China Polyolefins Market Outlook View the recording at:
http://forms.icis.com/content/LP0080_WebinarPolyolefinMarkets
John Richardson Director – ICIS training Asia and ICB Asia correspondent
1
About ICIS
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April 2013 3
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Consulting
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Prices
News Analysis
Test
4
About our speaker
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John Richardson
Director – ICIS training Asia and ICB Asia correspondent
April 2013 6
Presentation structure
A brief look at history Why weak demand
has surprised people in 2013
The prospects for the rest of this year
The long-term impact of economic reforms
Polyethylene history
PE demand growth has been below the growth in overall GDP for most of the years between 2006 and 2012
In 2006-2007, a dip in consumption of virgin resins showed how price sensitive the market is
0%
5%
10%
15%
20%
25%
30%
2006 2007 2008 2009 2010 2011 2012
China PE Versus GDP Growth
PE growth GDP growth
ICIS Consulting, World Bank & NBS
Polyethylene history
2009 boom was because of economic stimulus
Tighter monetary conditions from April 2011 bad news for the SMEs
Growth also hurt by lingering inventory problems
0%
5%
10%
15%
20%
25%
30%
2006 2007 2008 2009 2010 2011 2012
China PE Versus GDP Growth
PE growth GDP growth
ICIS Consulting, World Bank & NBS
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
2006 2007 2008 2009 2010 2011 2012
PE/GDP ratio
PE/GDP ratio
ICIS Consulting
And then from November, a ray of light!
China had avoided a hard landing
The new leaders would adopt “pro-growth” policies
PMIs and other data indicated a strong economic rebound
Accepted wisdom was suddenly that…
This confidence carried over into January-early February on...
More strength in the PMIs, although signs of export weakness were already showing
Strong export, retail sales data for December
Avoidance of the “fiscal cliff” Extra liquidity in China and
sustained confidence in politics
2012 GDP growth more like 5.5%, according to Standard Chartered
Accuracy of December export number also in doubt (and all the data this year)
Passenger car sales included inventories in showrooms
No substantive and independent investigation of any data – Dr John Lee
But data was being questioned
And where recovery did occur, was it the wrong kind of recovery?
Politically motivated surge in bank lending in May-October
Also, $1.1 trillion allocated to infrastructure investments
This has made economic rebalancing a lot harder
Domestic inflationary impact of the extra credit, spending occurred as global commodity prices rose
And so China has started to tighten
Total credit in the system was the highest ever last year because of official lending and shadow banking
It grew by 58% in Q1 And so credit is being
withdrawn – e.g. official loans down 16% in January-May; new measures to tackle shadow banking
What does this mean for the SMEs?
More evidence of weak real growth
Li Keqiang: “GDP numbers are man-made”
Margins squeezed by higher fuel and resin prices
Now they could face less credit
The commodity converters also affected by rising labour costs
Labour shortages grew worse post-CNY
But the difference this time around is that deflation, rather than inflation, could be the problem
The SMEs – back to the future?
Shan Dalin, pictured with his family, is a crane operator from Southwest China's Guizhou province who has worked in eastern Zhejiang province for 10 years. In 2012, Shan's monthly income rose to 2,800 yuan ($449) from lower than 2,000 yuan in 2008. [Photo/Xinhua]
“Zero or flat PE growth in 2013”*
Converters now think that the government is serious about reform
In the short term “a little bit more corruption would be good!”
