Global Polyolefins UpdateGlobal Polyolefins Update
FPA Fall Executive ConferenceFPA Fall Executive ConferenceOctober, 2006October, 2006
Chicago, IL U.S.A.Chicago, IL U.S.A.
Howard RappaportHoward RappaportGlobal Practice Leader Global Practice Leader -- ThermoplasticsThermoplastics
[email protected]@cmaiglobal.com
Singapore Shanghai Houston New York London Dusseldorf Dubai
A Global Organization Of Over 120 Full -Time Associates…
A Global Organization Of Over 120 Full -Time Associates…
HOUSTONHOUSTONLONDONLONDON
SINGAPORESINGAPORE
DubaiDubai
New YorkNew York
ShanghaiShanghai
DusseldorfDusseldorf
EconomyEconomyThink HappyThoughts…
0.00.0
0.50.5
1.01.0
1.51.5
2.02.0
2.52.53.03.03.03.53.53.5
4.04.0
4.54.5
5.05.0
8787 8888 8989 9090 9191 9292 9393 9494 9595 9696 9797 9898 9999 0000 0101 0202 0303 0404 0505 0606 0707 0808 0909
Percent ChangePercent Change
ForecastForecast
Source IMF, World Bank; Forecast CMAI Econ Group (03/2005) Source IMF, World Bank; Forecast CMAI Econ Group (03/2005)
World GDP Growth RatesConstant 2000 Dollars
World GDP Growth RatesWorld GDP Growth RatesConstant 2000 DollarsConstant 2000 Dollars
WhatWhat’’s Sustaining GDP Growth?s Sustaining GDP Growth?
•• Low interest ratesLow interest rates•• Low inflationLow inflation•• GlobalizationGlobalization•• Technological changesTechnological changes
0.00.0
0.50.5
1.01.0
1.51.5
2.02.0
2.52.53.03.03.03.53.53.5
4.04.0
4.54.5
5.05.0
8787 8888 8989 9090 9191 9292 9393 9494 9595 9696 9797 9898 9999 0000 0101 0202 0303 0404 0505 0606 0707 0808 0909
Percent ChangePercent Change
ForecastForecast
Source IMF, World Bank; Forecast CMAI Econ Group Source IMF, World Bank; Forecast CMAI Econ Group
World GDP Growth RatesConstant 2000 Dollars
World GDP Growth RatesWorld GDP Growth RatesConstant 2000 DollarsConstant 2000 Dollars
Potential Hurdles:Potential Hurdles:•• High energy costs reducing GDP by 0.5 to 0.75 High energy costs reducing GDP by 0.5 to 0.75
percentage points short term, 1 point or more percentage points short term, 1 point or more long term.long term.
•• Government deficits exceed $1 trillionGovernment deficits exceed $1 trillion•• Consumer debt / savings rateConsumer debt / savings rate•• Peaking real estate marketsPeaking real estate markets•• Trade Trade •• Currency realignment Currency realignment –– ChinaChina•• Relocation of industry Relocation of industry –– Developed to Developed to
DevelopingDeveloping
Estimated 2006 World GDP by RegionsEstimated 2006 World GDP by RegionsEstimated 2006 World GDP by RegionsWorld Total:$44.1 Trillion in 2004 U.S. DollarsWorld Total:$44.1 Trillion in 2004 U.S. DollarsWorld Total:$44.1 Trillion in 2004 U.S. Dollars
JapanJapan11%11%
Other North Other North AmericaAmerica
4%4%
ChinaChina5%5%
United StatesUnited States28%28%
South AmericaSouth America3%3%Middle EastMiddle East
3%3%
CIS & Baltic CIS & Baltic StatesStates
2%2%
Other NE. AsiaOther NE. Asia3%3%
Southeast AsiaSoutheast Asia2%2%
OceaniaOceania2%2%
Indian Indian SubcontinentSubcontinent
2%2% AfricaAfrica2%2%
West EuropeWest Europe31%31%
Central EuropeCentral Europe2%2%
China’s Growing Share of World GDPChina’s Growing Share of World GDP
1.5
4.0
81 83 85 87 89 91 93 95 97 99 01 03 05 07 090.0
0.5
1.0
2.0
2.5
3.0
3.5
4.5
5.05.0
PercentPercent5.5
China's Major ExportsChina's Major ExportsChina's Major Exports
Source: Custom StatisticsSource: Custom Statistics
00 2020 4040 6060 8080 100100 120120 140140 160160
Electrical MachineryElectrical Machinery
MachineryMachinery
ApparelApparel
Iron/Steel ProductsIron/Steel Products
Optical & Medical InstrumentsOptical & Medical Instruments
Furniture/BeddingFurniture/Bedding
FootwearFootwear
VehiclesVehicles
Toys & Sports EquipmentToys & Sports Equipment
20052005
19951995
Billion U.S. DollarsBillion U.S. Dollars
Manufacturing Hourly Labor Rates Manufacturing Hourly Labor Rates Manufacturing Hourly Labor Rates
0.000.00 5.005.00 10.0010.00 15.0015.00 20.0020.00 25.0025.00 30.0030.00 35.0035.00 40.0040.00
GermanyGermany
FranceFrance
USAUSA
U.K.U.K.
