Fibres
The Impact of Oil Prices on Fibers
IFAI Outlook Meeting – May 2015
Alasdair Carmichael – PCI Fibres864 583 6868
Fibres
Daily Oil Prices – WTI $/Barrel
40
50
60
70
80
90
100
110
Jan 2014 May 2015
$107.17 - 6/23
OPEC Meeting
Yemen action 3/25
$42.53 - 3/18Recovery??
Fibres
Oil production growth in 2014 in the US was the largest in over 100 years
US Oil Production Annual Change (million barrels/day)
Fibres
West Texas (WTI) vs Brent Oil ($/barrel)
As WTI cannot be exported it is not so relevant to Polyester raw materials as Asia drives prices and Brent oil is a better indication of Asian oil prices.
020406080
100120140160
WTI Brent
Fibres
" A man who would pay money for an oil price forecast is a man with too much money."
- Dr. Phil Leighton, Jacobs Consulting
The price of oil is fundamentally unstable.
Sage Advice on Oil Prices
EIA is forecasting US oil production will be down 57,000 barrels a day by May on a total of 9 million + /day. This will help stabilize prices and lead to a gradual increase which will bring idled wells back into production as higher prices are reached. Tight oil wells can be easily stopped and started.
Global oil production = 93.6 million barrels/day (12 million tons/day)
Fibres
EIA Short Term Oil Forecast – WTI $/barrel
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50
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100
110
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
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Q4
Q1
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Q4
2011 2012 2013 2014 2015 2016
Fibres
PCI PET Packaging, Resin &Recycling Ltd PCI Films Consulting LtdPCI Fibres & PCI Nylon
Xylenes
Paraxylene Ethylene Glycol
PTA MEG
PolyesterPolymer
PolyesterFiber
Ethylene
PCI Xylenes & Polyesters Ltd
Naphtha
Fibres
0
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800
0
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2013 Jan Jul 2014 Jan Jul 2015 Jan
Delta RHS Oil - WTI US Naphtha
Naphtha is the starting point for many Petrochemicals
Fibres
Main Polyester Raw Material Route ($/ton)
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2013 Jan Jul 2014 Jan Jul 2015 Jan
Oil - WTI Naphtha PX PTA
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Daily China Spot Prices for Polyester Raw Materials $/ton
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Jan 6 2014 5-May
Oil PX PTA MEG
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The average price disadvantage in US against Asia = $352/ton or 16c/lb
Polyester Raw Materials Prices, Asia vs USA $/ton
01002003004005006007008009001000
0200400600800
100012001400160018002000
2013 Jan Jul 2014 Jan Jul 2015 Jan
Delta - RHS Asia PTA/MEG US PTA/MEG
Fibres
USA Raw Material Price Change for Major Synthetic Fibers + Cotton
$/ton
800100012001400160018002000220024002600
Jan-14 Apr-14 July-14 Oct-14 Jan-15
PTA/MEG Capro Propylene Cotton
Jan 14 – Mar 15WTI Oil - 46%
PTA/MEG - 29%Capro – 39%
Propylene - 34%Cotton – 29%
Fibres
-15%
-10%
-5%
0%
5%
10%
15%
20%
PTA/MEG Capro Propylene Oil
But, Things Start to Change in April
March 2015 – April 2015 % Change (US prices) Daily Asian PriceApril 1 - April 30WTI Oil + 25%
($47.17 - $59.03)
PTA/MEG + 23%($833 - $1026)
Price increases announced in Polyester fibers & resin/polymer
Fibres
0
20
40
60
80
100
120
140
1980 1990 2000 2010 2020 2030
CellulosicsPolypropPolyesterNylonAcrylicCottonWool
Source: PCI Fibres GB14
Total Fiber Demand (million tons)
CAGR %1980 – 2015
Total Fiber = 3.17%Polyester = 6.59%Total Fiber excl.