Very low processor inventories, however, which might lead to a rally, according to some people
*Producers and traders
ICIS pricing. Up until 7 June
“Wild card” of the ExxonMobil plants in Singapore – 2 x 650,000 tonnes/year of metallocene LLDPE now said to be operating, but at what rates? Also, new 450,000 tonnes/year PP plant in the same complex
And there are new capacities
Source: ICIS pricing
Source: ICIS pricing
Source: ICIS pricing
Polypropylene Capacity Expansion 2H2012-2013 （Unit: 10kt/yr）
Region Province Producers 1H 2012 capacity
Capacity under Start-up Feedstock
construction
Northeast Heilongjiang Daqing Refining & Chemicals 30 30
9.2012
Oil refining
Northeast Liaoning Fushun Petrochemical 9 30 9.2012 cracking
CentralChina Henan Sinopec Jingmen Co 8 14 1.2013 Oil refining
East China Jiangsu Xuzhou Haitian Petrochemical Co 0 20 1.2013 Import
East China Zhejiang Ningbo Skyford 0 40 2.2013 MTO
South china Fujian Sinochem Quanzhou Petrochemical 0 20 2013 cracking
South china Guangdong Guangzhou Petrochemical 19 20 2013 cracking/imports
Northwest China Nixia Ningxia Petrochemical 10 0 2.2012 MTO
North China Neimenggu Datang International 50 0 2.2012 MTO
North China Neimenggu Hohhot Petrochemical 0 15 9.2012 Oil refining
CentralChina Hubei Wuhan Petrochemical 0 40 7.2013 cracking
Southwest China Chengdu Sichuan Petrochemical 0 45 6.2013 cracking
South china Guangxi Guangxi Beihai Petrochemical 20 0 4.2012 Oil refining
South china Guangdong Maoming Petrochemical 47 20 2.2013 Oil refining Total
294
Middle East turnaround season also over
Company Location Grade Capacity (tonnes/year)
Shutdown schedule in 2013
Arabian Petrochemical Co ( Petrokemya ) Al Jubail , Saudi Arabia
LLDPE 400,000 Mar (details to be confirmed ) HDPE 400,000
PetroRabigh Rabigh , Saudi Arabia LLDPE 600,000 Three weeks in Jan
Saudi Polymers Al Jubail , Saudi Arabia HDPE 2 x 550,000
10 Nov 2012 to Jan 2013 PP 400,000
Oman Oil Refineries and Petroleum Industries Co ( Orpic )
Sohar , Oman PP 340,000 45 days in Feb
Petrochemical Co ( Ibn Zahr )
Al Jubail , Saudi Arabia PP 500,000 a month in Feb or Mar
Borouge Ruwais , Abu Dhabi LLDPE 2 x 300,000 About a month for each
line from end Nov 2012 to Feb 2013 consecutively
HDPE 540,000 PP 2x 400,000
Saudi Ethylene and Polyethylene Co (SEPC)
Al Jubail , LDPE 400,000 Apr (to be confirmed)
Saudi Arabia HDPE 400,000 Saudi Polyolefins Co Al Jubail , Saudi Arabia PP 720,000 Apr (to be confirmed)
Sentiment likely to remain subdued as the economic adjustment process accelerates (more details in October)
The peak production season in Asia traditionally sees greater output from the South Koreans. How will they respond? Or will we see rate cuts?
Get used to it!
The rest of the year looks difficult
-100
100
300
500
700
900
1,100
1,300
1,500
Mar
gin,
$/t
onne
Regional HDPE Variable MarginsSoutheast Asia integrated HDPE variable margin (naphtha)Northeast Asia integrated HDPE variable margin (naphtha)Northwest Europe integrated HDPE variable margin (naphtha)US integrated HDPE variable margin (ethane)
ICIS pricing HDPE variable cost margins, up until end-May 2013
But The Opportunities Are Still Huge
Western China still very under-developed. Fly-in-fly-out workers and moving rural communities to cities?
Li Keqiang has promised to reform the Hukou system, but no details yet
But, again, how can this growth be achieved sustainably?
And so a big opportunity for the chemicals industry
The 12th Five-Year-Plan
Seven priorities 1. New Energy 2. Energy conservation &
environmental protection 3. Biotechnology 4. New materials 5. New IT 6. High-end equipment
manufacturing 7. Clean Energy vehicles
Some of the chemicals sectors affected
1. Performance materials 2. Water treatment chemicals,
process improvements 3. Bio-feedstocks, catalysts 4. Performance materials 5. Performance resins &
polymers
Questions?
Thank you! http://www.icis.com/blogs/asian-chemical-connections
