Vision 2010

Polypropylene
PREDATOR

to

Prey ?

Bob Dennett
Senior Consultant - Polyolefins
bdennett@cmaiglobal.com
Singapore

Shanghai

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New
Orleans
Houston
New York
London
Dsseldorf

Dubai

Global Polypropylene Demand Growth

Million Metric Tons
Product
Evolution

Product Realization

Discovery & Identification

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PP Realization

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Current & Future for Polypropylene

Propylene Situation
Polypropylene Supply
Polypropylene Demand
Global Trade & Economics
Summary

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Propylene Supply Profile - Unique

Crude
Oil

Motor
Gasoline

Motor
Gasoline

Crude
Unit

FCC
Unit

Gas
Oil

Alkylation
Unit

High Octane Alkylate

Gasoline

Isobutane
Other Fuel Uses

Refining Industry
Chemical Industry
RG
Propylene
Market

Ethane
Propane

Propane Dehydro

Other

Purification
Purification
Splitter
Splitter Unit
Unit

Polypropylene
Polypropylene
Unit
Unit

Propane to LPG

Naphtha

Metathesis

Cumene, Oligomers
Isopropanol

Injection
Molding,
Fibers,
Films

Steam
Steam Cracker
Cracker or
or
Olefin
Olefin Plant
Plant

Other
Other
Technologies
Technologies

Ethylene
& Olefins

Other propylene consumers:

acrylonitrile, propylene oxide, acrylic
acid, oxooxo-alcohols

PG & CG
Propylene
Markets

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World
2008 PG/CG Propylene Supply/Demand
Supply

Demand
PP
66%

Stm. Crackers
63%

Others
7%

FCC/Splitters
30%

Production =
72.7 Million Metric Tons

Others
3%
Propylene
Oxide
8%

Acrylic Oxo Alc.

Acid
7%
4%

Cumene
4%
Acrylonitrile
8%

Domestic Demand =
72.0 Million Metric Tons

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Chemical & Polymer Grade

Propylene Supply
On-Purpose
5%
FCC/
Splitters
22%

On-Purpose
2%
Stm.
Crackers
38%

Stm.
Crackers
73%

FCC/
Splitters
60%

On-Purpose
8%
FCC/
Splitters
29%

Stm.
Crackers
63%

On-PurposeStm.
33% Crackers
58%
FCC/
Stm.
FCC/ Crackers
56%
Splitters
44%

Splitters
9%

2009 Estimates

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On-Purpose
Stm.
23%
Crackers
59%
FCC/
Splitters
18%

What about U.S. PROPYLENE

Supply Today?
Derivative operating rates reduced with
weak demand.
Steam cracker production reduced by 1/3
with light feedslates and shutdowns.
Refinery production reduced by 8 to 10
percent with lower refinery rates.
Inventories low
Tight supply/demand globally is improving
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Cracker shutdowns decrease

propylene production
Middle East utilizing
advantaged light
feeds
High cost naphtha
crackers in West
Europe and Asia will
struggle with low
margins
North America
already rationalizing
high cost units
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Refinery Propylene Situation

Refiners increase diesel
production flexibility as
gasoline requirements
decline
Limited investment for
FCC units in North
America and WEP
Propylene from refiners
will stagnate or decrease
in developed regions
Developing regions supply
increasing with new
refineries.
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Cents Per Pound

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What is the U.S. PROPYLENE

Longer Term View ?
Demand gradually improves with economic
recovery..housing and automobiles?
Business economics may force some steam
cracker and refinery closures; further decreasing
capacity
New PDH unit in 2010 may not be the
last..current and projected economics are good.
Prices remaining higher than ethylene or at best at
parity.
All derivative unit operating rates impacted by
continued new capacity in Middle East and Asia.
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Forecast

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Million Metric Tons

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Propylene Conclusion
Global Supplies increasing
with new unit startups in
Middle East and Asia
The Middle East will emerge
as a global propylene
supplier (derivatives)
Alternative technologies for
propylene are here to stay
Propylene prices will be
impacted by on-purpose
propylene; equal value, but
more likely greater on
average versus ethylene
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What is the Current Story for U.S.

