New Horizons for China Petrochemical Industry
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CONTENTS 1
2
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B : C : C : A B FA C: B :
4
FF : / B
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B E :
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E :
E G E
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: C & &&
Bohai Gulf
Yangtze River Delta
Pearl River Delta
Announced Integrated Projects 2019-2025
2025C2 13.5/24%PX 13.3/30%
2025C2 15.3/27%PX 20.2/45%
2025C2 6.4/11%PX 2.0/4.5%
4%
11%14%
22%
0
50
100
150
200
250
2000 2005 2010 2015 2018 2020F 2025F
MTA Others US Middle East China
Capacity of ethylene and PX of China has reached 25MTA and 13.8MTA in 2018, which is expected to reach 53MTA and 40MTA by 2025, both ranking the 1st in the world.
+10%
AAGR: 14%
+8%
World Ethylene Capacity and Regional Share
6%20%
24%
47%
0102030405060708090
2000 2005 2010 2015 2018 2020F 2025F
MTA
AAGR: 19%
+14%
+9%
World PX Capacity and Regional Share
5
China alone contributes 50-70% of the new capacity during another two round of expansion in 2019 and 2023.
Average Annual New Capacity of Basic Petrochemicals
1996-2000 2007-2009 2012-2013 2018-2019 2021-2025Note: Basic chemicals including ethylene, propylene, butadiene, benzene, toluene, PX and methanol
MTA14
3021
1525
MTA
MTA
MTAMTA
11%
45%69%
55%
44%
China Middle East US Others
7
China still holds the largest share of world petrochemicals demand, which is expected to maintain a high growth after the recent booming period. Demand of synthetic resin, fiber and rubber is expected reach 135MTA, 60MTA and 3.2MTA respectively by 2025.
16%
30%
38%
40%
0
50
100
150
200
250
300
350
2000 2010 2019F 2025F
MTA
Others Middle East US China
AAGR 11%
7%
6%
Share and Growth of Synthetic Resin Demand
30%
63%
71%
74%
0
10
20
30
40
50
60
70
80
90
2000 2010 2019F 2025F
MTA
Others Middle East US China
Share and Growth of Synthetic Fiber Demand
14%
6.5%
5.5%
10%22%
25%
27%
0
2
4
6
8
10
12
2000 2010 2019F 2025F
MTA
Others Middle East US China
9.7%
4.5%
3.8%
Share and Growth of Synthetic Rubber Demand
8
World petrochemicals demand are recovering from years before, growth of which outruns the world GDP. China, as a key driver, is expects to hold 1% higher than the world average demand growth by 2025.
AAGR of World Synthetic Resin, Fiber and Rubber Demand
3.9%2011-2014 2015-2016
4.0%2017-2019 2020-2025
5.1% 4.2%2.6%2007-2010
5.1%4.8%5.2%
6.0%
8.0%China
World Avg.
China per capita consumption of petrochemicals is catching up with Japan and Europe in the coming years. But 43kg(in equivalent ethylene) still has a long way to go compared with South Korea(89-90kg) and U.S.(70-80kg).
9Consumption per capita of Equivalent Ethylene vs GDP per capita from 1990-2025
0
10
20
30
40
50
60
70
80
90
100
0 10000 20000 30000 40000 50000 60000 70000 80000
Kg per person
GDP per capita, $
China
South Korea
US
Japan
Europe2018
Aging Population VS Massive Urbanization
10
Massive urbanization is the best answer to the aging problem. Besides the second baby boom, we will see 170 million new citizens moving to cities by 2030, which means at least 250 billion $ new consumption and 2750 billion $ new investment.
250+ Billion $ New Consumption
2750+ Billion $ New Investment
2018 2030170 Million New Citizens
110 Million New Elders(aged over 60)
3-4 Million Second babies*estimated
Explosive Growth of E-commerce Boosting the Polymers Demand
11
Billions of online orders and catering services are creating a whole new area for polymers consumption,which is growing by 20-30% each year and increasing the demand of polyolefins by 1-2%.
