MEG & Paraxylene to Polyester - An Integrated

Approach

Madhu Suthanan

Business Analyst – Executive Director's Office

Reliance Industries Limited

31

8th China International Polyester & Intermediates F orum

Madhu SuthananReliance Industries Limited

8th China International Polyester and Intermediate Forum Shanghai

MEG & Paraxylene to Polyester

An Integrated Approach

Contents

2

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8th China International Polyester & Intermediates F orum

Polyester Growth

Robust economy augurs well for polyester growth

GDP Growth (%)

Polyester Growth (%)

Source: IMF

Polyester Growth = 2.3*GDP Growth

-4

0

4

8

12

16

20

-1 0 1 2 3 4 5 6

Polyester Dominance to Continue

Versatile properties aiding polyester growth

Polyester to cater to 70% of incremental demand 4

Fibre Consumption

Polyester

Natural

Others

0%

20%

40%

60%

80%

100%

1990 1995 2000 2005 2010 2015 2020

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8th China International Polyester & Intermediates F orum

Global Trade: Volatility More Intense than GDP

Cautious approach during uncertain times5

% Change

Source: IMF, WTO

6

Asia

Leadership to Stay

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8th China International Polyester & Intermediates F orum

Asia: Clothiers to the World

Economical raw materials and labour cost aids growth 7

N AmericaConsumption 11 MMT5 Yr Growth 3%

L AmericaConsumption 4 MMT5 Yr Growth 2%

E EuropeConsumption 5 MMT5 Yr Growth 6%

W EuropeConsumption 10 MMT5 Yr Growth 1%

ChinaConsumption 25 MMT5 Yr Growth 3%

IndiaConsumption6 MMT5 Yr Growth 6%

Africa/M EastConsumption 5 MMT5 Yr Growth 5%

Other AsiaConsumption 10 MMT5 Yr Growth 1%

Import

Export

7 MMT

1 MMT

5 MMT

3 MMT

3 MMT

2 MMT

15 MMT

2 MMT

Fibre Consumption

Textile Demand aiding Polyester Growth

Asia constitutes 80% of polyester productionIndia and China to drive growth 8

N AmericaProduction 5 MMT5 Yr Growth 3%

L AmericaProduction 1 MMT5 Yr Growth 16%

E EuropeProduction 0.5 MMT5 Yr Growth 16%

W EuropeProduction 3 MMT5 Yr Growth 4%

ChinaProduction 25 MMT5 Yr Growth 7%

IndiaProduction 4 MMT5 Yr Growth 12%

Africa/M EastProduction 2 MMT5 Yr Growth 10%

Other AsiaProduction 11 MMT5 Yr Growth 3%

Polyester Production

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8th China International Polyester & Intermediates F orum

PTA: Asia Centric Growth

Proximity to consumption centre – Deciding factor

N AmericaCapacity 6 MMT

5 Yr Growth 4%

L AmericaCapacity 0 MMT

5 Yr Growth High

E EuropeCapacity 0.3 MMT

5 Yr Growth 19%

W EuropeCapacity 3 MMT

5 Yr Growth 9%

ChinaCapacity 16 MMT

5 Yr Growth 19%India

Capacity 4 MMT5 Yr Growth 11%

Africa/M EastCapacity 1 MMT

5 Yr Growth 14%Other Asia

Capacity 19 MMT5 Yr Growth 2%

8 MMT

7 MMT0 MMT

1 MMT

1 MMT

0.1 MMT

Import

Export

1 MMT

1 MMT

PTA Capacity

MEG: Feedstock Availability Vital Factor

Emergence of new sources – Changing dynamics?

N AmericaCapacity 5 MMT

5 Yr Growth -2%

L AmericaCapacity 0.4 MMT

5 Yr Growth 0%

E EuropeCapacity 0.5 MMT

5 Yr Growth 0%W EuropeCapacity 2 MMT

5 Yr Growth -1%China

Capacity 4 MMT5 Yr Growth 15%

IndiaCapacity 1 MMT

5 Yr Growth 11%

Africa/M EastCapacity 9 MMT

5 Yr Growth 2%Other Asia

Capacity 7 MMT5 Yr Growth 0%

1 MMT

6 MMT

0.4 MM

T

0.2 MMT

Import

Export

1 MMT

0 MMT

1 MMT

7 MMT

MEG Capacity

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8th China International Polyester & Intermediates F orum

PX: Asia Major Growth Centre

China to remain net importer11

N AmericaCapacity 5 MMT

5 Yr Growth 0%

L AmericaCapacity 0.3 MMT

5 Yr Growth 0%

E EuropeCapacity 0.5 MMT

5 Yr Growth 13%

W EuropeCapacity 2 MMT

5 Yr Growth 5%

ChinaCapacity 8 MMT

5 Yr Growth 7%

IndiaCapacity 2 MMT

5 Yr Growth 21%

Africa/M EastCapacity 4 MMT

5 Yr Growth 8%Other Asia

Capacity 15 MMT5 Yr Growth 6%

Import

Export

0.1 MMT

0 MMT

1 MMT0.2 MMT

2 MMT

3 MMT

0.1 MMT

0 MMT

PX Capacity

12

Integrated

Business Model

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8th China International Polyester & Intermediates F orum

