60
Powered by Data, Driven by Insight Survival and profit in today’s chaotic petrochemicals markets ICIS pre-seminar at EPCA 2016, Budapest
Powered by Data Driven by Insight
Survival and profit in todayrsquos chaotic petrochemicals markets
ICIS pre-seminar at EPCA 2016 Budapest
Powered by Data Driven by Insight
Withstand market volatility with deep insight and tools to help you plan
Pricing reports Benchmark prices (spot or contract) including market commentaries on the latest deals transactions and price drivers
Real-time News24-hour global coverage of chemicals news including updates on plant capacities output and shutdowns keeping you informed of market developments as they happen
Price forecastsMonthly forecasts for selected commodities showing a 12-month rolling price forecast trade balances and market sentiment
Supply and Demand Database An end-to-end perspective across the global petrochemical and re nery supply chain Data includes import and export volumes consumption plant capacities and production ndash from 1978 up to 2030 ndash by product country and region
Scenario Study Demand ndash The New Direction for Pro t Special report addressing critical things to know to survive and prosper in todayrsquos chaotic petrochemical markets
Consulting Service Tailored solutions based on your unique business needs ndash from research and due diligence to investment analysis and portfolio optimisation
Navigate through price uncertainty with ICIS pricing data and market intelligence
ICIS APIC Booklet Adsindd 1 11516 337 pm
Powered by Data Driven by Insight
Withstand market volatility with deep insight and tools to help you plan
Pricing reports Benchmark prices (spot or contract) including market commentaries on the latest deals transactions and price drivers
Real-time News24-hour global coverage of chemicals news including updates on plant capacities output and shutdowns keeping you informed of market developments as they happen
Price forecastsMonthly forecasts for selected commodities showing a 12-month rolling price forecast trade balances and market sentiment
Supply and Demand Database An end-to-end perspective across the global petrochemical and re nery supply chain Data includes import and export volumes consumption plant capacities and production ndash from 1978 up to 2030 ndash by product country and region
Scenario Study Demand ndash The New Direction for Pro t Special report addressing critical things to know to survive and prosper in todayrsquos chaotic petrochemical markets
Consulting Service Tailored solutions based on your unique business needs ndash from research and due diligence to investment analysis and portfolio optimisation
Navigate through price uncertainty with ICIS pricing data and market intelligence
ICIS APIC Booklet Adsindd 1 11516 337 pm
Powered by Data Driven by Insight
Withstand market volatility with deep insight and tools to help you plan
Pricing reports Benchmark prices (spot or contract) including market commentaries on the latest deals transactions and price drivers
Real-time News24-hour global coverage of chemicals news including updates on plant capacities output and shutdowns keeping you informed of market developments as they happen
Price forecastsMonthly forecasts for selected commodities showing a 12-month rolling price forecast trade balances and market sentiment
Supply and Demand Database An end-to-end perspective across the global petrochemical and re nery supply chain Data includes import and export volumes consumption plant capacities and production ndash from 1978 up to 2030 ndash by product country and region
Scenario Study Demand ndash The New Direction for Pro t Special report addressing critical things to know to survive and prosper in todayrsquos chaotic petrochemical markets
Consulting Service Tailored solutions based on your unique business needs ndash from research and due diligence to investment analysis and portfolio optimisation
Navigate through price uncertainty with ICIS pricing data and market intelligence
ICIS APIC Booklet Adsindd 1 11516 337 pm
Enquire about our products and services
Energy Refining and the Implications
for PetrochemicalsChallenging the
ldquoComfortable Middlerdquo Scenario
Stefano ZehnderICIS Senior Consultant for
Global Refining amp Petrochemical Feedstocks
wwwiciscom 3
Energy
Petrochemicals amp the Emerging Markets
Refining amp Feedstocks
Agenda
wwwiciscom 4Copyright copy 2016 ICIS
Energy
Global energy demand is growing but not very fasthellip
Coal29
Oil31
Gas21
Non Fossil19
2015
07
09
19
22
13
00 05 10 15 20 25
COAL
OIL
NATURAL GAS
NON FOSSIL
TOTAL
Energy Demand AAGR 2015-2025
Source ICIS Supply and Demand Database
wwwiciscom 5Copyright copy 2016 ICIS
Energy Efficiency and lower carbon intensity challenge the ldquoComfortable Middlerdquo scenario
Peak Coal Approaching Peak Oil not yet but growth is declininghellip
1219
302
241
339
337 30148
262
304 685
Global Incremental Energy Demand (Millions TOE)
Coal
CoalOil
Oil
Gas
Gas
Non Fossil
Non Fossil
2015 2020 2025Source ICIS Supply and Demand Database
wwwiciscom 6Copyright copy 2016 ICIS
Energy continuing over-investment in China
China growth shrinkshellipcoal moves to surplus
1219
118 37438
626 9 2
112
584684
Global Incremental Energy Demand (Millions TOE)
North
AmericaEurope
China
Rest Of
World
2015 2020 2025
North
America
Europe
China
Rest Of
World
Source ICIS Supply and Demand Database
Supply and Demand DatabaseSingle searchable source of historical data on
global petrochemical and energy markets
Historical and forecast data (1978-2030)
Over 100 petrochemical products
Over 12000 re nery units
Over 18500 petrochemical plants
Import export and consumption volumes
Plant capacity production and operating status
Upcoming plants including speculative and announced projects
Data breakdown by country region product or product family
GDP population and consumer price index by country
More than just data the ICIS Supply and Demand Database is a powerful analytics tool which gives end-to-end perspectives across the global petrochemical supply chain including re neries Data is derived by ICISrsquos team of Consultants using a lsquobottom-uprsquo approach ndash reconciling demand with supply production local capacity and net trade Forecasts are validated against economic indicators such as GDP and per capita consumption
Request a one-to-one demo now enquiryiciscomwwwiciscomsupplydemanddata
ICIS APIC Booklet Adsindd 4 11516 306 pm
Supply and Demand DatabaseSingle searchable source of historical data on
global petrochemical and energy markets
Historical and forecast data (1978-2030)
Over 100 petrochemical products
Over 12000 re nery units
Over 18500 petrochemical plants
Import export and consumption volumes
Plant capacity production and operating status