CanadaCanada
JapanJapan
SpainSpain
S.KoreaS.Korea
TaiwanTaiwan
MexicoMexico
ChinaChina
U.S. Dollars per HourU.S. Dollars per Hour Sources: Int'l Labor Organization, UN Industrial Sources: Int'l Labor Organization, UN Industrial Development Organization, U.S. Dept. of LaborDevelopment Organization, U.S. Dept. of Labor
Source: Federal Reserve Board Source: Federal Reserve Board
Comparison of U.S. Non-Durable Goods Production Index Comparison of U.S. NonComparison of U.S. Non--Durable Goods Production Index Durable Goods Production Index Fundamental Change in Manufacturing…Fundamental Change in ManufacturingFundamental Change in Manufacturing……
1981/82 Recession1981/82 Recession 1990/91 Recession1990/91 Recession 2000/03 Recession2000/03 Recession
Peaks:Peaks:August 1981August 1981September 1990September 1990June 2000June 2000
Months PriorMonths Priorto Peakto Peak
Months After PeakMonths After Peak--66 00 +6+6 +12+12 +18+18 +24+24 +30+30 +36+36 +42+42 +48+48 +54+54 +60+60 +66+66 +72+72 +78+78
Aug. 06
9090
9595
100100
105105
110110
115115
120120
125125IndexIndex
Higher Oil Prices impactGDP Growth
Higher Oil Prices impactHigher Oil Prices impactGDP GrowthGDP Growth
--10.010.0
--5.05.0
0.00.0
5.05.0
10.010.0
15.015.0
20.020.0
7070 7272 7474 7676 7878 8080 8282 8484 8686 8888 90 90 92 92 94 94 96 96 98 98 0000 0202 0404 060600
1010
2020
3030
4040
5050
6060
757575
GDPGDP
WTI Crude OilWTI Crude Oil
GDP GDP -- Percent (%) ChangePercent (%) Change WTI WTI -- Dollars per BarrelDollars per Barrel
ENERGYENERGY
You may think the U.S. industry is big, but….You may think the U.S. industry is big, butYou may think the U.S. industry is big, but……..
OilOil20 MM20 MMBPDBPD
2.3 T#Yr2.3 T#YrRefiningRefining
93%93%TransportationTransportation
&&Heating FuelsHeating Fuels
NaphthaNaphthaGas OilGas Oil 7%7%
PetrochemPetrochem
GasGas60 B Cubic60 B CubicFeet/dayFeet/day
Ethane, PropaneEthane, PropaneNatural Gasoline,Natural Gasoline,
ButaneButane 5%5%
MethaneMethane(Fuel Gas)(Fuel Gas) 95%95%
GasGasProcessingProcessing
EnergyEnergy Base ChemicalsBase Chemicals PlasticsPlastics
Higher Energy Prices Impact the Chain…Higher Energy Prices Impact the Chain…Non-DurablesNon-Durables
ConsumersConsumers RetailRetail
Higher Energy Prices
World Crude Oil Price TrendsWorld Crude Oil Price TrendsWorld Crude Oil Price Trends
00
1010
2020
3030
4040
5050
6060
7070
8080
9090 9191 9292 9393 9494 9595 9696 9797 9898 9999 0000 0101 0202 0303 0404 0505 0606 0707 0808 0909 1010
US$ / BarrelUS$ / Barrel
WTIWTI BrentBrent DubaiDubai
ForecastForecast
U.S. Natural Gas Liquids PricesU.S. Natural Gas Liquids PricesU.S. Natural Gas Liquids Prices
00
2020
4040
6060
8080
100100
120120
140140
160160
9090 9191 9292 9393 9494 9595 9696 9797 9898 9999 0000 0101 0202 0303 0404 0505 0606 0707 0808 0909 10100.000.00
2.002.00
4.004.00
6.006.00
8.008.00
10.0010.00
12.0012.00
14.0014.00
16.0016.00
Nat. Gas WellheadNat. Gas Wellhead EthaneEthane PropanePropane NN--ButaneButane
ForecastForecast
Gas LiquidsGas LiquidsCents Per GallonCents Per Gallon
Nat. Gas Wellhead Nat. Gas Wellhead $ Per $ Per MMBtuMMBtu
North America Energy Price TrendsNorth America Energy Price TrendsNorth America Energy Price Trends
0.000.00
2.002.00
4.004.00
6.006.00
8.008.00
10.0010.00
12.0012.00
8181 8383 8585 8787 8989 9191 9393 9595 9797 9999 0101 0303 0505 0707 09090.00.0
1.01.0
2.02.0
3.03.0
4.04.0
5.05.0
6.06.0
7.07.0Crude/Gas RatioCrude/Gas Ratio
Natural GasNatural Gas Crude (WTI)Crude (WTI) Crude / Gas RatioCrude / Gas Ratio
U.S. Dollars per MM BtuU.S. Dollars per MM Btu
Low cost natural gas (relative to crude) is no longer a viable long term source of energy and feedstock's for the North American ethylene market
