WELCOME Asian Aromatics Market Outlook Webinar 01 August 2012 Hosted by ICIS
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Asia s aromatics: Trends and directions Mahua Chakravarty Senior Editor, ICIS Pricing 2012
Key recent trends for benzene and toluene
Volatility and macroeconomic slowdown: impact on benzene and toluene Upstream volatility and economic crisis caused slow demand from the downstream markets and liquidity drops High PX prices through 2011 resulted in high production of benzene and stronger demand for toluene Benzene influenced by supply glitches in Asia and uncertainty in US and EU markets China s downstream industries struggle with low credit liquidity and slower economy
BTX production high through 2011, but poor olefins affect crackers in Q2 2012 BTX supply from crackers high in 2011, supported by positive margins, but supply tightened from Q2 2012 High PX prices through 2011 supported reforming margins and operating rates, but PX softens in 2012 TDP margins thin due to narrow benzene/toluene spread, but gains support from firm MX Benzene production from HDA minimal due to negative margins, but impact on market limited
04/01/2008 04/04/2008 04/07/2008 04/10/2008 04/01/2009 04/04/2009 04/07/2009 04/10/2009 04/01/2010 04/04/2010 04/07/2010 04/10/2010 04/01/2011 04/04/2011 04/07/2011 04/10/2011 04/01/2012 04/04/2012 04/07/2012 USD/tonne 2011-2012 BTX margins held up by strong MX-PX chain & steady toluene Naphtha to BTX spread 500 400 300 200 100 0-100 -200 2008 to July 2012 BZ-Naphtha TOL-Naphtha MX-Naphtha Source: ICIS
BTX margins up from 2011 on strong MX-PX chain & steady toluene 1400 1200 1000 190.6 226.6 250 200 800 134 154.12 151.1 150 600 100 400 200 50 0 2008 2009 2010 2011 2012 BTX Naphtha Spread 0 Source: ICIS
BENZENE
Arbitrage to remain key outlet for benzene in Asia Exports from Asia to the US rise in 2012 despite the slow economic climate in the US Coal benzene supply continues to increase in China, adding to the regional high balance But SM capacity growth slows to 3 new plants in 2012 Bulk of the growth in benzene demand in 2012-14 is expected to come from the phenol and caprolactam segments
China continues to lead Asia s capacity growth in 2012 Company Country/Location Benzene (kt/yr) Start-up Gaoqiao PC Shanghai, China 120 Jan 2012 Jiujiang PC Jiujiang, China 80 H2 2012 Jilin PC Jilin, China 110 Q2 2012 Daqing PC Daqing, China 120 Q4 2012 Dragon Aromatics Zhangzhou, China 240 Early Q3 2012 (Xiamen) Petrochina Sichuan Pengzhou, China 150 Late 2012- H1 2013 PC Fushun PC Fushun, China 160 Q4 2012 Huachen Energy Pinghu, China 30 Q3 2012 Fujian R & P Fujian, China 40 Late 2012-2013 ExxonMobil Singapore 340 H2 2012 Source: ICIS & Chemease
China will continue to add capacity in 2013 Company Country/Location Benzene (kt/yr) Start-up Sinopec Quanzhou, China 250 2013 Sinopec Wuhan Wuhan, China 160 2013 Source: Chemease
China s coal benzene capacity additions in 2012-2013 Company Benzene (kt/yr) Shandong Jinneng 100 Shandong Lumei 80 Jiangsu Meiya 80 Jiangsu Gelanchunpu 50 Jiangsu Dinghe 100 Jiangsu Shatong 100 Neimenggu Baotou 100 Hebei Dahua 50 Hebei Wangbaixing 100 Ningxia Baofeng 80 Henan Shouchuang 100 Henan Shoushan 50 Henan Jinma 100 Henan Zhongchuang 55 Total 1,145
Coal benzene being used for cyclohexanone and SM production Demand by downstream sectors- 2011 Maleic Anhydride 12% Phenol 7% Others 4% Styrene 10% Aniline 21% Cyclohexanone 46% Styrene Cyclohexanone Aniline Phenol Maleic Anhydride Others Source: Chemease
Tonnes China is a balanced market now 600,000 400,000 200,000 0 2007 2008 2009 2010 2011 x Jan-June 2012 Imports 248,735 327,981 621,839 197,232 185,685 157,096 Exports 56,129 69,410 278,111 119,714 110,349 19,180 Imports Exports 2 per. Mov. Avg. (Imports) Source: China Customs