Upcoming plants including speculative and announced projects
Data breakdown by country region product or product family
GDP population and consumer price index by country
More than just data the ICIS Supply and Demand Database is a powerful analytics tool which gives end-to-end perspectives across the global petrochemical supply chain including re neries Data is derived by ICISrsquos team of Consultants using a lsquobottom-uprsquo approach ndash reconciling demand with supply production local capacity and net trade Forecasts are validated against economic indicators such as GDP and per capita consumption
Request a one-to-one demo now enquiryiciscomwwwiciscomsupplydemanddata
ICIS APIC Booklet Adsindd 4 11516 306 pm
Supply and Demand DatabaseSingle searchable source of historical data on
global petrochemical and energy markets
Historical and forecast data (1978-2030)
Over 100 petrochemical products
Over 12000 re nery units
Over 18500 petrochemical plants
Import export and consumption volumes
Plant capacity production and operating status
Upcoming plants including speculative and announced projects
Data breakdown by country region product or product family
GDP population and consumer price index by country
More than just data the ICIS Supply and Demand Database is a powerful analytics tool which gives end-to-end perspectives across the global petrochemical supply chain including re neries Data is derived by ICISrsquos team of Consultants using a lsquobottom-uprsquo approach ndash reconciling demand with supply production local capacity and net trade Forecasts are validated against economic indicators such as GDP and per capita consumption
Request a one-to-one demo now enquiryiciscomwwwiciscomsupplydemanddata
ICIS APIC Booklet Adsindd 4 11516 306 pm
Click here to request a free demo
Refining amp Feedstocks
wwwiciscom 8Copyright copy 2016 ICIS
Chinarsquos over-investment extends to RefiningGas Oil stagnation and new Refineries a surplus of Transport Fuels
But net imports of petrochemical feedstockshellip
0
2
4
6
8
10
12
14
16
0
20
40
60
80
100
120
140
160MT
Refining Capacity vs Demand
Gasoline Demand
Diesel Demand
Crude Capacity (right Scale Million bd)
-125
-67
57
89
54
-150 -100 -50 00 50 100
LPG
Naphtha(net)
Gasoline
Kerosenes
Gas Oils
2015 Net Balances(Million Tonne)
Source ICIS Supply and Demand Database
wwwiciscom 9Copyright copy 2016 ICIS
European Refiners are increasingly pressuredhellipRoad Fuels demand is declining Refineries are rationalized
Basically a net importer of everything but Gasolinehellip
0
2
4
6
8
10
12
14
16
18
0
50
100
150
200
250
300MT
Refining Capacity vs Demand
Gasoline Demand
Diesel Demand
Crude Capacity (right Scale Million bd)
-127
-93
547
-142
-443
-600 -400 -200 00 200 400 600
LPG
Naphtha(net)
Gasoline
Kerosenes
Gas Oils
2015 Net Balances(Million Tonne)
Source ICIS Supply and Demand Database
wwwiciscom 10Copyright copy 2016 ICIS
European Refiners face more challengeshellip
What if a higher penetration of electrical vehicles takes place
0
5
10
15
20
25
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
MILLION VEHICLES
Electric Vehicles Scenarios (EU 15 + EFTA)
Base Case Scenario (assumes Hybrids mostly on ICE)
Higher Penetration Scenario
0
5
10
15
20
25
30
35
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Electric Vehicles Scenarios (EU 15 + EFTA)
Higher Penetration Scenario Car Fleet Share ()
Higher Penetration Scenario New Cars Market Share ()
Source ICIS Supply and Demand Database amp ICIS Consulting
wwwiciscom 11Copyright copy 2016 ICIS
Refinersrsquo options (Europe is first but other will follow) Rationalization (less naphtha) or more Petrochemicals
Impact of a higher penetration of electrical vehicles
0
10
20
30
40
50
60
70
80
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
MILLION TONNE
Demand Trendsin Higher EVs Scenario
Gasoline Demand Diesel Demand
-12
-10
-8
-6
-4
-2
0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
MILLION TONNE
Demand Impactversus Base Scenario
Gasoline Demand Change Diesel Demand Change
Source ICIS Supply and Demand Database amp ICIS Consulting
wwwiciscom 12
34
North America
02
South amp Central America
16
Europe
00Former USSR
00
Africa
00
Middle East
00
North East Asia
16
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 13
34 279
North America
02 57
South amp Central America
16139
Europe
00
58
Former USSR
0071
Africa
00
415
Middle East
00
307
North East Asia
16185
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 14
34 27989
North America
02 57 08
South amp Central America
16139
33
Europe
00
58 174
Former USSR
0071
152
Africa
00
415 406
Middle East
00
307
596
North East Asia
16185 64
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 15
34 27989
151North America
02 57 08 23
South amp Central America
16139
33
490Europe
00
58 17493
Former USSR
0071
152
240
Africa
00
415 406
40Middle East
00
307
596
187
North East Asia
16185 64
270
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 16
US Shale developments in a lower oil price scenario not the original plan
0
2
4
6
8
10
12
14
16
18
20
Jan
-10
May
-10
Sep
-10
Jan
-11
May
-11
Sep
-11
Jan
-12
May
-12
Sep
-12
Jan
-13
May
-13
Sep
-13
Jan
-14
May
-14
Sep
-14
Jan
-15
May
-15
Sep
-15
Jan
-16
May
-16
US Price developments $MMBTU
Natural Gas Crude Oil Ethane Propane
A large amount of ethane remains ldquorejectedrdquo waiting for the new demand But once demand arrives
more production will be required and transport costs featuredhellip
Propane availability suggests ample supply is available but seasonal factors remain in place Steam-
crackersrsquo feedstock flexibility will be a substantial competitive advantage
0
500
1000
1500
2000
2015 2016 2017 2018 2019 2020
US Ethane Balances under unchanged Supply (lsquo000 bd)
To Ethylene Export by Pipeline
Deep Sea exports 2015 Production
Rejection
Source ICIS Consulting amp ICIS Prices
wwwiciscom 17
EU
(127)
ME
350AF
41
Balances Surplus Deficit
35
53
51 75
88
80
35
60
22to Japan
195
NAM
to rest of SAP
39
27to China
LAM
(65)
Rest of SAP amp
Indonesia
(108)
64
53
FUSSR
JAPAN
(114)
SKOREA
(38)
INDIA
(80)
Global LPG Key Trade Flows (2015)
Volumes in Million tonne
CHINA
(106)
US LPG will remain long flows to international markets rapidly increasing
The US is by now the largest
country exporter of Propane in the
World It was a net importer of
LPG just a few years ago
Exports are now flowing to Asia
and Europe
European demand for Ethylene
has doubled and supply is
declining
The Middle East remains the
largest region in terms of exports
Ample avails in international
markets have promoted Asian
PDH developments
China imports are now exceeding
those of Japan
Source ICIS Supply and Demand Database
wwwiciscom 18Copyright copy 2016 ICIS
European Petrochemical Feedstocks
A growing inflow of imported Light NGLs
Ethylene production from LPG is now swinging within a 20-30 range