Low cost natural gas (relative to crude) is Low cost natural gas (relative to crude) is no longer a viable long term source of no longer a viable long term source of energy and feedstock's for the North energy and feedstock's for the North American ethylene marketAmerican ethylene market
ForecastForecast
Global Assembly LineGlobal Assembly LineGrowth in Chemicals Demand Will Continue to Outpace That of The World Economies
Extremely Efficient Supply Chains Have Been Developed –Global Companies and WTO Very Supportive
Growth in Chemicals Demand Will Continue to Outpace That of The World Economies
Extremely Efficient Supply Chains Have Been Developed –Global Companies and WTO Very Supportive
Improving Standard of Living in China & India Have Significantly Increased Internal Consumption
Implies That Current Pace of Additions Could be Absorbed Fairly Quickly
(Good Investment Analysis)
Improving Standard of Living in China & India Have Significantly Increased Internal Consumption
Implies That Current Pace of Additions Could be Absorbed Fairly Quickly
(Good Investment Analysis)
Hydrocarbon
Value
Hydrocarbon
Value
Labor CostLabor Cost
Consumer Demand
Consumer Demand
Commodities to Converted Products to Retail Goods…Commodities to Converted Products to Retail Goods…
Basic Chemicals and Plastics Global Demand
Basic Chemicals and Plastics Global Demand
Emerging Economies have become this sector’s growth engine with no
sign of a global slowdown
Emerging Economies have become Emerging Economies have become this sectorthis sector’’s growth engine with no s growth engine with no
sign of a global slowdownsign of a global slowdown
00
100100
200200
300300
400400
500500
600600
700700
858585 868686 878787 888888 898989 909090 919191 929292 939393 949494 959595 969696 979797 989898 999999 000000 010101 020202 030303 040404 050505 060606 070707 080808 090909 101010
Million Metric TonsMillion Metric Tons
Basic Chemicals & Plastics DemandNorth America & West Europe Share
Basic Chemicals & Plastics DemandNorth America & West Europe Share
8585 8686 8787 8888 8989 9090 9191 9292 9393 9494 9595 9696 9797 9898 9999 0000 0101 0202 0303 0404 0505 0606 0707 0808 0909 1010
Percent of WorldPercent of World
2020
3030
4040
5050
6060
7070
8080
This slow pace of growth, coupled with a still robust consumer
products demand, has shifted production to “cost competitive”
regions
This slow pace of growth, coupled This slow pace of growth, coupled with a still robust consumer with a still robust consumer
products demand, has shifted products demand, has shifted production to production to ““cost competitivecost competitive””
regionsregions
9090
40% Share in
2010
40% Share in
2010
70% Share in
1985
70% Share in
1985
Global Basic Chemicals and PlasticsGlobal Basic Chemicals and PlasticsPercent New Capacity In Middle East & ChinaPercent New Capacity In Middle East & China
00
2020
4040
6060
8080“New Gulf” & China Capacity Represent Vast Majority of the Global Additions During The Remainder of this Decade –
Emphasis Shifts to the “New Gulf”
““New GulfNew Gulf”” & China Capacity & China Capacity Represent Vast Majority of the Represent Vast Majority of the Global Additions During The Global Additions During The Remainder of this Decade Remainder of this Decade ––
Emphasis Shifts to the Emphasis Shifts to the ““New GulfNew Gulf””
78% in 201078% in 201078% in 2010
8686 8888 9090 9292 9494 9696 9898 0000 0202 0404 0606 0808 1010
“New Gulf”““New GulfNew Gulf””
ChinaChina
What Drives Polymer Prices?What Drives Polymer Prices?What Drives Polymer Prices?
