woodmac.com/chemicals Fibers Update - 2019 · • Comprehensive market view with long-term outlook...

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woodmac.com/chemicals

woodmac.com/chemicalsTrusted Chemicals Intelligence

Laura Murphy, Fibers Research Director

Fibers Update - 2019CARE Conference, Houston, May 2019

• Wood Mackenzie Background• Raw Materials and the Supply Chain

• Nylon• Polyester

• Global Views• Economic Overview• Recycling Overview• Summary

Agenda

• Verisk Analytics (NASDAQ:VRSK)• Was PCI (Alasdair Carmichael)• Services:

• Asia Weekly• Global Monthly• Technical Fibers Monthly• Annual global supply demand report• Special-request reports and studies• Raw materials

Wood Mackenzie Chemicals

Natural Gas

CrudeOil

Fibers

woodmac.com/chemicalswoodmac.com/chemicals

Vinyl Services

Forecast market prices and understand supply demand dynamics with our comprehensive analysis of market drivers and events throughout the chlor-alkali and olefin-to-resin chain.

Global supply demand analytics and monthly market overview

• Comprehensive market view with long-term outlook covering supply, demand and market balances out to 2040

• Updates to global EDC, VCM and PVC asset capacities and projects

• Gain insight at both a regional and global level with analysis of 170+ countries

• Frame and test your long-term strategy with detailed pricing outlook

• Topical insights on key industry developments

• Monthly short-term outlook reports allow you to understand recent industry developments and the near-term market outlook

• 18-36 month view of demand, supply and prices

• Market trends from feedstocks through EDC, VCM and PVC

• Support from our specialist analyst team

Raw Materials

Nylon and Polyester Raw Materials

Nylon 6,6 Raw Materials

Nylon 6,6 Supply Chain Issues Force majeure declarations Adiponitrile (ADN) Supply 4 major, large scale plants Difficult to justify new plant (But Ascend and Invista have

just announced new capacities – for 2022-2023) Capacity increases

2016 – Invista @ Orange, TX 2018 - Ascend @ Decatur, AL 2019 – Invista/Solvay @ Butachimie, France 2020 – Invista @ Victoria, TX

2018 Polymer Price Increases +5-25 c/lb for Q1 +25-38 c/lb for Q2/Q3 More expected for next year

2012 2013 2014 2015 2016 2017 2018 20191 2 3 4 5 6 7 8 91011121 2 3 4 5 6 7 8 91011121 2 3 4 5 6 7 8 91011121 2 3 4 5 6 7 8 91011121 2 3 4 5 6 7 8 91011121 2 3 4 5 6 7 8 91011121 2 3 4 5 6 7 8 91011121 2 3 4 5 6 7 8 91011

BASF HMD

Ascend HMD

Solvay AA Chalampe

Radici AA

BASF - HMD

Invista ADN/HMD/PA66

Butachimie Strike - ADN

INEOS/BASF - HMD

BASF MHD/PA66

Solvay PA66

Activity

Invista ADN/HMD

Ascend HMD

Invista PA66 Harvey

Invista ADN/HMD

Radici All PA66 chain

Solvay all PA66 chain

Ascend PA66

Nylon 6,6 Forces Majeure

Source: Wood Mackenzie Chemicals

Nylon 6,6 Supply Chain Issues Force majeure declarations Adiponitrile (ADN) Supply

4 major, large scale plants in the world Difficult to justify new plant (But Ascend and Invista

have just announced new capacities – for 2022-2023) Capacity increases

2016 – Invista @ Orange, TX 2018 - Ascend @ Decatur, AL 2019 – Invista/Solvay @ Butachimie, France 2020 – Invista @ Victoria, TX

2018 Polymer Price Increases +5 - 25 c/lb for Q1 +25 - 38 c/lb for Q2/Q3 +10 - 25 c/lb for Q1 2019

Forecast

Crude Oil – 2019 forecast

Apparently no critical problems from the crude oil side

Source: Wood Mackenzie

202020182014 2015 2016 2017 2019

Nylon 6,6 Raw Materials

Forecast

Benzene, Propylene, Butadiene: Prices and forecasts

Source: Wood Mackenzie ChemicalsJul19 Jan20Jul18Jul17Jan17 Jan19Jan18

Butadiene: Price increaseswill be limited by weakdemand in China. A seasonaldecrease followed by arebound is possible in the endof 2019.