Will domestic Refiners improve the naphtha balance in a low oil price scenario
-16
-14
-12
-10
-8
-6
-4
-2
0
2MILLION TONNE
EuropeFeedstock Balances
Ethane LPG Naphtha
0
5
10
15
20
25
30
MILLION TONNE
Europe Ethylene Production by Feedstock
Naphtha amp Heavier LPG Ethane
Source ICIS Supply and Demand Database
Petrochemicals and the Emerging
Markets
wwwiciscom 20Copyright copy 2016 ICIS
Petrochemicals the opportunity is there but will require the right business models
Global demand growth is much faster than oilrsquoshellip
and a target for Refiners
Polyolefins50
Key Elastomers4
Polyesters amp
PUrethanes26
Other Key
Plastics20
2015
41
31
44
33
4
00 10 20 30 40 50
Polyolefins
Key Elastomers
Polyesters amp PUrethanes
Other Key Plastics
TOTAL
Petrochemical Demand AAGR 2015-2025
Source ICIS Supply and Demand Database
wwwiciscom 21Copyright copy 2016 ICIS
Global PetrochemicalsChina is important Europe is growinghellip
almost half of 2020-25 EU increase is in Turkey + Poland
685
5 62306
267
558
352
332 791
Global Incremental Petrochemical Demand (Million Tonne)
North
America
Europe China
Rest Of
World
2015 2020 2025
North
America
EuropeChina
Rest Of
World
Source ICIS Supply and Demand Database
wwwiciscom 22Copyright copy 2016 ICIS
Global Petrochemicals
Polyolefins are the workhorsehellip
685
35918 195
113
406
2 235129 791
Global Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Incremental
Oil Demand is 148 MMT
Source ICIS Supply and Demand Database
wwwiciscom 23Copyright copy 2016 ICIS
Petrochemicals in the ldquoRest of the Worldrdquo
Polyolefins most important Aromatics chain grows at the same pace
267
15307 61
46
195
07 78 52 332
Rest of World Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Source ICIS Supply and Demand Database
wwwiciscom 24Copyright copy 2016 ICIS
Beyond Energy geographical influence is shifting to the ldquoRest of the Worldrdquo
Much of the high growth in the rest of the World is on the ldquoOne Belt One Roadrdquohellip
Asia Excl
China50
Africa amp MEast
39
F USSR
4
S America7
Asia Excl
China52
Africa amp MEast
32
F USSR
7
S America9
Asia Excl
China63
Africa amp
MEast19
F USSR
8
S America10
Energy Oil Petrochemicals
Share of 2015-2025 Incremental Demand in the ldquoRest of Worldrdquo
India Indonesia
Vietnam Russia amp
Iran account for
40 of global
growth potentialSource ICIS Supply and Demand Database
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
The Economic Supercycle and
Why It Is Over
John RichardsonICIS Senior Consultant Asia
wwwiciscom 26
What was the economic Supercycle
The end of the Supercycle What it means for petrochemicals
China past and future Its role in the end of the Supercycle
and what happens next
The way forward New opportunities
Agenda
What was the Supercycle
wwwiciscom 28
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 29
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 30
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
What this means for petrochemicals
wwwiciscom 32
The supply-driven model no longer works
A paradigm shift is under way in the global economy as well as in the global petrochemical markets
Having expected this we successfully forecast the slowdown in the Chinese economy and the collapse of oil prices
Stimulus hangover a lot of it badly spent has left big supply overhangs and so the loss of pricing power
Chinarsquos Role In This New Paradigm
The History
wwwiciscom 34
The biggest credit bubble in economic history
President Xi Jinping opening the 3rd Plenum November 2013
ldquoThe good meat is all gone all that is left are hard bones to chewrdquo
Premier Li Keiqiang in his Work Report to the National Peoplersquos Congress March 2016
ldquoThis is the crucial period in which China currently finds itself and during which we must build up powerful new drivers in order to accelerate the development of the new economyrdquo
2014
wwwiciscom 35
China petrochemicals volumes critically important
67
892
2171
378
749
89 120
1088
2560
-
500
1000
1500
2000
2500
3000
00
0 to
nn
es
2015 LLDPE imports
Source ICIS Supply and Demand Database
7 7 77 8 8
8
35 35 35 36 36 36 36
0
5
10
15
20
25
30
35
40
2016 2017 2018 2019 2020 2021 2022
-
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
lsquo00
0 to
nn
es
China versus India PP consumption
World Consumption India Consumption
China Consumption India as a percentage of global total
China as a percentage of global total
wwwiciscom 36
The impact of stimulus on chemicals and polymers
0
200
400
600
800
1000
1200
1400
China Europe Japan SouthKorea
US Taiwan
lsquo00
0 to
nn
esy
ea
r
Average size of PTA capacities
2000 2016
Source ICIS Supply and Demand Database
7872
77
91
114
138
154
164158
0
20
40
60
80
100
120
140
160
180
-
10000
20000
30000
40000
50000
60000
2009 2010 2011 2012 2013 2014 2015 2016 2017
China PTA
Capacity in 000 tonnesyear Consumption in 000 tonnesyear
Capacity as of consumption
wwwiciscom 37
5000
10000
15000
20000
25000
30000
35000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
To
nn
es
China ethylene versus propylene consumption
Ethylene Propylene
China becomes the first country or region in the world where propylene consumption exceeds ethylene
China consumed 13m tonnes of phenol in 2010 versus capacity of 880000 tonnesyear In 2017 ICIS Consulting expects capacity 27m tonnesyear versus 24m tonnes of demand
Acrylic acid capacity in China in 2010 was 11m tonnesyear versus consumption of 1m tonnes In 2017 we are forecasting 35m tonnesyear of capacity versus 17m tonnes of demand
Source ICIS Supply and Demand Database
wwwiciscom 38
Source ICIS Supply and Demand Database
It was about building factories for the sake of building factories to preserve jobs
Little regard was given to conventional analysis of long- term supply and demand
It wasnrsquot about cost per tonne economics
6368 70
7780
8486 87
90
0
10
20
30
40
50
60
70
80
90
100
-
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PP consumption and capacity
Capacity in 000 tonnesyear Consumption in 000 tonnes
Capacity as a percentage of consumption
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
Powered by Data Driven by Insight
Withstand market volatility with deep insight and tools to help you plan
Pricing reports Benchmark prices (spot or contract) including market commentaries on the latest deals transactions and price drivers
Real-time News24-hour global coverage of chemicals news including updates on plant capacities output and shutdowns keeping you informed of market developments as they happen
Price forecastsMonthly forecasts for selected commodities showing a 12-month rolling price forecast trade balances and market sentiment
Supply and Demand Database An end-to-end perspective across the global petrochemical and re nery supply chain Data includes import and export volumes consumption plant capacities and production ndash from 1978 up to 2030 ndash by product country and region