Cost / FeedstocksCost / FeedstocksRaw Material PricesRaw Material PricesOperating CostsOperating Costs
Supply/DemandSupply/DemandUtilization RatesUtilization RatesLoss of Available Capacity (outages)Loss of Available Capacity (outages)Inventory Trends (resin, finished goods, etc.)Inventory Trends (resin, finished goods, etc.)Exports / Imports Exports / Imports
Other DynamicsOther DynamicsPerception / Anticipation of New CapacityPerception / Anticipation of New CapacityDesire for Market ShareDesire for Market SharePrices of Competitive MaterialsPrices of Competitive MaterialsMarket Leadership Market Leadership Market Momentum Market Momentum Natural Disasters / Political TurmoilNatural Disasters / Political Turmoil
Wood
Aluminum
PET
Glass
PVC
Steel
PS
LL/LDPE
Paper
ABS
HDPE
Plastics Compete with Other Plastics & Traditional Materials…
Plastics Compete with Other Plastics & Traditional Materials…
PP
Finished Goods Flowing into the U.S.Finished Goods Flowing into the U.S.
00.51.01.52.02.53.03.54.04.55.0
Bags,
Boxes &
Closu
res
Plates
, Shee
ts & Foam
Tablew
are &
House
hold
Building M
ateria
ls
Other Plat
e & Shee
t
Tubes, P
ipes, H
oses,
Fittings
Self A
dhesive
Mate
rials
Floor & W
all C
overin
g
Monofilamen
t & Pro
files
Bath &
Lavato
ry
200320032004200420052005
Billion Dollars
Finished Goods Moving into EuropeFinished Goods Moving into Europe
00.51.01.52.02.53.03.54.0
Bags,
Boxes &
Closu
res
Plates
, Shee
ts & Foam
Tubes, P
ipes, H
oses,
Fittings
Tablew
are &
House
hold
Other Plat
e & Shee
t
Self A
dhesive
Mate
rials
Building M
ateria
lsBath
& Lav
atory
Floor & W
all C
overin
g
Monofilamen
t & Pro
files
200320032004200420052005
Billion Dollars
The Growing U.S. Plastics Trade DeficitThe Growing U.S. Plastics Trade Deficit
-3500
-3000
-2500
-2000
-1500
-1000
-500
0
500
1000
97 98 99 00 01 02 03 04 05China Rest of World
$ Millions
Source: ACC
Resin and Finished GoodsResin and Finished Goods
EthyleneEthylene
EthyleneEthylene
LDPELDPEHDPEHDPE
LLDPELLDPE
PVCPVCPolystyrene/ABSPolystyrene/ABS
PET/Ethylene GlycolPET/Ethylene Glycol
Ethylene impacts many products…Ethylene impacts many products…
Basic Ethylene Flow ChartBasic Ethylene Flow Chart
SteamSteamCrackerCracker EthyleneEthylene
Naphthas
Gas OilsRefinery
CrudeOil
F i e l dCondensates
Ethane
Propane
ButanesNaturalGas
GasSeparation
Unit
•Propylene
••ButadieneButadiene
••ButylenesButylenes•BTX BTX (pygas)
•HeavyAromatics
•Methane
•Hydrogen
•Fuel Oil
Feedstocks
Today’s Global Ethylene MarketToday’s Global Ethylene Market
107 Million Metric Tons in 2005107 Million Metric Tons in 2005
Demand by EndDemand by End--UseUse
EDCEDC12%12%
Ethylene Ethylene OxideOxide
13%13%
PEPEPE60%60%60%
OthersOthers8%8% EBZEBZ
7%7%
Production by FeedProduction by Feed
OthersOthers2%2%
ButaneButane4%4%
Gas OilGas Oil5%5%
PropanePropane8%8%EthaneEthaneEthane
28%28%28%
NaphthaNaphthaNaphtha53%53%53%
Middle East Ethylene CapacityMiddle East Ethylene CapacityMiddle East Ethylene Capacity
KSAKSA IranIran QatarQatar KuwaitKuwait UAEUAE OmanOman OtherOther
The staggering increase in ethylene capacity in the Region is well documented The staggering increase in ethylene capacity in the Region is weThe staggering increase in ethylene capacity in the Region is well documented ll documented
00
5,0005,000
10,00010,000
15,00015,000
20,00020,000
25,00025,000
30,00030,000
35,00035,000
40,00040,000
20002000 20012001 20022002 20032003 20042004 20052005 20062006 20072007 20082008 20092009 20102010 20112011 20122012
Thousand Metric TonsThousand Metric Tons
Iran Cracker StatusIran Cracker Status
EPC bids due June 06. Bids delayed
20131900Bandar AssaluyehOlefins 12
20141200Bandar AssaluyehOlefins 14
EPC bids to be re-offered2009320IlamOlefins 13 Ilam
Linde EPC cancelled. Scope changes?
20122 * 1200Bandar AssaluyehOlefins 11 Bakhtar
Mech complete 2007Feed plant end-2008
Q1 2009500Kharg IslandOlefins 5 Kharg
Utilities issue with Olefins 9 up ?
Q1/2 20071340Bandar AssaluyehOlefins 10 JAM
Most Likely to start on timeQ4 20061000Bandar AssaluyehOlefins 9 Arya Sasol
Mid 2010
Q4 2006
May 2005
Timing
EPC award to PIDEC in Aug 2005
Laleh LDPE next year ?