Polypropylene ?
PP domestic demand in U.S. and Canada has
been bad; lowest levels since 2001
The poor demand resulted from higher relative
polymer prices (P/E ratio unfavorable) and the
economic downturn
Exports were strong in the 1st 9 months of 2009,
but the high price of propylene has brought much
of the exports to a halt
Resin producers did an excellent job in optimizing
inventory build in 2009 and inventories have been
kept around 30 days sales
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Polypropylene
North America, Percent Change 2009 vs. 2008

Production
Imports
Total Supply
Domestic Sales
Exports (est.)
Total Sales
Avg. Op. Rate- YTD 09
Inventory change
MM LBS . YTD 2009

PP
-1.0
-18.3
-1.2
-7.5
30.5
-3.0
82.9
-125

Sources: ACC, Plastics Division; Govt Trade Data

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PP: Demand And Exports Affected

by High Prices

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Regardless of Exports, Domestic Demand

Bad How Are Producers Coping?
Discipline!
Only producing what
is going to be
consumed
Limiting inventory
build up
Controlling feedstock
purchases

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Global Plastics Consumption 2009

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Versatility Differentiates PP From Other Polymers

Other
7%
Raffia
15%

Film & Sheet

23%

Fiber
16%
Injection Molding
35%
Blow Molding
1%
Pipe & Profile
3%

2009 World PP Demand = 44.4 Million Metric Tons

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Polypropylene Moving Forward .

Polypropylene is no longer cheap:
- must compete based on properties and features
rather than prices
- may see some reverse polymer substitution
Oversupply also expected for the next few years;
producers faced with low operating rates or
rationalization
No region enjoys a marked cost advantage versus
others. Trade to become very competitive
Non-tariff barriers likely to delay arrival of significant
quantities of imported resins into North America
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Capacity: How Much is too Much?

Forecast

North America

South America

C. Europe/CIS

Asia/Pacific

West Europe

Africa/Middle East

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Top Global Polypropylene Producers/Marketers

(Based on Estimate of Marketed Capacity)
2014

2002
Capacity
Company
(000's MT)
Basell
6207
BP Chemical
2242
Sinopec Group
2106
ExxonMobil
1772
ATOFINA
1712
Borealis
1400
Reliance Industries
1200
DSM
985
Formosa Plastics
980
PetroChina
880
Total
19484

Share
%
16.70
6.03
5.67
4.77
4.61
3.77
3.23
2.65
2.64
2.37
52.43

Company
LyondellBasell
Sinopec Group
PetroChina Group
SABIC
Borealis/Borouge
Reliance Industries
Total PC
ExxonMobil
Formosa Plastics
Ineos
Total

Total Capacity

37159

Total Capacity

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Capacity Share
(000's MT) %
7258
10.30
5050
7.17
6.26
4413
3730
5.29
3195
4.54
2750
3.90
2715
3.85
2635
3.74
2273
3.23
1910
2.71
35929 51.00
70451

World Polypropylene Demand by Region

3.6%
7.0%
2.7%
5.1%
7.9%
8.5%

2009 Total Demand = 44.4 Million Metric Tons

2014 Total Demand = 58.0 Million Metric Tons
Global PP Growth Rate = 5.5%

6.5%
6.2%
4.5%
10.4%

% AAGR, 2009-14

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3.8

3.6

2009 Domestic Demand = 6.5 Million MT

2014 Domestic Demand = 7.7 Million MT
Total Domestic Demand Growth Rate = 3.6%
4.0

3.1

3.4

% AAGR, 2009-14

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Where is Production and Consumption?

World
North America
West Europe
Middle East
Asia
Others

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North America to Lose Leading Position

Polypropylene Trade Patterns
1005
-1669
-1304 -2016

589 -516
154

-196

-422 4125
-368 -670
-51

-179

2009
2014
Thousand Metric Tons

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396 1121

Forecast
Peak

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Million Metric Tons

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Summary Strategic Issues

Overcapacity is here to stay
Profitability will suffer
Can North America do well? Isolation &
discipline key

Cost correction (P/E ratio) helps long term

demand growth prospects of industry
However, PP no longer a cheap polymer
New trade patterns emerging; trade
expected to be very competitive
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In An Oversupply Situation 2009-2011

Plastics Sales Rep

B
U
Y
E
R

Inventory Con
trol

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THANK YOU !
Contact any CMAI location to assist in your
petrochemicals and plastics market analysis
New
New York
York

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Shanghai

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CHEMICAL MARKET ASSOCIATES, INC.

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