Growth in new SM production slows down from 2012 Company Location Product Capacity (tonnes/yr) Start-up status Yanshan Beijing, China SM 270,000 2012 Baling Hunan, China SM 120,000 Aug 2012 PetroChina Jilin Jilin, China SM 320,000 Oct 2012 SP Chemical Jiangsu, China SM 320,000 Delayed to late 2013 PetroChina Taizhou Zhejiang, China SM 600,000 2015 Source: ICIS & Chemease
Rapid phenol expansions in 2012-14 maintain demand for benzene Company Location Product Capacity (tonnes/yr) Start-up status Kingboard Jiangsu, China Phenol 200,000 2012 Sinopec Beijing, China Phenol 137,500 2012-2013 Yanshan Sinopec Mitsui Caojing, China Phenol 250,000 2013 Shandong Shandong, Phenol 220,000 2013 Lihuayi China LG Chem South Korea Phenol 300,000 2013 FCFC Ningbo, China Phenol 300,000 2013-2014 Ineos Nanjing, China Phenol 400,000 2014 Zhangjiagang Changchun Jiangsu, China Phenol 200,000 2014 CEPSA Shanghai, China Phenol 250,000 2014 Source: ICIS & Chemease
Exporting to US remains key for Asia 2009 21% 1% 23% 2% 5% 25% 23% US Taiwan China Singapore Saudi Arabia Japan Netherland 2010 12% 2% 3% 6% 5% 42% 30% Source: KITA US Taiwan China Singapore Saudi Arabia Japan Netherland
South Korean exports to US rise in 2011-2012 2011 0% 7% 8% 3% 11% 47% 24% US Taiwan China Singapore Saudi Arabia Japan Netherland 2012 9% 7% 6% 2% 43% 8% 25% Source: KITA US Taiwan China Singapore Saudi Arabia Japan Netherland
South Korean exports to US regular in 2012 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0 354,714 374,513 483,435 446,158 518,518 282,965 531,858 670,248 315,280 2004 2005 2006 2007 2008 2009 2010 2011 Jan-June 2012 Source: Korea International Trade Association (KITA)
TOLUENE
Asia desperately looks for outlets other than China Demand from China mired in uncertainty and depends on local production, demand, inventory level Gasoline blending is emerging as a key outlet within Asia, especially China, and is driven by economic growth Simultaneously, there is a race to export to southeast Asia, India and other regions Average monthly imports to China in 2011 was 50,000-60,000 tonnes, which dips in 2012
Tonnes Uncertainty in Chinese imports amid rapid capacity growth China's total imports 900,000 800,000 790932 829337 700,000 600,000 567,136 655090 500,000 444,637 400,000 300,000 200,000 100,000 0 273583 2006 2007 2008 2009 2010 Jan-Nov 2011 Source: China Customs 2008-April 2012 201900 Jan-April 2012 Imports down in 2011 & 2012 on economic slowdown and cash flow issues
Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 2012 imports fall although inventory dips 250000 200000 150000 100000 50000 0 Source: Chemease East China inventory at historical high in 2010
South Korea spreads its wings beyond China to southeast Asia and India 2011 Vietnam Indonesia 3% 3% US 10% Singapore 3% Australia 2% India 11% Japan 8% China 60% Source: KITA
India emerges as key export destination for South Korea, after China & Taiwan Jan-June 2012 10% 5% 3% 4% 1% 1% 1% 42% 12% 21% China Taiwan India US Indonesia Vietnam Japan Malaysia Philippines Singapore Source: KITA
South Korean supply finds outlet in southeast Asia 50,000 40,000 30,000 20,000 10,000 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 Indonesia 6,005 965 1,918 5 3,001 33,738 21,169 26,314 28,908 Vietnam 2,477 9,740 6,803 19,903 41,455 25,931 18,783 Indonesia Vietnam 2 per. Mov. Avg. (Vietnam) 2 per. Mov. Avg. (Indonesia) Source: KITA
South Korea & southeast Asia dominate exports to India 100,000 80,000 60,000 40,000 20,000 0 2006 2007 2008 2009 2010 2011 2012 India 18,831 18,761 3,276 42,456 51,170 88,795 69,302 India 2 per. Mov. Avg. (India) Source: KITA