Scenario Study Demand ndash The New Direction for Pro t Special report addressing critical things to know to survive and prosper in todayrsquos chaotic petrochemical markets
Consulting Service Tailored solutions based on your unique business needs ndash from research and due diligence to investment analysis and portfolio optimisation
Navigate through price uncertainty with ICIS pricing data and market intelligence
ICIS APIC Booklet Adsindd 1 11516 337 pm
Powered by Data Driven by Insight
Withstand market volatility with deep insight and tools to help you plan
Pricing reports Benchmark prices (spot or contract) including market commentaries on the latest deals transactions and price drivers
Real-time News24-hour global coverage of chemicals news including updates on plant capacities output and shutdowns keeping you informed of market developments as they happen
Price forecastsMonthly forecasts for selected commodities showing a 12-month rolling price forecast trade balances and market sentiment
Supply and Demand Database An end-to-end perspective across the global petrochemical and re nery supply chain Data includes import and export volumes consumption plant capacities and production ndash from 1978 up to 2030 ndash by product country and region
Scenario Study Demand ndash The New Direction for Pro t Special report addressing critical things to know to survive and prosper in todayrsquos chaotic petrochemical markets
Consulting Service Tailored solutions based on your unique business needs ndash from research and due diligence to investment analysis and portfolio optimisation
Navigate through price uncertainty with ICIS pricing data and market intelligence
ICIS APIC Booklet Adsindd 1 11516 337 pm
Powered by Data Driven by Insight
Withstand market volatility with deep insight and tools to help you plan
Pricing reports Benchmark prices (spot or contract) including market commentaries on the latest deals transactions and price drivers
Real-time News24-hour global coverage of chemicals news including updates on plant capacities output and shutdowns keeping you informed of market developments as they happen
Price forecastsMonthly forecasts for selected commodities showing a 12-month rolling price forecast trade balances and market sentiment
Supply and Demand Database An end-to-end perspective across the global petrochemical and re nery supply chain Data includes import and export volumes consumption plant capacities and production ndash from 1978 up to 2030 ndash by product country and region
Scenario Study Demand ndash The New Direction for Pro t Special report addressing critical things to know to survive and prosper in todayrsquos chaotic petrochemical markets
Consulting Service Tailored solutions based on your unique business needs ndash from research and due diligence to investment analysis and portfolio optimisation
Navigate through price uncertainty with ICIS pricing data and market intelligence
ICIS APIC Booklet Adsindd 1 11516 337 pm
Enquire about our products and services
Energy Refining and the Implications
for PetrochemicalsChallenging the
ldquoComfortable Middlerdquo Scenario
Stefano ZehnderICIS Senior Consultant for
Global Refining amp Petrochemical Feedstocks
wwwiciscom 3
Energy
Petrochemicals amp the Emerging Markets
Refining amp Feedstocks
Agenda
wwwiciscom 4Copyright copy 2016 ICIS
Energy
Global energy demand is growing but not very fasthellip
Coal29
Oil31
Gas21
Non Fossil19
2015
07
09
19
22
13
00 05 10 15 20 25
COAL
OIL
NATURAL GAS
NON FOSSIL
TOTAL
Energy Demand AAGR 2015-2025
Source ICIS Supply and Demand Database
wwwiciscom 5Copyright copy 2016 ICIS
Energy Efficiency and lower carbon intensity challenge the ldquoComfortable Middlerdquo scenario
Peak Coal Approaching Peak Oil not yet but growth is declininghellip
1219
302
241
339
337 30148
262
304 685
Global Incremental Energy Demand (Millions TOE)
Coal
CoalOil
Oil
Gas
Gas
Non Fossil
Non Fossil
2015 2020 2025Source ICIS Supply and Demand Database
wwwiciscom 6Copyright copy 2016 ICIS
Energy continuing over-investment in China
China growth shrinkshellipcoal moves to surplus
1219
118 37438
626 9 2
112
584684
Global Incremental Energy Demand (Millions TOE)
North
AmericaEurope
China
Rest Of
World
2015 2020 2025
North
America
Europe
China
Rest Of
World
Source ICIS Supply and Demand Database
Supply and Demand DatabaseSingle searchable source of historical data on
global petrochemical and energy markets
Historical and forecast data (1978-2030)
Over 100 petrochemical products
Over 12000 re nery units
Over 18500 petrochemical plants
Import export and consumption volumes
Plant capacity production and operating status
Upcoming plants including speculative and announced projects
Data breakdown by country region product or product family
GDP population and consumer price index by country
More than just data the ICIS Supply and Demand Database is a powerful analytics tool which gives end-to-end perspectives across the global petrochemical supply chain including re neries Data is derived by ICISrsquos team of Consultants using a lsquobottom-uprsquo approach ndash reconciling demand with supply production local capacity and net trade Forecasts are validated against economic indicators such as GDP and per capita consumption
Request a one-to-one demo now enquiryiciscomwwwiciscomsupplydemanddata
ICIS APIC Booklet Adsindd 4 11516 306 pm
Supply and Demand DatabaseSingle searchable source of historical data on
global petrochemical and energy markets
Historical and forecast data (1978-2030)
Over 100 petrochemical products
Over 12000 re nery units
Over 18500 petrochemical plants
Import export and consumption volumes
Plant capacity production and operating status
Upcoming plants including speculative and announced projects
Data breakdown by country region product or product family
GDP population and consumer price index by country
More than just data the ICIS Supply and Demand Database is a powerful analytics tool which gives end-to-end perspectives across the global petrochemical supply chain including re neries Data is derived by ICISrsquos team of Consultants using a lsquobottom-uprsquo approach ndash reconciling demand with supply production local capacity and net trade Forecasts are validated against economic indicators such as GDP and per capita consumption
Request a one-to-one demo now enquiryiciscomwwwiciscomsupplydemanddata
ICIS APIC Booklet Adsindd 4 11516 306 pm
Supply and Demand DatabaseSingle searchable source of historical data on
global petrochemical and energy markets
Historical and forecast data (1978-2030)
Over 100 petrochemical products
Over 12000 re nery units
Over 18500 petrochemical plants
Import export and consumption volumes
Plant capacity production and operating status