Upstream feed issue50-60% utilisation
Comments
1100Bandar ImamOlefins 8 Arvand
1100Bandar ImamOlefins 7 Marun
520Bandar ImamOlefin 6 Amir Kabir
EthyleneLocationUnit
Saudi Arabian Ethylene ProjectsSaudi Arabian Ethylene ProjectsSaudi Arabian Ethylene Projects
Projects complete at Yanpet, Kemya, & Jubail United
By mid 2007860Debottlenecks
Under Construction3Q 20081,200SHARQ (SABIC / Mitsubishi Consortium)
Under Construction2Q 20081,300Yansab (SABIC)
Under constructionFinancing Closed in June
3Q 20081,000Tasnee / Sahara(Tasnee, Zamil, Basell)
Under Construction4Q 20081,300PETRORabigh (Saudi Aramco / Sumitomo Chem)
Under Construction4Q 2007300Jubail ChevronPhillips
CommentsStart-upCapacity (KTA)
Project / Sponsors
EPC’s awardedFinancing Activities Underway
3Q 20091,350Saudi Kayan(PMD / SABIC)
~ 11,000 KTA New Capacity
SIPChem
National ChevronPhillips
Ras Tanura(Saudi Aramco / Dow)
1,200
1,400
1,000 2010
2011
2012
Feed Allocation Granted / IPO of Company in 4Q 06
Feed Allocated / Project Under Development
MOU Signed Scoping Underway
Other GCC Ethylene ProjectsOther GCC Ethylene ProjectsOther GCC Ethylene Projects
Ethane / Naphtha Cracker –Under Study
2012 - 14 ?900 – 1,000Qatar Petroleum / Honam
Study – EP Cracker20131,200-1,400Qatar Petroleum / Shell
Construction 2Q062Q 20091,300Ras Laffan Ethylene (CPChem/Total/Qatar P)
Firm Through 20104,450Total
Study – EP Cracker20111,200-1,400Qatar Petroleum / ExxonMobil
Significant Metathesis Unit Planned1Q 20101,400 Borouge II (Borealis / ADNOC)
CommentsStart-upCapacity (KTA)
Project / Sponsors
Development / Financing Plan2011900OPIC (Dow / Oman Oil)
Under Construction3Q 2008850TKOC (Dow / PIC Kuwait)
There is possibility for significant capacity beyond these projThere is possibility for significant capacity beyond these projects under studyects under study
Pinch Points in the Middle EastPinch Points in the Middle East• Materials
– Steel, Titanium, and Pricing
• Fabrication Shop Time Availability – Specialty equipment deliveries are very long– Normal materials like plate and pipe are also short
• People– Engineering & Project Management – Skilled construction crafts
• Logistics for everything !– Materials, vessels, and people all have to be brought in !
• Materials – Steel, Titanium, and Pricing
• Fabrication Shop Time Availability – Specialty equipment deliveries are very long– Normal materials like plate and pipe are also short
• People– Engineering & Project Management – Skilled construction crafts
• Logistics for everything !– Materials, vessels, and people all have to be brought in !
PolyethylenePolyethylene
Film & SheetFilm & Sheet50%50%
Injection MoldingInjection Molding13%13%
Pipe & ExtrusionPipe & Extrusion7%7%
Extrusion CoatingExtrusion Coating3%3%
RaffiaRaffia1%1%FiberFiber
1%1%RotomoldingRotomolding1%1%
Wire & CableWire & Cable2%2%
Blow MoldingBlow Molding12%12%
OtherOther10%10%
*Excluding Exports*Excluding Exports
WorldWorld2006 Total PE Consumption by End Use2006 Total PE Consumption by End Use
Consumption = 65.9 Million Metric TonsConsumption = 65.9 Million Metric Tons
PE Global Operating RatesPE Global Operating Rates
0
20
40
60
80
100
120
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 1550