Propylene: A rebound is likelymid-year due to improveddemand and exports. In Asiaand Europe, increases in2H19, with tight supply.

Benzene: A recovery of pricesis expected to continue to thelevel of $800/t by Q1 2020, asoversupply eases.

Nylon 6 Raw Materials

Nylon 6 Supply Chain Issues

Force majeure declarationsCaprolactam Supply

New Chinese investmentLarge plants, but costly to run

2018 Polymer/Fiber PricingPrice increase to keep the gap “Swing” products will head to nylon 6 (and polyester) as nylon 6,6 gets too expensive

Forecast

Benzene, Propylene, Butadiene: Prices and forecasts

20Jan20Jul19Jan17 Jan19

Jul17 Jan18 Jul18

Caprolactam: CPL prices arelikely to turn higher followingbenzene. In Asia, the marginis expected to recover furtherfollowing the sharp decreasein the end of 2018.

Benzene: A recovery of pricesis expected to continue to thelevel of $800/t by Q1 2020, asoversupply eases.

Polyester Raw Materials

Jan-14 Jul-14 Jan-15 Jul-16 Jan-17 Jul-17 Jan-18Jan-16 Jul-18Jul-15 Jan-19

+38+32+40

WTI (c/lb)PTA+MEG Formula (c/lb)

Polyester Supply Chain – Bankruptcies and Forces Majeure

M&G, or Mossi & Ghisolfi (PTA and resin)Bankruptcy 10/2017

Apple Grove, WV (resin plant @ 360 kt) –bought by Far Eastern and restarted

Corpus Christi (resin @1.1 Mt and PTA @1.3 Mt) –Construction halted, but 3-way JV between DAK, Indorama, Far Eastern to proceed

DuraFibers (Industrial PET fiber)Bankruptcy 9/2017

Salisbury, NC (high denier) – closedGrover, NC (fine denier) – Fiber Innovators InternationalWinnsboro, SC, (tire cord fabric) – Indorama

Fires and Forces Majeures in 2018 reduced available fiber and rawsAlpek Mexico – down for 6+ weeks after fire in structural areaEquipment issues and hurricanes plagued PSF

Polyester Supply Chain - Investments

Huvis Indorama JV (low melt) - Spartanburg 60 kt

Far Eastern purchase of M&G’s Apple Grove resin plant - $34M JV of Indorama, Alpek, and Far Eastern purchase of Corpus Christi @ $1.1B

FTC approved JV purchase on 12/24/2018 – Happy Holidays! Estimated startup 2020 for resin, PTA to be 18 months after

Fiber Industries restart of Wellman plant (staple) Parkdale / Intrinsic Textiles JV to develop CiCLO (biodegradable) technology Unifi / Polartec recent announcement to use CiCLO in fleece production Indorama/Loop Industries JV to begin US production of 100% sustainably

produced resin and fiber in Q1 2020 Indorama and DAK just bought rPET plants

US Polyester Supply Chain – Antidumping and CountervailingPET Resin• ADD + CVD• Filed 3/2015: • Canada, China, India,

Oman• ADD (Filed 9/2017) Brazil,

Indonesia, Korea, Pakistan and Taiwan

• 5 - 276%• Dismissed (10/2018) on

Brazil, India, Korea, Pakistan, Taiwan

Jan-16

Jul-17

Jul-16

Jul-18

Jan-18

Jan-17

Jan-19

PET Resin to Formula Price Difference

US Polyester Supply Chain – Antidumping and CountervailingPET Resin• ADD + CVD• Filed 3/2015: • Canada, China, India,