Upcoming plants including speculative and announced projects
Data breakdown by country region product or product family
GDP population and consumer price index by country
More than just data the ICIS Supply and Demand Database is a powerful analytics tool which gives end-to-end perspectives across the global petrochemical supply chain including re neries Data is derived by ICISrsquos team of Consultants using a lsquobottom-uprsquo approach ndash reconciling demand with supply production local capacity and net trade Forecasts are validated against economic indicators such as GDP and per capita consumption
Request a one-to-one demo now enquiryiciscomwwwiciscomsupplydemanddata
ICIS APIC Booklet Adsindd 4 11516 306 pm
Click here to request a free demo
Refining amp Feedstocks
wwwiciscom 8Copyright copy 2016 ICIS
Chinarsquos over-investment extends to RefiningGas Oil stagnation and new Refineries a surplus of Transport Fuels
But net imports of petrochemical feedstockshellip
0
2
4
6
8
10
12
14
16
0
20
40
60
80
100
120
140
160MT
Refining Capacity vs Demand
Gasoline Demand
Diesel Demand
Crude Capacity (right Scale Million bd)
-125
-67
57
89
54
-150 -100 -50 00 50 100
LPG
Naphtha(net)
Gasoline
Kerosenes
Gas Oils
2015 Net Balances(Million Tonne)
Source ICIS Supply and Demand Database
wwwiciscom 9Copyright copy 2016 ICIS
European Refiners are increasingly pressuredhellipRoad Fuels demand is declining Refineries are rationalized
Basically a net importer of everything but Gasolinehellip
0
2
4
6
8
10
12
14
16
18
0
50
100
150
200
250
300MT
Refining Capacity vs Demand
Gasoline Demand
Diesel Demand
Crude Capacity (right Scale Million bd)
-127
-93
547
-142
-443
-600 -400 -200 00 200 400 600
LPG
Naphtha(net)
Gasoline
Kerosenes
Gas Oils
2015 Net Balances(Million Tonne)
Source ICIS Supply and Demand Database
wwwiciscom 10Copyright copy 2016 ICIS
European Refiners face more challengeshellip
What if a higher penetration of electrical vehicles takes place
0
5
10
15
20
25
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
MILLION VEHICLES
Electric Vehicles Scenarios (EU 15 + EFTA)
Base Case Scenario (assumes Hybrids mostly on ICE)
Higher Penetration Scenario
0
5
10
15
20
25
30
35
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Electric Vehicles Scenarios (EU 15 + EFTA)
Higher Penetration Scenario Car Fleet Share ()
Higher Penetration Scenario New Cars Market Share ()
Source ICIS Supply and Demand Database amp ICIS Consulting
wwwiciscom 11Copyright copy 2016 ICIS
Refinersrsquo options (Europe is first but other will follow) Rationalization (less naphtha) or more Petrochemicals
Impact of a higher penetration of electrical vehicles
0
10
20
30
40
50
60
70
80
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
MILLION TONNE
Demand Trendsin Higher EVs Scenario
Gasoline Demand Diesel Demand
-12
-10
-8
-6
-4
-2
0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
MILLION TONNE
Demand Impactversus Base Scenario
Gasoline Demand Change Diesel Demand Change
Source ICIS Supply and Demand Database amp ICIS Consulting
wwwiciscom 12
34
North America
02
South amp Central America
16
Europe
00Former USSR
00
Africa
00
Middle East
00
North East Asia
16
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 13
34 279
North America
02 57
South amp Central America
16139
Europe
00
58
Former USSR
0071
Africa
00
415
Middle East
00
307
North East Asia
16185
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 14
34 27989
North America
02 57 08
South amp Central America
16139
33
Europe
00
58 174
Former USSR
0071
152
Africa
00
415 406
Middle East
00
307
596
North East Asia
16185 64
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 15
34 27989
151North America
02 57 08 23
South amp Central America
16139
33
490Europe
00
58 17493
Former USSR
0071
152
240
Africa
00
415 406
40Middle East
00
307
596
187
North East Asia
16185 64
270
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 16
US Shale developments in a lower oil price scenario not the original plan
0
2
4
6
8
10
12
14
16
18
20
Jan
-10
May
-10
Sep
-10
Jan
-11
May
-11
Sep
-11
Jan
-12
May
-12
Sep
-12
Jan
-13
May
-13
Sep
-13
Jan
-14
May
-14
Sep
-14
Jan
-15
May
-15
Sep
-15
Jan
-16
May
-16
US Price developments $MMBTU
Natural Gas Crude Oil Ethane Propane
A large amount of ethane remains ldquorejectedrdquo waiting for the new demand But once demand arrives
more production will be required and transport costs featuredhellip
Propane availability suggests ample supply is available but seasonal factors remain in place Steam-
crackersrsquo feedstock flexibility will be a substantial competitive advantage
0
500
1000
1500
2000
2015 2016 2017 2018 2019 2020
US Ethane Balances under unchanged Supply (lsquo000 bd)
To Ethylene Export by Pipeline
Deep Sea exports 2015 Production
Rejection
Source ICIS Consulting amp ICIS Prices
wwwiciscom 17
EU
(127)
ME
350AF
41
Balances Surplus Deficit
35
53
51 75
88
80
35
60
22to Japan
195
NAM
to rest of SAP
39
27to China
LAM
(65)
Rest of SAP amp
Indonesia
(108)
64
53
FUSSR
JAPAN
(114)
SKOREA
(38)
INDIA
(80)
Global LPG Key Trade Flows (2015)
Volumes in Million tonne
CHINA
(106)
US LPG will remain long flows to international markets rapidly increasing
The US is by now the largest
country exporter of Propane in the
World It was a net importer of
LPG just a few years ago
Exports are now flowing to Asia
and Europe
European demand for Ethylene
has doubled and supply is
declining
The Middle East remains the
largest region in terms of exports
Ample avails in international
markets have promoted Asian
PDH developments
China imports are now exceeding
those of Japan
Source ICIS Supply and Demand Database
wwwiciscom 18Copyright copy 2016 ICIS
European Petrochemical Feedstocks
A growing inflow of imported Light NGLs
Ethylene production from LPG is now swinging within a 20-30 range
Will domestic Refiners improve the naphtha balance in a low oil price scenario
-16
-14
-12
-10
-8
-6
-4
-2
0
2MILLION TONNE
EuropeFeedstock Balances
Ethane LPG Naphtha
0
5
10
15
20
25
30
MILLION TONNE
Europe Ethylene Production by Feedstock
Naphtha amp Heavier LPG Ethane
Source ICIS Supply and Demand Database
Petrochemicals and the Emerging
Markets
wwwiciscom 20Copyright copy 2016 ICIS
Petrochemicals the opportunity is there but will require the right business models
Global demand growth is much faster than oilrsquoshellip
and a target for Refiners
Polyolefins50
Key Elastomers4
Polyesters amp
PUrethanes26
Other Key
Plastics20
2015
41
31
44
33
4
00 10 20 30 40 50
Polyolefins
Key Elastomers
Polyesters amp PUrethanes
Other Key Plastics
TOTAL
Petrochemical Demand AAGR 2015-2025
Source ICIS Supply and Demand Database
wwwiciscom 21Copyright copy 2016 ICIS
Global PetrochemicalsChina is important Europe is growinghellip
almost half of 2020-25 EU increase is in Turkey + Poland
685
5 62306