60
70
80
90
100
110
Demand 4.8, 4.0* Capacity 5.2, 3.6* Operating Rate
Million Metric Tons Operating Rate, %
* % AAGR 2005-10, 2010-15
Top Global Polyethylene Producers/MarketersTop Global Polyethylene Producers/Marketers
2000
Capacity % Capacity-000- MT Share
ExxonMobil 5688 9.17Dow Chemical 4305 6.94Chevron Phillips 2740 4.42Equistar 2731 4.40Union Carbide 2459 3.97Basell 2370 3.82Borealis 2300 3.71ATOFINA 1861 3.00Polimeri Europa 1597 2.58BP Chemical 1570 2.53Total 27621 44.54
2010
Capacity % Capacity-000- MT Share
Dow Chemical 8060 8.33ExxonMobil 7105 7.34SinopecSinopec 6023 6.22SABICSABIC 5528 5.71Borealis 3861 3.99Chevron Phillips 3601 3.72PetroChinaPetroChina 3575 3.69Ineos 3011 3.11NPC - Iran 2775 2.87Lyondell 2593 2.68Total 46131 47.68
(Based on Estimate of Marketed Capacity)(Based on Estimate of Marketed Capacity)
World PolyethyleneWorld PolyethyleneNet Capacity AdditionsNet Capacity Additions
-1000
01000
20003000
40005000
60007000
8000
2005 2006 2007 2008 2009 2010
North America South AmericaWest Europe C. Europe/CIS & Baltic StatesMiddle East / Africa Asia / Pacific
Thousand Metric Tons
World Total PE Demand Growth By RegionWorld Total PE Demand Growth By Region
0 5 10 15 20 25 30Million Metric Tons
ISC
SEA
NEA
MDE
AFR
CIS
CEP
WEP
SAM
NAM
2005 2010 20157.5, 6.3*
5.4, 4.9*
7.8, 5.5*
5.1, 4.0*
6.2, 6.5*
4.5, 3.2*
6.7, 5.8*
2.6, 1.9*
4.2, 3.6*
3.2, 2.2*
* % AAGR 2005-10, 2010-15
World AAGR % 2005-2010 = 4.8World AAGR % 2010-2015 = 4.0
Middle East Exports PE to the WorldMiddle East Exports PE to the World
20002000 20052005 20102010 20152015
North America PolyethyleneNorth America PolyethyleneNameplate Capacity by Producer 2006Nameplate Capacity by Producer 2006
0
500
1000
1500
2000
2500
3000
3500
4000
ExxonMobil
DowLyo
ndell
Chevro
n Phillips
Nova C
hemica
lForm
osaIneo
sPEMEXWes
tlake
Eastm
an
Inperial
Oil Ltd.
Total Petr
o.Du Pont
Huntsman
Petromont
AT Plastic
sHoney
wellTico
na
LLDPELDPEHDPE
Thousand Metric Tons
Note: Chevron Phillips includes JV with Ineos
Further Consolidation Expected
U.S./Canada PE Demand by IndustryU.S./Canada PE Demand by Industry
% AAGR 2006-11
00 10001000 20002000 30003000 40004000 50005000 60006000 70007000
OtherOther
RotomoldingRotomolding
Wire & CableWire & Cable
Blow MoldingBlow Molding
Extrusion CoatingExtrusion Coating
Pipe & ExtrusionPipe & Extrusion
Injection MoldingInjection Molding
Film & SheetFilm & Sheet
2011201120062006
2.62.6
3.23.2
3.53.5
3.03.0
2.12.1
4.14.1
3.53.5
1.61.6
Thousand Metric Thousand Metric
2006 Total Demand = 22.1 Million Metric Tons2006 Total Demand = 22.1 Million Metric Tons
Demand 2006-2011Demand 2006-2011
Arbitrage Window Opened in Q4 2005Arbitrage Window Opened in Q4 2005
0
200400
600
800
10001200
1400
16001800
2000
2200
Jan-05 Mar-05 May-05 Jul-05 Sep-05 Nov-05 Jan-06 Mar-06 May-06 Jul-06
WEP HDPE BM, ContractNEA HDPE BM, Spot CFR China
Dollars Per Metric Ton
NAM HDPE BM, Contract
HurricanesHurricanes
U.S. PE Imports Proliferated in Q4 2005U.S. PE Imports Proliferated in Q4 2005
0
10
20
30
40
50
60
70
80
J F M A M J J A S O N D 06 F M A M
South Korea Singapore Taiwan Thailand ROW
Thousand Metric Tons
Is This a Blip or a Trend?