Oman• ADD (Filed 9/2017)

Brazil, Indonesia, Korea, Pakistan and Taiwan

• 5 - 276%• Dismissed (10/2018) on

Low Melt Fibers• ADD • Filed 6/2017: • Korea and Taiwan • 0 - 52% • Spared: Huvis - Korea

Fine Denier Staple• ADD + CVD• Filed 5/2017:• China, India, Korea,

Taiwan, • 0 – 220% • Spared: Toray -

Korea and Tainan Spinning –Taiwan

Jan-16

Jul-18

Jan-18

Jul-16

Jan-17

Jul-17

Jan-19

303234363840

Jul-18

Jan-18

Jan-16

Jul-16

Jan-17

Jul-17

1.2d Staple to Formula Price Difference

10152025303540

Jul-16

Jan-18

Jan-17

Jan-16

Jul-17

Jul-18

Low Melt to Formula Price Difference

DTY Filament• ADD + CVD• Filed 10/2018:

China, India• Beginning stages

of investigation50

Jan-17

Jul-17

Jan-16

Jul-18

Jul-16

Jan-18

150d DTY to Formula Price Difference

Taiwan, • 0 – 220% • Spared: Toray - Korea and

Tainan Spinning –Taiwan

242628303234363840424446

Jan-19

Jul-18

Jan-16

Jul-16

Jan-17

Jul-17

Jan-18

US Polyester Supply Chain – Antidumping and Countervailing

PET Resin• ADD + CVD• Filed 3/2015: • Canada, China, India,

• 5 - 276%• Dismissed (10/2018) on

Taiwan, • 0 – 220% • Spared: Toray - Korea

and Tainan Spinning –Taiwan

Jan-17

Jan-16

Jul-16

Jul-17

Jan-18

Jul-18

Jan-19

253035404550

Jan-17

Jan-16

Jul-16

Jul-17

Jan-19

Jan-18

Jul-18

10152025303540

Jan-16

Jul-16

Jan-17

Jul-17

Jul-18

Jan-18

of investigation50

Jul-17

Jan-18

Jan-17

Jan-16

Jul-16

Jul-18

Low Melt Fibers• ADD • Filed 6/2017: • Korea and

Taiwan • 0 - 52% • Spared: Huvis -

Jul-18

Jul-17

Jan-19

Jan-17

Jan-16

Jul-16

Jan-18

• 5 - 276%• Dismissed (10/2018) on

Jul-17

Jan-16

Jan-17

Jul-16

Jan-18

Jan-19

Jul-18

253035404550

Jul-16

Jul-18

Jan-16

Jul-17

Jan-17

Jan-18

Jan-19

Jul-16

Jul-18

Jan-17

Jan-16

Jul-17

Jan-18

Jan-19

of investigation50

Jul-16

Jan-16

Jul-18

Jan-17

Jul-17

Jan-18

China, India• Beginning stages of

investigation• 4/2019 – Critical

circumstances petition filed –means retroactive penalties potentially

Jul-16

Jul-17

Jan-16

Jan-18

Jul-18

Jan-17

Jan-19

• 5 - 276%• Dismissed (10/2018) on

Jul-18

Jan-19

Jan-17

Jan-16

Jul-16

Jul-17

Jan-18

253035404550

Jan-17

Jan-16

Jul-16

Jul-17

Jan-18

Jul-18

Jan-19

Jan-16

Jan-18

Jul-16

Jan-17

Jul-17

Jul-18

Jan-19

China, India• Beginning stages of

investigation• 4/2019 – Critical

circumstances petition filed –means retroactive penalties potentially

505560657075

Jan-19

Jan-17

Jan-18

Jan-16

Jul-18

Jul-16

Jul-17

woodmac.com/chemicalsUS polymer prices

The outlook for PA66 (nylon) fibres is becoming increasingly difficult

Source: Wood Mackenzie Chemicals.