India emerges as key import market in Asia India has emerged as an important export destination in the past few years Expected growth at 6% and above in the next few years, driven by economic growth Net importer of toluene from southeast Asia, South Korea, the Philippines, Thailand and Iran Net annual deficit of more than 150,000 tonnes. Key producer is Reliance
OUTLOOK
Looking ahead benzene Benzene prices may fall sharply in second-half 2012 as the US and EU markets may correct Limited growth in downstream SM capacity, beyond China Demand from key downstream sectors like SM and phenol may remain weak on poor economic conditions Supply in southeast Asia may rise if Exxon starts production and when TPPI restart plant
Looking ahead toluene Toluene demand to remain key factor driving prices in Asia Demand from China to be affected by slow downstream solvents and blending markets Imports into India could be affected due to currency-related losses
Asia Styrene Monomer: Key Trends and Outlook Clive Ong Senior Editor, ICIS Pricing 2012
Asia SM in second half of 2012 Sentiment in Q3 turning bullish on expectations of stronger demand from China Traditional manufacturing for exports season Kicking off from low base in Q2 Weak global economic conditions resulting in continued stimulus by governments Overall demand to be slower than 2011?
SM spot prices in first half of 2012 Source: ICIS
SM inventories in east China 2012 160,000 1600 140,000 1400 120,000 1200 100,000 1000 80,000 800 60,000 600 40,000 400 20,000 200 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 0 Inventories Spot Price Source: ICIS
SM inventories in east China 2012 180,000 1500 160,000 140,000 120,000 100,000 80,000 60,000 40,000 1450 1400 1350 1300 20,000 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1250 Inventories Spot Price Source: ICIS
Tonnes SM inventories in east China 2011 vs 2012 180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Months 2012 2011 Source: ICIS
SM prices in 2011 vs 2012 Jan-Jun 1600 1500 1400 1300 1200 1100 2011 Price 2012 Price Source: ICIS
SM prices in 2007-2012 Spot Price 2007-2012 1800 1600 1400 1200 1000 800 600 400 200 0 1 14 27 40 53 66 79 92 105 118 131 144 157 170 183 196 209 222 235 248 261 274 Spot Price 2007-2012 Source: ICIS
SM demand in 2011 vs 2012 800 700 600 500 400 300 200 100 0 Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec 2011 2012 Source: ICIS
Styrenic Resins Downstream demand mostly weak for first half of 2012 Key export destinations of Europe and the US facing weak economic conditions Slowing Chinese economic growth Elevated resins prices Low operating rates in China
China ABS demand in 2011 vs 2012 400 350 300 250 200 150 100 50 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2011 2012 Source: ICIS
China PS demand in 2011 vs 2012 300 250 200 150 100 50 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2011 2012 Source: ICIS
China EPS demand in 2011 vs 2012 300 250 200 150 100 50 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2011 2012 Source: ICIS
Macro-events The 2008 mortgage & financial crisis Governments and central banks intervene in their economies Liquidity flood and asset prices 2011: End of Stimulus 2012: More Stimulus?
Crude futures from 2007 onwards 160 140 QE1 QE2 120 100 QE Lite 80 60 40 20 Japan Rate falls to 0.1% Fed Funds Rate falls to 0.25% UK Rate falls to 0.5% ECB Rate falls to 1% 0 2007 2008 2009 2010 2011 Japan Rate falls to 0% WTI Crude Source: ICIS
Government Intervention and Crude Oil 120 110 100 End of QE2 Operation Twist 1 T ESFS Fed $500B swaps with ECB 6 central banks $swaps Operation Twist II Bank of Japan negative rates 90 80 70 60 US keep low rates to 2014 UK raises QE to 325B Japan 1 T QE Fed/China supports EU bailout UK raises QE to 375B ECB cut rates to 0.75% Spanish bank bailout Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 WTI Crude Source: ICIS
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