50Billion
Packages
250-300KTPE/PP
50-60KTPE/PP
20% 20-30%8 BillionOrders
New Demand from Environmental Protection Business
12
Recycling rate of China has been much higher than the average of the world, which makes it harder to getsignificantly improved in years, together with waste plastics import ban, increased the virgin PE demand by0.7-1.0 million ton. While air-pollution control regulation has driven the natural gas pipeline demand by 10%.
-
0
3000
6000
9000
2015 2016 2017 2018 2019
KT
New Polymers Replacement Waste Ethyl Polymers ImportWaste Ethyl Polymers Production
AAGR: -12%
0
100
200
300
400
500
2017 2018 2019
KT
New Consumption from Fuel Changing PolicyPE Consumption for Pipeline
- - - -
AAGR: 10.3%
- -
EU30%
China25%
World18%
U.S.9%
Sources: Roland Geyer, Jenna R. Jambeck, Kara Lavender Law
2015 2020 2025 2030
65
99
145
12%
10%
8.9%Billion $
A Prosperous Outlook for High Performance MaterialsConsumption upgrading promotes the high performance materials demand. A more than 10% growth will be expected in the coming years, and the revenue of this area will reach 145 billion $ by 2030, accounting for 40-50% of the world.
40
BatteryMaterials
ConstructionChemicals
EngineeringPlastics
MedicalPlastics
PackageMaterials
ElectronicMaterials
EVA &alpha-olefins
Liquid CrystalMaterials
High PerformancePlastics
Revenue of China High Performance Materials Industry
C1/C2: Large Import Still ThereMethanol effective supply cannot fully meet the fast growing MTO and fuel demand, net export approaching 10 MT.Self-sufficiency of ethylene is rocketing, while more than 10MT of equivalent ethylene still has to be imported.
Note�Self-Sufficiency Rate=Production/Demand
0
20
40
60
80
100
120
2018 2019 2020 2025
MT
MTO Fuel Others Capcacity
88%
89%
88%
86%
Self-Sufficiency
0
10
20
30
40
50
60
70
2018 2019 2020 2025
MT
PE EG SM EO PVC Others Capcacity
Note�Ethylene Demand including derivatives demand(in ethylene)
51% 51%
58%
83%
Self-Sufficiency
C3/C4: Balance is on the Horizon
0
10
20
30
40
50
60
70
80
2018 2019 2020 2025
MT
PP AN PO Phenol/Aceton Butanol/2-ethylhexanol Acrylic Others Capcacity
77%82% 83%
93%
Self-Sufficiency
Expanding propylene capacity and demand are getting near the balance point, while PP still needs import;Not only the large integrated projects but also the BDH has changed the whole landscape for butadiene.
0
1
2
3
4
5
6
7
8
2018 2019 2020 2025
MT
BR SBR SBCs NBR ABS Others Capcacity
73% 75%
107%
97%
Self-Sufficiency
Note�BD Demand including derivatives demand(in BD)Note�Propylene Demand including derivatives demand(in Propylene)
Aromatics: Nearing the OvercapacityExtensive investment on PX has dramatically change the outlook for it, balanced or even overcapacity is expected by 2025. For benzene, import won’t be absent, but potential increase of the capacity utilization clouded the market.
40%
55%62%
103%
0%
20%
40%
60%
80%
100%
120%
0
10
20
30
40
50
60
2018 2019 2020 2025
MT
Capcacity Demand Self-Sufficiency(RHS)
0
5
10
15
20
25
30
35
2018 2019 2020 2025
MT
SM Nitrobenzene CPL Phenol Others Capcacity
82%
85%
90%
88%
Self-Sufficiency
Balance across the SpectrumPolymers supply still cannot meet the demand by 2025, while some, especially the aromatics, will be facing the overcapacity pressure.