Jul-17Jan-16 Jul-16 Jan-17 Jan-18 Jul-18 Jan-19 Jul-19

PA6, CFRPET Resin, Del$/

PP, Del

PA66, CFR

Some World Views

woodmac.com/chemicalsHow has demand growth been supplied?

Fiber Demand by Fiber Type, 1980-2018

1980 1985 2000 2005 2010 20151990

+4.8+8

Cellulose

AcrylicPolypropyleneNylon

CottonPolyester

woodmac.com/chemicalsWorld fiber demand with estimates through to 2030Fiber Demand by Type, 1980-2030

199519901985 2015

1980 2000 2005 2010 2020 2025 2030

+82+55

PolypropyleneAcrylic

NylonCelluloseCottonPolyester

woodmac.com/chemicalsHow will this new demand be supplied?

The expected breakdown of this new fiber supply, 2018-2030

2026 2030

2018 2022 2024 20282020

+2Wool

Cellulose

AcrylicPolypropyleneNylon

CottonPolyester

woodmac.com/chemicalsGlobal polyester production by region

Global production – ex-China

2000 2010 2020 2030

India A/ME/TurkS.Asia EuropeAmericas JKT

And now with China

30405060

2000 2010 2020 2030

+598.4%

China India S.Asia Americas Europe A/ME/Turk JKT

China jumps from 26% of global polyester production in 2000…….

1990 2000 2010 2020 2030

China India S.Asia EuropeAmericas JKTA/ME/Turk

Others

… to 71% in 18 years

ons 55

2000 2010

2020 2030

China S.AsiaIndia Americas Europe A/ME/Turk JKT

Others

woodmac.com/chemicalsGlobal fiber mill consumption

Strong growth for most major fibers

Source: Wood Mackenzie Chemicals, USDA; Cotton is USDA and season 2016/17 is set to calendar 2017

WoolAcrylicNylon F+SPFY Cotton PP F+SCel staplePSF

+1.3 +0.8

201720182019

Fibers and the US Economy

US Production Index for Fiber, Yarn and Thread Mills (2012=100)

Production for fiber, yarn and thread mills has gone down since its peak in 1998

Source: US Federal Reserve

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

+2% -3%

US Economy – Part 1

US Production Index for Other Mills (2012=100)

Downstream mills are showing the same trends as fiber and yarn mills

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 202050

Fabric Mills

Textile Furnishing Mills

Textile/Fabric Finishing/coating millsTextile Product Mills

Carpet and Rug MillsOther Textile product mills

US Production Index for Carpet and Rug Mills (2012=100)

And looking just at carpet and rug mills….

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

200220

US Production Index for Other Mills and Apparel (2012=100)

Apparel production has fallen off the cliff

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 20200

Fabric Mills

Textile Product MillsTextile/Fabric Finishing/coating mills

Carpet and Rug MillsTextile Furnishing Mills

Other Textile product millsApparel

US Production Index for Other Mills and Apparel (2012=100)

Since 2012 – some winners and some losers

2012 2013 2014 2015 2016 2017 201890

Carpet and Rug Mills

Fiber Mills

Sustainability and Pollution

Some Recycling Targets

2017714 kt recycled bottles

2025Pepsi – 45% recycled contentWalmart – 20% recycled brand name content Danone/Evian – 100%Unilever – 50%Nestle Waters – 50%Colgate – 25%

2030Coca Cola – 100% packaging, 50% bottles (uses 3 million tons globally)Pepsi – 50% (50 kt)

Disposal

US PET Bottles

Available(5,913)

Total US Bottles

Recycled(1,726)

Export (283)

US Reclaimer Purchases

(1,606)Clean Flake*(1,075)

RPET Use in

Domestic Markets(1,575)

Clean Flake Equivalent (184)

(333)(61)

US PET MATERIAL FLOWS 2017(Million lbs)

PC Bottle Imports (61)

(4,037)Non-Bottle PET (103)