267
558
352
332 791
Global Incremental Petrochemical Demand (Million Tonne)
North
America
Europe China
Rest Of
World
2015 2020 2025
North
America
EuropeChina
Rest Of
World
Source ICIS Supply and Demand Database
wwwiciscom 22Copyright copy 2016 ICIS
Global Petrochemicals
Polyolefins are the workhorsehellip
685
35918 195
113
406
2 235129 791
Global Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Incremental
Oil Demand is 148 MMT
Source ICIS Supply and Demand Database
wwwiciscom 23Copyright copy 2016 ICIS
Petrochemicals in the ldquoRest of the Worldrdquo
Polyolefins most important Aromatics chain grows at the same pace
267
15307 61
46
195
07 78 52 332
Rest of World Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Source ICIS Supply and Demand Database
wwwiciscom 24Copyright copy 2016 ICIS
Beyond Energy geographical influence is shifting to the ldquoRest of the Worldrdquo
Much of the high growth in the rest of the World is on the ldquoOne Belt One Roadrdquohellip
Asia Excl
China50
Africa amp MEast
39
F USSR
4
S America7
Asia Excl
China52
Africa amp MEast
32
F USSR
7
S America9
Asia Excl
China63
Africa amp
MEast19
F USSR
8
S America10
Energy Oil Petrochemicals
Share of 2015-2025 Incremental Demand in the ldquoRest of Worldrdquo
India Indonesia
Vietnam Russia amp
Iran account for
40 of global
growth potentialSource ICIS Supply and Demand Database
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
The Economic Supercycle and
Why It Is Over
John RichardsonICIS Senior Consultant Asia
wwwiciscom 26
What was the economic Supercycle
The end of the Supercycle What it means for petrochemicals
China past and future Its role in the end of the Supercycle
and what happens next
The way forward New opportunities
Agenda
What was the Supercycle
wwwiciscom 28
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 29
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 30
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
What this means for petrochemicals
wwwiciscom 32
The supply-driven model no longer works
A paradigm shift is under way in the global economy as well as in the global petrochemical markets
Having expected this we successfully forecast the slowdown in the Chinese economy and the collapse of oil prices
Stimulus hangover a lot of it badly spent has left big supply overhangs and so the loss of pricing power
Chinarsquos Role In This New Paradigm
The History
wwwiciscom 34
The biggest credit bubble in economic history
President Xi Jinping opening the 3rd Plenum November 2013
ldquoThe good meat is all gone all that is left are hard bones to chewrdquo
Premier Li Keiqiang in his Work Report to the National Peoplersquos Congress March 2016
ldquoThis is the crucial period in which China currently finds itself and during which we must build up powerful new drivers in order to accelerate the development of the new economyrdquo
2014
wwwiciscom 35
China petrochemicals volumes critically important
67
892
2171
378
749
89 120
1088
2560
-
500
1000
1500
2000
2500
3000
00
0 to
nn
es
2015 LLDPE imports
Source ICIS Supply and Demand Database
7 7 77 8 8
8
35 35 35 36 36 36 36
0
5
10
15
20
25
30
35
40
2016 2017 2018 2019 2020 2021 2022
-
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
lsquo00
0 to
nn
es
China versus India PP consumption
World Consumption India Consumption
China Consumption India as a percentage of global total
China as a percentage of global total
wwwiciscom 36
The impact of stimulus on chemicals and polymers
0
200
400
600
800
1000
1200
1400
China Europe Japan SouthKorea
US Taiwan
lsquo00
0 to
nn
esy
ea
r
Average size of PTA capacities
2000 2016
Source ICIS Supply and Demand Database
7872
77
91
114
138
154
164158
0
20
40
60
80
100
120
140
160
180
-
10000
20000
30000
40000
50000
60000
2009 2010 2011 2012 2013 2014 2015 2016 2017
China PTA
Capacity in 000 tonnesyear Consumption in 000 tonnesyear
Capacity as of consumption
wwwiciscom 37
5000
10000
15000
20000
25000
30000
35000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
To
nn
es
China ethylene versus propylene consumption
Ethylene Propylene
China becomes the first country or region in the world where propylene consumption exceeds ethylene
China consumed 13m tonnes of phenol in 2010 versus capacity of 880000 tonnesyear In 2017 ICIS Consulting expects capacity 27m tonnesyear versus 24m tonnes of demand
Acrylic acid capacity in China in 2010 was 11m tonnesyear versus consumption of 1m tonnes In 2017 we are forecasting 35m tonnesyear of capacity versus 17m tonnes of demand
Source ICIS Supply and Demand Database
wwwiciscom 38
Source ICIS Supply and Demand Database
It was about building factories for the sake of building factories to preserve jobs
Little regard was given to conventional analysis of long- term supply and demand
It wasnrsquot about cost per tonne economics
6368 70
7780
8486 87
90
0
10
20
30
40
50
60
70
80
90
100
-
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PP consumption and capacity
Capacity in 000 tonnesyear Consumption in 000 tonnes
Capacity as a percentage of consumption
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
Energy Refining and the Implications
for PetrochemicalsChallenging the
ldquoComfortable Middlerdquo Scenario
Stefano ZehnderICIS Senior Consultant for
Global Refining amp Petrochemical Feedstocks
wwwiciscom 3
Energy
Petrochemicals amp the Emerging Markets
Refining amp Feedstocks
Agenda
wwwiciscom 4Copyright copy 2016 ICIS
Energy
Global energy demand is growing but not very fasthellip
Coal29
Oil31
Gas21
Non Fossil19
2015
07
09
19
22
13
00 05 10 15 20 25
COAL
OIL
NATURAL GAS
NON FOSSIL
TOTAL
Energy Demand AAGR 2015-2025
Source ICIS Supply and Demand Database
wwwiciscom 5Copyright copy 2016 ICIS
Energy Efficiency and lower carbon intensity challenge the ldquoComfortable Middlerdquo scenario
Peak Coal Approaching Peak Oil not yet but growth is declininghellip
1219
302
241
339
337 30148
262
304 685
Global Incremental Energy Demand (Millions TOE)
Coal
CoalOil
Oil
Gas
Gas
Non Fossil
Non Fossil
2015 2020 2025Source ICIS Supply and Demand Database
wwwiciscom 6Copyright copy 2016 ICIS
Energy continuing over-investment in China
China growth shrinkshellipcoal moves to surplus
1219
118 37438
626 9 2
112
584684
Global Incremental Energy Demand (Millions TOE)
North
AmericaEurope
China
Rest Of
World
2015 2020 2025
North
America
Europe
China
Rest Of
World
Source ICIS Supply and Demand Database
Supply and Demand DatabaseSingle searchable source of historical data on
global petrochemical and energy markets
Historical and forecast data (1978-2030)
Over 100 petrochemical products
Over 12000 re nery units
Over 18500 petrochemical plants
Import export and consumption volumes
Plant capacity production and operating status
Upcoming plants including speculative and announced projects
Data breakdown by country region product or product family