Polyester = 1.44%Nylon = 0.76%
Fibres
-4
-2
0
2
4
6
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10
12
14
Pfilament Pstaple Cotton Cellulosics Nylon PP Acrylic Wool
million tonnes
Source: PCI Fibres Demand Model
Change in Global Mill Consumption – 2007 : 2014, Winners & Losers
Fibres
0
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150
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250
2011 2012 2013 2014
ImportDomestic
Domestic39%
Import61%
Polyester Industrial US Domestic Consumption (000 tons)
Closure of Moncure in Q4 2014 starts to show in increased imports for full year
To Feb 2015
Impact of closure becomes clearer. Imports in 2013 were 44% of total, now 61%.
To 2/15 imports increased by 5.1ktons over 2/14, Chinese imports increased by 4.5k tons.
Fibres
North American Total Auto Build (millions)
02468
101214161820
1951 1961 1971 1981 1991 2001 2011
TruckCar
Total Auto production:
2009 = 8.67m2014 = 16.97m
Fibres
• In 2 years Mexico has announced or started up $11 billion of new automotive investment.
• Mexico will be the 7th largest vehicle producer in the world in 2015.
• Mexico is the 4th largest exporter of vehicles (Japan, Germany, S.Korea, Mexico)
• In last 20 months Audi, Kia, Daimler/Nissan and BMW have all announced new assembly plants each of more than $1 billion.
• 12/14 GM investing $3.6 billion at existing plants to double capacity in Mexico
• 03/15 VW announces $1 billion expansion at Puebla plant - Tiguan
• Mexico has excellent free trade agreements – EU, NAFTA, S.America, 40 countries + TPP Asia Pacific expected. Easy access to Atlantic and Pacific ports. Competitive labor costs, but expensive energy.
North American Auto Industry Booming
• BMW investing a further $1 billion in Spartanburg making it the largest BMW plant in the world. 75% of production for export. Total Investment $7.5 billion
• US auto exports broke record for 4th consecutive year in 2014. 2010 = 1.3 million light vehicles, 2014 = 2.1 million ($159 billion)
• Volvo announce $500m plant in S.C. 4/2015
Why is Auto Build important to Polyester & Nylon
Fibres
Synthetic Fibers into N. American Auto Build (lbs/vehicle)
01234567
PET FilamentPET StaplePA Filament
Total Polyester Fiber used in LCV Auto Build 2014 = 450 mm lbswith an estimated 150 mm lbs from rPET
Total Nylon Fiber used in NA LCV Auto Build 2014 = 200 mm lbs
38.2 lbs/vehicle
Fibres
02468
101214161820
1969 1974 1979 1984 1989 1994 1999 2004 2009 2014
Total US Housing
Starts & Sales
Total N.A. Auto Build
Auto & Housing Recovery from Recession (million units)
Fibres
Nylon 66 impacted by Invista Force Majeure Early April 2015
Plant issue at Victoria TX resulting in Force Majeure. No official news yet of the severity of the cut back in deliveries of the expected duration. Key products impacted by FM are Adiponitrile(ADN), Hexamethylene Diamine (HMD) and Nylon 66 Polymer.
Nylon – Current Issues
Fibres
PCI PET Packaging, Resin &Recycling Ltd PCI Films Consulting LtdPCI Fibres & PCI Nylon PCI Films Consulting Ltd
Nylon
Caprolactam
ButadieneBenzene Propylene
Cyclohexane Adiponitrile
Adipic Acid
HMDA
N6 polymer N66 polymer
Acrylonitrile
PCI Xylenes & Polyesters Ltd
Fibres
Nylon 66 impacted by Invista Force Majeure Early April 2015
Plant issue at Victoria TX resulting in Force Majeure. No official news yet of the severity of the cut back in deliveries of the expected duration. Key products impacted by FM are Adiponitrile(ADN), Hexamethylene Diamine (HMD) and Nylon 66 Polymer.