Fiber (732)

(4,037)Sheet & Film (291)

(4,037)Strapping (130)

(4,037)Food & Bev Bottles (4,037)

Other (19)

Canadian RPET (241)

(4,037)Other Imported RPET (259) Non food bottles

Courtesy:NAPCORand AlasdairCarmichael

PET BOTTLE RECYCLING RATE HISTORY

01,0002,0003,0004,0005,0006,0007,000

lbs Bottles on US

Shelves (MMlbs.)Total US BottlesCollected (MMlbs.)Gross RecyclingRate

Courtesy: NAPCOR and Alasdair Carmichael

US RPET FIBER CAPACITIES (EST)

Fiber Type Feed

Post Ind

Post Cons

Filament

Staple

000 tons Shares of PI and PC feed vary on price, availability and end uses.

Trend is to more PI and imported flake as domestic PC prices high.

FIBER END USES FOR PC RECYCLED PET 2017

Filament includes Carpet BCF and Textile Filament. End uses not broken out as not enough producers to ensure confidentiality.Non-Wovens is the largest Staple end use.

FilamentFiberfillNon-WovensSpinning Fiber

woodmac.com/chemicalsSustainability is the looming issue

• How to satisfy demand in a sustainable way• Recycled pre- and post- consumer waste volumes are still small• Huge growth from emerging countries

• Population and income growth• Fast fashion, affordable fashion, rising demand for hygiene products

• Recycling and waste disposal systems are lagging and unprofitable• Business model is for export to emerging economies

• How to measure environmental and social impact of different fibers?• What needs to be measured? • How to measure?• And then, so what?

• Microfiber pollution – who’s problem is it? Does labeling a shirt matter?

And finally…

There is lots of positive news in the textile world…

• Fiber Industries restart of the Wellman polyester staple plant• Investment by PHP and SANS of polyester HDI capacity• Huvis/Indorama JV for low melt spinning in Spartanburg• Parkdale / Intrinsic Textiles JV to develop CiClo (biodegradable) technology• Indorama / Loop Industrties JV to begin production of 100% sustainably

produced resin and fiber• US Auto industry – 4th largest sales year in 2018• 5% tire capacity increase last year, with more planned through 2022• Ford cancels Mexico plant, expands US one• Indorama and DAK bought rPET plants• New USMCA expected to close some loopholes• Chinese investment in US spinning mills (Shandong Ruyi in AR, Keer in SC)• US keeps improving environmental footprint of cotton• SewBots to for Tshirt production, now available as a rental

woodmac.com/chemicalsAnd I like to end on a positive note….

Connect with Laura

laura.murphy@woodmac.com1-610-388-1392 (office)1-423-802-6161 (mobile)

Contact Information

Laura MurphyResearch Director, FibersWood Mackenzie Chemicals

woodmac.com/chemicalsDisclaimerStrictly Private & Confidential These materials, including any updates to them, are published by and remain subject to the copyright of the Wood Mackenzie group ("Wood Mackenzie"), and are made available to clients of Wood Mackenzie under terms agreed between Wood Mackenzie and those clients. The use of these materials is governed by the terms and conditions of the agreement under which they were provided. The content and conclusions contained are confidential and may not be disclosed to any other person without Wood Mackenzie's prior written permission. Wood Mackenzie makes no warranty or representation about the accuracy or completeness of the information and data contained in these materials, which are provided 'as is'. The opinions expressed in these materials are those of Wood Mackenzie, and nothing contained in them constitutes an offer to buy or to sell securities, or investment advice. Wood Mackenzie's products do not provide a comprehensive analysis of the financial position or prospects of any company or entity and nothing in any such product should be taken as comment regarding the value of the securities of any entity. If, notwithstanding the foregoing, you or any other person relies upon these materials in any way, Wood Mackenzie does not accept, and hereby disclaims to the extent permitted by law, all liability for any loss and damage suffered arising in connection with such reliance.

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