Balance of China Major Petrochemicals in 2025
-20000
-15000
-10000
-5000
0
5000
10000
15000
20000
-100000
-75000
-50000
-25000
0
25000
50000
75000
100000
Met
hano
l
Ethy
lene
LDPE
HDPE
LLD
PE EG
Prop
ylen
e
PP AN PO
Acet
one
n-bu
tano
l
2-et
hylh
exan
ol
Buta
dien
e
BR SBR PX PTA
PET
Benz
ene
SM
Phen
ol
CPL
C1 C2 C3 C4 Aromatics
,000 ton Production Demand Balance(RHS)
China18: 23MTA25: 28MTA
India18: 3.0MTA25: 7.7MTA
In 2018, China polymers gap reach up to 23 MTA, which will be increased by at least 5 MT by 2025. Far more incremental imports will be expected than other areas.
18
Polymers Balance Change of Major Import Areas from 2018-2025
Africa18: 5.7MTA25: 7.8MTA
South America18: 4.4MTA25: 6.5MTA
South Asia18: 2.4MTA25: 3.8MTA
2018 2025
Note: Polymers including synthetic resins, fibers and rubbers
A Further Opening-up Market
20
A series of measures are implemented to reduce the market access barrier, which has attracted not only the domestic private investors but also the foreign investors, like Saudi Aramco, SABIC to join the game.
9%
11%
Private Investors
25%
Foreign Investors
13%
Ethylene Capacity Share 2018(inner circle) and 2025
Ethylene
26%
7%
Private Investors
50%
Foreign Investors
7%
PX Capacity Share 2018(inner circle) and 2025
PX
Remove restrictions on wholly foreign funded petrochemical companies
Remove restrictions on crude oil import of private companies
Introduce mixed ownership to SOEs
Implement negative list for market access
Cut items requiring government review by 30%
Cut taxes and administrative fees Lower the VAT from 17% to 13%
A More Diversified Market
21
In 2019, Zhejiang and Hengli PC will bring the aromatics version of OTC on board, and ExxonMobil will bring the olefins version to Huizhou, China years later. Meanwhile the first ethane VLEC will arrive in China and the first ACO unit gets into production.
China Ethylene Capacity Share by Process 2025 China Propylene Capacity Share by Process 2025
Ethylene-Based26%
Coal-based74%
Ethylene Glycol
China Ethylene Glycol Capacity Share by Process 2025
Naphtha Cracking
69%
ACO1%
DCC1%
MTO5%
CTO14%
Ethane Cracking
5%
LPG Cracking3%
OTC2%
Ethylene
FCC22%
Naphtha Cracking
37%
CTP3%
MTP1%
MTO5%
CTO15%
PDH17%
Propylene
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
-200
-150
-100
-50
0
50
100
150
200
250
300
350
2000 2005 2010 2015 2020 2025 2030
Margin Index Self-sufficiency Index
Profitability Facing Temporary Downward Pressure
22
Overcapacity of some products will bring downward pressure to the overall profitability. As the rebalance
goes on, the self-sufficiency will decline again and the profitability will get rebound sometime after 2025.
Margin Index and Self-sufficiency Index of China Petrochemical Market
2026-2027
2027-2028
2017-2018
Rebalance PeriodGolden Age Another Cycle�
Consolidation on the Way
23
Stricter environment regulations and fierce competition are forcing the disadvantages out of the games.Rapid decreasing small companies/units and climbing concentration ratio indicate the on-going consolidation.
concentration
ratio+27%
-18%
201525200
201624500
201723300 2018
21300
Numbers of enterprises above designated size
Takeaways
24
• As the largest producer and consumer, China petrochemical market to maintain a steady annualdemand growth of 6-7% and a capacity growth of 9-10% before 2025.
• Opportunities are emerging from massive urbanization, consumption upgrading, infrastructureconstruction, e-commerce, environmental protection business and further opening up.
• China will take more imports from the Middle East and U.S., as the polymers gap of China will bewidening up by 5 million tons by 2025.
• Steady economy and huge demand will help the market to get rebalanced quickly. And a rebound isexpected sometime after 2025.
Q&A