ADN is particularly critical as there are only 4 major plants in the world that supply the world’s needs for Nylon 66:• Invista Victoria TX – 403,000 tons• Invista Orange TX – 360,000 tons• Ascend Decatur AL – 455,000 tons• Butachimie France – 520,000 tons (Rhodia/Invista J/V)
Nylon – Current Issues
Fibres
Global PA Demand by End-Use: PA6 vs PA66
Global PA6 Consumption – by Application Global PA66 Consumption – by Application
0
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201420102005200019951990
ktes/yr
Textile FilamentIndustrial FilamentCarpet FilamentStaple FibreEngineering PlasticsFilm
0200400600800
100012001400160018002000220024002600
201420102005200019951990
ktes/yr
Source: PCI Nylon
Non Fiber
Fiber
Fibres
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1000
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5000
1990
1992
1994
1996
1998
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2004
2006
2008
2010
2012
2014
2016
2018
2020
Nylon 66Nylon 6
Total Nylon Fiber Production (000 tons)
2015 Polyester Production = 48.7 m tons; Nylon = 4.2 m tons
Fibres
-
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1990 1995 2000 2005 2010 2015 2020
J K TChinaIndiaSouth AsiaTur/Afr/MEEuropeL AmericaN America
Nylon Industrial Filament Production by Region (000 tons)
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100
2000 2005 2010 2015 2012
N6 N66
Share by Polymer Type
N66 makes slight gains – air bags, cap ply
Fibres
What do all these have in Common?
Fibres
Source: Composites Forecasting & Consulting
Fibres
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2011 2015 2020
OthersSABICHyosungKemrockAKSACytecHexcelChineseFormosa PlasticsSGLMitsubishi RayonZoltekToho TenaxToray
Note: 2020 capacity forecasts vary from 170,000 tons to 200,000 tons
Global Capacity Estimates for Carbon Fiber (000 tons)
Fibres
Toray acquire Zoltek in 2014 - $584 million Toray announce $1 bn investment in SC. 65% spend by 2017 – precursor, fiber & prepreg
Toray adding 5th prepreg line in Washington State
Toray sign 10 year deal with Boeing for 777X & 787 estimated at $8.6 bn sales
Toray start new precursor plant in France in 2014
Mitsubishi doubling CF capacity to 4,000 tons in Sacramento CA in 2016
SGL/BMW doubled CF capacity to 6,000 tons in WA in 2014; adding a further 3,000 tons started. $300m
invested
Cytec doubling CF capacity by adding 3,000 ton plant in SC – start up 2016
Hexcel building new plant in France – start up 2017. $250 million investment
Hyosung invest $230m for 2,000 tons in 2013, plan to invest further $800m to 17,000 tons by 2020
Recent Carbon Fiber Activity
Toray doubling large tow carbon fiber capacity in Mexico to 5,000 tons – May 2015
Fibres
Source: Toho Tenax (Division of Teijin)
Production Process for Carbon Fiber
Fibres
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2012 2014 2016 2018 2020 2022
Industrial
Consumer
Aerospace
Global End Use Growth in Carbon Fiber (000 tons)
Source: Composites Forecasting & Consulting
IndustrialAutomotiveEnergy (wind, gas & oil, storage, tidal)General engineeringMedicalTooling
ConsumerSports (golf, fishing, tennis, skis, bikes etc)MarineOthers
AerospaceAircraft (wings, bodies, engines)MilitarySpace launchMunitionsOthers
Fibres
Fiber Industry Status
Market is generally strong – Carpet has been weakest element.
Apparel business very good – mainly via CAFTA/NAFTA.
Automotive excellent – Domestic origin preferred.
Closure of Performance Fibers Moncure plant cuts US capacity for High Tenacity by 36%
Non Woven volumes continue to grow.
Polyester producers in filament & staple running full, Nylon not as strong.
Short term forecast sees polyester prices increasing due to raw materials and full utilization.
Mid term: as oil increases synthetic fibers will increase, we expect oil to plateau to mid year and then increase into Q4.
Nylon 66 Invista Force Majeure coming to a conclusion without too much disruption in the market.
Fibres
IFAI Outlook Meeting – May 2015
THANKS&
Questions??
Alasdair Carmichael – PCI Fibres864 583 6868