GDP population and consumer price index by country
More than just data the ICIS Supply and Demand Database is a powerful analytics tool which gives end-to-end perspectives across the global petrochemical supply chain including re neries Data is derived by ICISrsquos team of Consultants using a lsquobottom-uprsquo approach ndash reconciling demand with supply production local capacity and net trade Forecasts are validated against economic indicators such as GDP and per capita consumption
Request a one-to-one demo now enquiryiciscomwwwiciscomsupplydemanddata
ICIS APIC Booklet Adsindd 4 11516 306 pm
Supply and Demand DatabaseSingle searchable source of historical data on
global petrochemical and energy markets
Historical and forecast data (1978-2030)
Over 100 petrochemical products
Over 12000 re nery units
Over 18500 petrochemical plants
Import export and consumption volumes
Plant capacity production and operating status
Upcoming plants including speculative and announced projects
Data breakdown by country region product or product family
GDP population and consumer price index by country
More than just data the ICIS Supply and Demand Database is a powerful analytics tool which gives end-to-end perspectives across the global petrochemical supply chain including re neries Data is derived by ICISrsquos team of Consultants using a lsquobottom-uprsquo approach ndash reconciling demand with supply production local capacity and net trade Forecasts are validated against economic indicators such as GDP and per capita consumption
Request a one-to-one demo now enquiryiciscomwwwiciscomsupplydemanddata
ICIS APIC Booklet Adsindd 4 11516 306 pm
Supply and Demand DatabaseSingle searchable source of historical data on
global petrochemical and energy markets
Historical and forecast data (1978-2030)
Over 100 petrochemical products
Over 12000 re nery units
Over 18500 petrochemical plants
Import export and consumption volumes
Plant capacity production and operating status
Upcoming plants including speculative and announced projects
Data breakdown by country region product or product family
GDP population and consumer price index by country
More than just data the ICIS Supply and Demand Database is a powerful analytics tool which gives end-to-end perspectives across the global petrochemical supply chain including re neries Data is derived by ICISrsquos team of Consultants using a lsquobottom-uprsquo approach ndash reconciling demand with supply production local capacity and net trade Forecasts are validated against economic indicators such as GDP and per capita consumption
Request a one-to-one demo now enquiryiciscomwwwiciscomsupplydemanddata
ICIS APIC Booklet Adsindd 4 11516 306 pm
Click here to request a free demo
Refining amp Feedstocks
wwwiciscom 8Copyright copy 2016 ICIS
Chinarsquos over-investment extends to RefiningGas Oil stagnation and new Refineries a surplus of Transport Fuels
But net imports of petrochemical feedstockshellip
0
2
4
6
8
10
12
14
16
0
20
40
60
80
100
120
140
160MT
Refining Capacity vs Demand
Gasoline Demand
Diesel Demand
Crude Capacity (right Scale Million bd)
-125
-67
57
89
54
-150 -100 -50 00 50 100
LPG
Naphtha(net)
Gasoline
Kerosenes
Gas Oils
2015 Net Balances(Million Tonne)
Source ICIS Supply and Demand Database
wwwiciscom 9Copyright copy 2016 ICIS
European Refiners are increasingly pressuredhellipRoad Fuels demand is declining Refineries are rationalized
Basically a net importer of everything but Gasolinehellip
0
2
4
6
8
10
12
14
16
18
0
50
100
150
200
250
300MT
Refining Capacity vs Demand
Gasoline Demand
Diesel Demand
Crude Capacity (right Scale Million bd)
-127
-93
547
-142
-443
-600 -400 -200 00 200 400 600
LPG
Naphtha(net)
Gasoline
Kerosenes
Gas Oils
2015 Net Balances(Million Tonne)
Source ICIS Supply and Demand Database
wwwiciscom 10Copyright copy 2016 ICIS
European Refiners face more challengeshellip
What if a higher penetration of electrical vehicles takes place
0
5
10
15
20
25
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
MILLION VEHICLES
Electric Vehicles Scenarios (EU 15 + EFTA)
Base Case Scenario (assumes Hybrids mostly on ICE)
Higher Penetration Scenario
0
5
10
15
20
25
30
35
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Electric Vehicles Scenarios (EU 15 + EFTA)
Higher Penetration Scenario Car Fleet Share ()
Higher Penetration Scenario New Cars Market Share ()
Source ICIS Supply and Demand Database amp ICIS Consulting
wwwiciscom 11Copyright copy 2016 ICIS
Refinersrsquo options (Europe is first but other will follow) Rationalization (less naphtha) or more Petrochemicals
Impact of a higher penetration of electrical vehicles
0
10
20
30
40
50
60
70
80
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
MILLION TONNE
Demand Trendsin Higher EVs Scenario
Gasoline Demand Diesel Demand
-12
-10
-8
-6
-4
-2
0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
MILLION TONNE
Demand Impactversus Base Scenario
Gasoline Demand Change Diesel Demand Change
Source ICIS Supply and Demand Database amp ICIS Consulting
wwwiciscom 12
34
North America
02
South amp Central America
16
Europe
00Former USSR
00
Africa
00
Middle East
00
North East Asia
16
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 13
34 279
North America
02 57
South amp Central America
16139
Europe
00
58
Former USSR
0071
Africa
00
415
Middle East
00
307
North East Asia
16185
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 14
34 27989
North America
02 57 08
South amp Central America
16139
33
Europe
00
58 174
Former USSR
0071
152
Africa
00
415 406
Middle East
00
307
596
North East Asia
16185 64
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 15
34 27989
151North America
02 57 08 23
South amp Central America
16139
33
490Europe
00
58 17493
Former USSR
0071
152
240
Africa
00
415 406
40Middle East
00
307
596
187
North East Asia
16185 64
270
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 16
US Shale developments in a lower oil price scenario not the original plan
0
2
4
6
8
10
12
14
16
18
20
Jan
-10
May
-10
Sep
-10
Jan
-11
May
-11
Sep
-11
Jan
-12
May
-12
Sep
-12
Jan
-13
May
-13
Sep
-13
Jan
-14
May
-14
Sep
-14
Jan
-15
May
-15
Sep
-15
Jan
-16
May
-16
US Price developments $MMBTU
Natural Gas Crude Oil Ethane Propane
A large amount of ethane remains ldquorejectedrdquo waiting for the new demand But once demand arrives
more production will be required and transport costs featuredhellip
Propane availability suggests ample supply is available but seasonal factors remain in place Steam-
crackersrsquo feedstock flexibility will be a substantial competitive advantage
0
500
1000
1500
2000
2015 2016 2017 2018 2019 2020
US Ethane Balances under unchanged Supply (lsquo000 bd)
To Ethylene Export by Pipeline
Deep Sea exports 2015 Production
Rejection
Source ICIS Consulting amp ICIS Prices