0
2
4
6
8
10
12
01 02 03 04 05 06 07 08 09 10 1170
75
80
85
90
95
100
Production- 0.2* Demand 3.7* Capacity 0.9* Operating Rate
Million Metric Tons Operating Rate, %
* %AAGR 2006-11
HDPE Supply/Demand BalanceHDPE Supply/Demand BalanceHDPE Supply/Demand BalanceNorth AmericaNorth AmericaNorth America
PolypropylenePolypropylene
Strong Relative PP Resin GrowthStrong Relative PP Resin GrowthStrong Relative PP Resin Growth
-5%
-3%
-1%
1%
3%
5%
7%
9%
11%
13%
15%
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
PP PE PS PVC
Propylene IssuesPropylene IssuesPropylene Issues
•• Generally a byGenerally a by--product of making ethylene product of making ethylene and gasolineand gasoline
•• Propylene use growing faster than ethylene Propylene use growing faster than ethylene use and gasoline consumptionuse and gasoline consumption
•• On purpose propylene more importantOn purpose propylene more important•• Supply sources vary from region to regionSupply sources vary from region to region
Other Technologies
Steam Cracker or Olefin Plant
Ethane Propane Other propylene consumers:
acrylonitrile, propylene oxide, acrylic acid, oxo-alcohols
PG & CG Propylene Markets
Propane to LPG
Cumene, Oligomers Isopropanol
FCC Unit
Alkylation
Unit
Isobutane
High Octane Alkylate Gasoline
Other Fuel Uses
Purification Splitter Unit
Refining IndustryRefining Industry
Chemical IndustryChemical Industry
Gas Oil
RG Propylene Market
PropyleneSupplyProfile
PropylenePropyleneSupplySupplyProfileProfile
Crude
UnitCrude Oil
Motor Gasoline
Motor Gasoline
Naphtha
Ethylene & Olefins
Polypropylene
Unit
Injection Molding, Fibers, Films
Propane Dehydro
Metathesis
Olefin Cracking
DCC
Gas-to-Olefins
Others
North America North America North America Future Propylene SupplyFuture Propylene SupplyFuture Propylene Supply
1212
1313
1414
1515
1616
1717
1818
1919
20012001 20022002 20032003 20042004 20052005 20062006 20072007 20082008 20092009 20102010
Volume (MM MT)Volume (MM MT)
Production Growth 2004Production Growth 2004--2010: 2.7% AAGR2010: 2.7% AAGR
Base Base SupplySupply
Steam Steam CrackersCrackers
FCC UnitsFCC Units
MetathesisMetathesis
WorldWorldWorld2006 Polypropylene Demand by End Use2006 Polypropylene Demand by End Use2006 Polypropylene Demand by End Use
Film & SheetFilm & Sheet22%22%
Injection MoldingInjection Molding36%36%Pipe & ProfilePipe & Profile
3%3%
Blow MoldingBlow Molding1%1%
FiberFiber16%16%
RaffiaRaffia14%14%
OtherOther8%8%
Demand = 42.6 Million Metric TonsDemand = 42.6 Million Metric Tons
U.S./Canada PP IndustryU.S./Canada PP IndustryDemand 2005-2010Demand 2005-2010
Data Source: APCData Source: APC% % AAGR, 05AAGR, 05--1010
00 1.01.0 2.02.0 3.03.0 4.04.0 5.05.0 6.06.0 7.07.0
OtherOther
Fiber & FilamentFiber & Filament
Film & SheetFilm & Sheet
Blow MoldingBlow Molding
Injection MoldingInjection Molding
20102010
20052005
Sales (Billion Pounds)Sales (Billion Pounds)
3.6% 3.6%
1.3% 1.3%
3.7% 3.7%
5.3% 5.3%
4.6% 4.6%
Total Growth Rate = 3.3%Total Growth Rate = 3.3%
Million Metric TonsMillion Metric Tons
Indian SCIndian SC
SE AsiaSE Asia
NE AsiaNE Asia
M EastM East
AfricaAfrica
CIS & Baltic StatesCIS & Baltic States
C EuropeC Europe
W EuropeW Europe
S AmericaS America
N AmericaN America
00 55 1010 1515 2020
20062006 2011201110.110.15.65.6
7.27.2
7.67.6
10.510.5
6.46.4
6.56.5
3.23.2
6.46.4
3.33.3 (AAGR %)(AAGR %)
2006 Total Demand = 42.6 Million Metric Tons2006 Total Demand = 42.6 Million Metric Tons2011 Total Demand = 55.8 Million Metric Tons2011 Total Demand = 55.8 Million Metric Tons
World Polypropylene Demand by RegionWorld Polypropylene Demand by RegionWorld Polypropylene Demand by Region
20002000CapacityCapacity ShareShare
CompanyCompany (000's MT)(000's MT) %%BasellBasell 63226322 17.7117.71SinopecSinopec 21852185 6.126.12BP ChemicalBP Chemical 19641964 5.505.50ATOFINAATOFINA 16801680 4.714.71Borealis Borealis 14351435 4.024.02ExxonMobilExxonMobil 11341134 3.183.18Reliance IndustriesReliance Industries 950950 2.662.66PetroChinaPetroChina 716716 2.422.42DSMDSM 810810 2.272.27Formosa PlasticsFormosa Plastics 800800 2.242.24TotalTotal 1814518145 50.8250.82
Total CapacityTotal Capacity 3570135701
20102010CapacityCapacity ShareShare