Volatile Standalone Delta

High vulnerability leads to uncertain profits13

PX/Naphtha PTA/PX

MEG/Naphtha PSF/PTA-MEG

US$/MT

US$/MT

US$/MT

US$/MT

Coefficient of Variation 31%

Coefficient of Variation 36%

Coefficient of Variation 39%

Coefficient of Variation 36%

Coefficient of Variation measures fluctuation of delta

0

250

500

750

1000

1250

Q1 '00

Q3 '00

Q1 '01

Q3 '01

Q1 '02

Q3 '02

Q1 '03

Q3 '03

Q1 '04

Q3 '04

Q1 '05

Q3 '05

Q1 '06

Q3 '06

Q1 '07

Q3 '07

Q1 '08

Q3 '08

Q1 '09

Q3 '09

Q1 '10

Q3 '10

Q1 '11

Q3 '11

PX delta for PES PTA delta for PES MEG delta for PES

Delta (PSF) Avg Chain Delta

Integrated Chain Delta

Logistic advantage, Lower fixed cost, Lower conversion & packing costs 14

US$/MT

Coefficient of Variation 19%

Avg Delta: $732/MT

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8th China International Polyester & Intermediates F orum

Polyester & Feedstock Prices

Integration captures maximum value addition

US$/MT

Feedstock: Going Green

Reliability & commercial feasibility – Deciding fact or

Bio – based Paraxylene

(PX)

Bio – based Monoethylene Glycol

(MEG)

Bio – based Polyester

Bio – based Terepthalic Acid

(PTA)

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8th China International Polyester & Intermediates F orum

Surplus Capacity to Impact Margins

MEG capacities to normalise in short termPTA capacities to be impacted by PX shortage

PX PTAMMT MMT

MMT

10 Yr Average

10 Yr Average

10 Yr Average

MEG

0

2

4

6

8

10

2010 2011 2012 2013 2014 20150

4

8

12

16

20

2010 2011 2012 2013 2014 2015

0

2

4

6

8

2010 2011 2012 2013 2014 2015

18

Indian Polyester

Markets Fortifying

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8th China International Polyester & Intermediates F orum

0

500

1000

1500

2000

2500

3000

2010 2011 2012 2013 2014 2015

0

2000

4000

6000

8000

2010 2011 2012 2013 2014 2015

0

1300

2600

3900

5200

6500

2010 2011 2012 2013 2014 2015

India Feedstock Scenario

New capacity envisaged in PX, PTA, MEG

KT

KT

KT

Demand

Capacity

Demand

Capacity

Demand

Capacity

PX PTA

MEG

India- Backward Integration

Integration forms keystone of growth for Reliance

Degree of Backward Integration

Reliance Degree of Integration

Polyester Capacity

5.5 MMT

PTA 32% 100%

MEG 32% 100%

PX 68% 100%

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8th China International Polyester & Intermediates F orum

Reliance Story

Competitive strength lies in integration

Polyester

FibreIntermediates

Petrochemicals

Crude Oil Refining

Exploration & Production

Retail

1980s

1990s

1990s

2000s

Post 2000

2007

Reliance Polyester Story

Early foresight gives advantage

PSF Facility at Patalganga1986

1982 First POY Plant at Patalganga

2000Acquired Raymond Synthetics/Central India Polyester

1999Acquired Orissa Synthetics

2001Acquired Jagatjit Cotton & Textile Mills

1993 Acquired Terene Fibres

1998Polyester Facility at Hazira, Acquired IPL

2003

2006

CP at Hazira (POY / PSF)Reinvestments

2007Acquired Hualon,

Malaysia

PX 1988

PTA

PTA, MEG

PX

Polyester Growth

Feedstock Integration

2002MEGAcquired Indian

Petrochemicals

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8th China International Polyester & Intermediates F orum

Reliance Expansions

RIL continues its growth in the integrated approach

PX: 1.8 MMT

PTA: 2.3 MMT

MEG: 0.7 MMT

PFY: 0.4 MMT

PTY: 0.14 MMT

PSF: 0.3 MMT

PET: 0.65 MMT

Reliance Vision: Pillars of Success

Growth is Life24

“To continuously Grow

on a sustainable basis and be

the Largest, the most Innovative,

and the most Admired

Polyester Producer in the world”

Captive

Availability of

PX , PTA & MEG

Cost Leadership

Green Field

Expansions /

Acquisition

Market Leadership

Best Practices

Six Sigma,

ISO 9001, 14000

Global Acceptance

R&D

Product / Technology

Leadership

Innovation Leadership

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8th China International Polyester & Intermediates F orum

Summary

• Versatility in applications accelerates polyester d emand

• Asia to be center of growth for polyester chain

• Feedstock overcapacity to impact margins and operat ions

• Integrated operations insulates profitability shock s

• Integrated capacity addition across polyester chain will

continue to be the growth model for Reliance