Electronics Medical Cons./Sports/Rec. Packaging Other
Phenomenal Growth in Electronics In India 900 million mobile phone connections in India Mobile penetration now 74% and still growing Other electronic applications also growing very rapidly
Engineering Resins in Automobiles A and B pillar covers (PC/ABS, ABS) Interior trim (ABS, PC/ABS) Door Panels (PC/ABS) Instrument panel (PC/ABS, ABS) Center console (ABS, PC/ABS) Panoramic Roof & Roof Modules (PC) Rear windshield glazing (PC) Headlight housings (PC, ABS) Headlight lens (PC) Door Handles (PA, ABS, PC/ABS) Wheel covers (PC/ABS) Air intake manifold PA6,6 Engine Cover (PA6,6) Oil Pan (PA6,6) Front Grille (ABS) Bumper, Bumper with integrated lighting, Fender (PC/ABS, PC/PBT) Side mirror housings (PC/PBT, PC/ASA)
Polycarbonate Global Capacity Additions Thousand Metric Tons 350 300 250 200 150 100 50 0 2011 2012 2013 2014 2015 2016 Northeast Asia Middle East West Europe
New Polycarbonate Projects Kazanorgsintez 65KT 2009 Kazan, Russia MCC/MEP/SINOPEC 60KT 2011 Yanshan, Beijing Mitsubishi 60KT 2010 Kurosaki, Japan Kayan 260KT 2011 Al Jubail, Saudi Arabia Bayer 100KT 2010 Bayer 300KT 2014-2016 Caojing, Shanghai Zhenjiang ChiMei 75KT 2012 Jiangsu LingYou Engineering Plastics 80KT 2012, 80KT 2016 Shanghai SINOPEC/SABIC JV 260KT 2015 Tianjin
All In China Kazanorgsintez 65KT 2009 Kazan, Russia MCC/MEP/SINOPEC 60KT 2011 Yanshan, Beijing Mitsubishi 60KT 2010 Kurosaki, Japan Kayan 260KT 2011 Al Jubail, Saudi Arabia Bayer 100KT 2010 Bayer 300KT 2014-2016 Caojing, Shanghai Zhenjiang ChiMei 75KT 2012 Jiangsu LingYou Engineering Plastics 80KT 2012, 80KT 2016 Shanghai SINOPEC/SABIC JV 260KT 2015 Tianjin
Polycarbonate Chain Review Feedstock impact Structural changes in supply / demand Outlook for prices and margins
Global Polycarbonate Rates Will Improve Million Metric Tons 6.0 5.0 4.0 3.0 2.0 1.0 Operating Rate 100% 90% 80% 70% 60% 50% 0.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Production Total Capacity Operating Rate 40%
Polycarbonate Margins Recovering Euros Per Metric Ton 3,000 2,500 2,000 1,500 1,000 500 0 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Phenol Contribution Acetone Contribution ECU Contribution Conversion Costs (Var. + Fixed) PCB Optical Media Market Price PCB Optical Media Margin 19
Conclusions PC demand growth for automotive glazing will help offset some optical media reduction Outlook dependent on strength of demand growth from China and India, and rate of increase in new production capacity Supply demand in balance but producer margins at 10 year lows, so expect price increases
Polypropylene Versatility vs. Price Martin Wiesweg GSK Polymer Workshop April 11, 2012
The Good Old Days Cheap Material Avenue to move excess propylene Versatile Able to replace other products Poor man s engineering polymer Low price and versatility drove growth PP one of the polymers with the highest demand growth rate
In Last Two Years, Cost Position Changed Price Ratio 1.4 1.3 1.2 1.1 1.0 0.9 0.8 0.7 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 PP/HDPE North America PP/HDPE West Europe PP/HDPE China
Economy & Price Causing PP Demand To Falter Growth, Million Metric Tons 5.0 Cumulative Growth, Million Metric Tons 35.0 4.0 3.0 2.0 1.0 0.0-1.0 30.0 25.0 20.0 15.0 10.0 5.0-2.0 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Global Capacity Growth Global Demand Growth Cumulative Global Capacity Growth Cumulative Global Demand Growth
Ensuing Oversupply Driving Profitability Down Margin, Cents Per Pound 8.0 6.0 4.0 2.0 0.0-2.0 Margin, Dollar Per Metric Ton 176 132 88 44 0-44 -4.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011-88 United States West Europe
Consequence: Per Capita Demand To Grow at Slower Pace Than Expected Regional Per Capita Demand, kg/person 25.0 Global Per Capita Demand, kg/person 10.0 20.0 15.0 10.0 5.0 9.0 8.0 7.0 6.0 5.0 0.0 2000 2002 2004 2006 2008 2010 2012 2014 2016 World United States West Europe Northeast Asia South America 4.0
Demand Not Expected to Catch Up, Oversupply Conditions to Ensue Excess Capacity, Million Metric Tons 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 Percentage of Global Demand 24% 21% 18% 15% 12% 9% 6% 3% -2.0 2000 2002 2004 2006 2008 2010 2012 2014 2016 Global Excess Capacity Growth Cumulative Global Excess Capacity Growth Global Excess Capacity as a % of Global Demand 0%
Demand Not Expected to Catch Up, Oversupply Conditions to Ensue Excess Capacity, Million Metric Tons Global Operating Rate, % 14.0 92.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 90.0 88.0 86.0 84.0 82.0 80.0 78.0-2.0 2000 2002 2004 2006 2008 2010 2012 2014 2016 Global Excess Capacity Growth Cumulative Global Excess Capacity Growth Global Operating Rate 76.0
China Will Become Increasingly Self Sufficient Domestic Demand, Million Metric Tons 25 Imports as a % of Domestic Demand 50 20 40 15 30 10 20 5 10 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 China Domestic Demand Imports as a % of Domestic Demand 0 29
Trade Flows to Change 121 3622 444 2346 53-1302 -893-1803 -38 575-154 2011 Net Trade 2016 Net Trade (Thousand Metric Tons) -702-524 -663-690 -392 30
Prices to Converge, But Remain Expensive Price, Cents Per Pound 90 80 70 60 50 40 30 Price, Dollars Per Metric Ton 1,984 1,764 1,543 1,323 1,102 882 661 20 441 1995 1998 2001 2004 2007 2010 2013 2016 North America Discounted West Europe Discounted China spot
Conclusions PP to remain expensive Developing economies will enjoy most of the growth Consumer products/packaging to drive growth Oversupply conditions expected in next two years; benefits Asia Trade to become competitive; trade flows to change Regional price disparities will ease, longer term Short term price to affect demand; versatility to help long term
What May Change Outlook Economic Meltdown - China Rapid Increase in Oil Prices Weather issues affecting regional supplies Acceleration of demand destruction in North America
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