CompanyCompany (000's MT)(000's MT) %%BasellBasell 81528152 13.7813.78SinopecSinopec 44884488 7.597.59SABICSABICSABIC 36503650 6.176.17Reliance Industries/IPCLReliance Industries/IPCLReliance Industries/IPCL 27802780 4.704.70Total PCTotal PC 26152615 4.424.42IneosIneos 25352535 4.294.29PetroChinaPetroChina 23502350 3.973.97BorealisBorealis 22402240 3.793.79ExxonMobilExxonMobil 21252125 3.593.59Formosa PlasticsFormosa Plastics 18351835 3.103.10TotalTotal 3277032770 55.3955.39
Total CapacityTotal Capacity 5916359163
Global Change in PolypropyleneProducers/Marketers
Global Change in PolypropyleneProducers/Marketers
Announced Global PP AdditionsAnnounced Global PP AdditionsAnnounced Global PP Additions
00
10001000
20002000
30003000
40004000
50005000
60006000
20052005 20062006 20072007 20082008 20092009 20102010
N. AmericaN. America S. AmericaS. AmericaW. EuropeW. Europe C. Europe/CIS & Baltic StatesC. Europe/CIS & Baltic StatesAfrica/M. EastAfrica/M. East Asia/PacificAsia/Pacific
Thousand Metric TonsThousand Metric Tons
00
1010
2020
3030
4040
5050
6060
7070
0101 0202 0303 0404 0505 0606 0707 0808 0909 1010 11116565
7070
7575
8080
8585
9090
9595
100100
Demand 5.5*Demand 5.5* Capacity 6.6*Capacity 6.6* Operating RateOperating Rate
Million Metric TonsMillion Metric Tons Operating Rate, %Operating Rate, %
WorldWorldWorldPolypropylene Supply/Demand BalancePolypropylene Supply/Demand BalancePolypropylene Supply/Demand Balance
* %AAGR 2006* %AAGR 2006--1111
North America PolypropyleneNorth America PolypropyleneCapacity by Producer/Marketer - Year End 2006Capacity by Producer/Marketer - Year End 2006
00200200400400600600800800
100010001200120014001400160016001800180020002000
Basell
Basell
Ineos
Ineos
ExxonMobil
ExxonMobil
Sunoco
SunocoTotal
PC
Total PC
FPC USA
FPC USA
Dow Dow
Huntsman
Huntsman
Phillips
Phillips S
umika
SumikaPinnac
le
Pinnacle
Indelpro
Indelpro
Lyondell
Lyondell
Thousand Metric TonsThousand Metric Tons
Note: ConocoPhillips included in Note: ConocoPhillips included in BasellBasell, Epsilon Products in Sunoco, Epsilon Products in Sunoco
00
22
44
66
88
1010
1212
0101 0202 0303 0404 0505 0606 0707 0808 0909 1010 11117070
7575
8080
8585
9090
9595
100100
Production 1.7*Production 1.7* Demand 2.8*Demand 2.8* Capacity 1.6*Capacity 1.6* Operating RateOperating Rate
Polypropylene Supply/Demand BalancePolypropylene Supply/Demand BalancePolypropylene Supply/Demand BalanceMillion Metric TonsMillion Metric Tons
North AmericaNorth AmericaNorth America
Operating Rate, %Operating Rate, %
* %AAGR 2006* %AAGR 2006--1111
PP - Shifting Trade PatternsPP - Shifting Trade Patterns
2000 2005 2010
Looking Ahead…Issues for Producers
Looking Ahead…Issues for Producers
• WEP & NAM increase imports of finished goods & resin.
• Prices peak during 2005 – 2007, bottom out in 2010 – 2011 but remain above historic averages.
• Regional price deltas will narrow with arbitrage.
• Continued cost pressure from imported finished goods (China, India, Viet Nam, Middle East).
• Further industry rationalization & consolidation is expected.
• Highest operating rates for producers will be in Middle East.
• Optimized asset & grade slate management required in WEP and NAM.
• Environmental initiatives may impact regulations, technology and consumer preferences.
Looking Ahead…Issues for Fabricators
Looking Ahead…Issues for Fabricators
• Where is the most economical region to produce and ship my finished product?
• Which products pack & ship more efficiently in a sea-going container?
• Security of supply & cost drive continued imports of commodity finished goods & resins.
• Continued cost pressure from imported finished goods (China, India, Viet Nam, Middle East).
• Further converter industry consolidation is expected.
• Environmental initiatives may impact regulations and consumer preferences.
What are the Retailers Doing…?What are the Retailers Doing…?• Sourcing globally • Using indices on contract
purchases• Implementing recycling &
waste reduction strategies• Considering raw material
procurement• Learning more about upstream
dynamics• Listening & reacting to
consumer preferences• Resisting higher prices
Winners & LosersWinners & Losers• Global Footprint• Integrated Economics• Own Technology• Logistics Capability• Optimized Rates• Differentiation• Nimble Organization• Relationship (last look)• Industry Leader
• Asset Isolation• Commodity
Applications• Limited Flexibility• Vulnerable to Imports• Limited Plant Utilization• Local Player Without
Differentiation