wwwiciscom 17
EU
(127)
ME
350AF
41
Balances Surplus Deficit
35
53
51 75
88
80
35
60
22to Japan
195
NAM
to rest of SAP
39
27to China
LAM
(65)
Rest of SAP amp
Indonesia
(108)
64
53
FUSSR
JAPAN
(114)
SKOREA
(38)
INDIA
(80)
Global LPG Key Trade Flows (2015)
Volumes in Million tonne
CHINA
(106)
US LPG will remain long flows to international markets rapidly increasing
The US is by now the largest
country exporter of Propane in the
World It was a net importer of
LPG just a few years ago
Exports are now flowing to Asia
and Europe
European demand for Ethylene
has doubled and supply is
declining
The Middle East remains the
largest region in terms of exports
Ample avails in international
markets have promoted Asian
PDH developments
China imports are now exceeding
those of Japan
Source ICIS Supply and Demand Database
wwwiciscom 18Copyright copy 2016 ICIS
European Petrochemical Feedstocks
A growing inflow of imported Light NGLs
Ethylene production from LPG is now swinging within a 20-30 range
Will domestic Refiners improve the naphtha balance in a low oil price scenario
-16
-14
-12
-10
-8
-6
-4
-2
0
2MILLION TONNE
EuropeFeedstock Balances
Ethane LPG Naphtha
0
5
10
15
20
25
30
MILLION TONNE
Europe Ethylene Production by Feedstock
Naphtha amp Heavier LPG Ethane
Source ICIS Supply and Demand Database
Petrochemicals and the Emerging
Markets
wwwiciscom 20Copyright copy 2016 ICIS
Petrochemicals the opportunity is there but will require the right business models
Global demand growth is much faster than oilrsquoshellip
and a target for Refiners
Polyolefins50
Key Elastomers4
Polyesters amp
PUrethanes26
Other Key
Plastics20
2015
41
31
44
33
4
00 10 20 30 40 50
Polyolefins
Key Elastomers
Polyesters amp PUrethanes
Other Key Plastics
TOTAL
Petrochemical Demand AAGR 2015-2025
Source ICIS Supply and Demand Database
wwwiciscom 21Copyright copy 2016 ICIS
Global PetrochemicalsChina is important Europe is growinghellip
almost half of 2020-25 EU increase is in Turkey + Poland
685
5 62306
267
558
352
332 791
Global Incremental Petrochemical Demand (Million Tonne)
North
America
Europe China
Rest Of
World
2015 2020 2025
North
America
EuropeChina
Rest Of
World
Source ICIS Supply and Demand Database
wwwiciscom 22Copyright copy 2016 ICIS
Global Petrochemicals
Polyolefins are the workhorsehellip
685
35918 195
113
406
2 235129 791
Global Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Incremental
Oil Demand is 148 MMT
Source ICIS Supply and Demand Database
wwwiciscom 23Copyright copy 2016 ICIS
Petrochemicals in the ldquoRest of the Worldrdquo
Polyolefins most important Aromatics chain grows at the same pace
267
15307 61
46
195
07 78 52 332
Rest of World Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Source ICIS Supply and Demand Database
wwwiciscom 24Copyright copy 2016 ICIS
Beyond Energy geographical influence is shifting to the ldquoRest of the Worldrdquo
Much of the high growth in the rest of the World is on the ldquoOne Belt One Roadrdquohellip
Asia Excl
China50
Africa amp MEast
39
F USSR
4
S America7
Asia Excl
China52
Africa amp MEast
32
F USSR
7
S America9
Asia Excl
China63
Africa amp
MEast19
F USSR
8
S America10
Energy Oil Petrochemicals
Share of 2015-2025 Incremental Demand in the ldquoRest of Worldrdquo
India Indonesia
Vietnam Russia amp
Iran account for
40 of global
growth potentialSource ICIS Supply and Demand Database
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
The Economic Supercycle and
Why It Is Over
John RichardsonICIS Senior Consultant Asia
wwwiciscom 26
What was the economic Supercycle
The end of the Supercycle What it means for petrochemicals
China past and future Its role in the end of the Supercycle
and what happens next
The way forward New opportunities
Agenda
What was the Supercycle
wwwiciscom 28
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 29
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 30
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
What this means for petrochemicals
wwwiciscom 32
The supply-driven model no longer works
A paradigm shift is under way in the global economy as well as in the global petrochemical markets
Having expected this we successfully forecast the slowdown in the Chinese economy and the collapse of oil prices
Stimulus hangover a lot of it badly spent has left big supply overhangs and so the loss of pricing power
Chinarsquos Role In This New Paradigm
The History
wwwiciscom 34
The biggest credit bubble in economic history
President Xi Jinping opening the 3rd Plenum November 2013
ldquoThe good meat is all gone all that is left are hard bones to chewrdquo
Premier Li Keiqiang in his Work Report to the National Peoplersquos Congress March 2016
ldquoThis is the crucial period in which China currently finds itself and during which we must build up powerful new drivers in order to accelerate the development of the new economyrdquo
2014
wwwiciscom 35
China petrochemicals volumes critically important
67
892
2171
378
749
89 120
1088
2560
-
500
1000
1500
2000
2500
3000
00
0 to
nn
es
2015 LLDPE imports
Source ICIS Supply and Demand Database
7 7 77 8 8
8
35 35 35 36 36 36 36
0
5
10
15
20
25
30
35
40
2016 2017 2018 2019 2020 2021 2022
-
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
lsquo00
0 to
nn
es
China versus India PP consumption
World Consumption India Consumption
China Consumption India as a percentage of global total
China as a percentage of global total
wwwiciscom 36
The impact of stimulus on chemicals and polymers
0
200
400
600
800
1000
1200
1400
China Europe Japan SouthKorea
US Taiwan
lsquo00
0 to
nn
esy
ea
r
Average size of PTA capacities
2000 2016
Source ICIS Supply and Demand Database
7872
77
91
114
138
154
164158
0
20
40
60
80
100
120
140
160
180
-
10000
20000
30000
40000
50000
60000
2009 2010 2011 2012 2013 2014 2015 2016 2017
China PTA
Capacity in 000 tonnesyear Consumption in 000 tonnesyear
Capacity as of consumption
wwwiciscom 37
5000
10000
15000
20000
25000
30000
35000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
To
nn
es
China ethylene versus propylene consumption
Ethylene Propylene
China becomes the first country or region in the world where propylene consumption exceeds ethylene
China consumed 13m tonnes of phenol in 2010 versus capacity of 880000 tonnesyear In 2017 ICIS Consulting expects capacity 27m tonnesyear versus 24m tonnes of demand
Acrylic acid capacity in China in 2010 was 11m tonnesyear versus consumption of 1m tonnes In 2017 we are forecasting 35m tonnesyear of capacity versus 17m tonnes of demand
Source ICIS Supply and Demand Database
wwwiciscom 38
Source ICIS Supply and Demand Database
It was about building factories for the sake of building factories to preserve jobs
Little regard was given to conventional analysis of long- term supply and demand
It wasnrsquot about cost per tonne economics
6368 70
7780
8486 87
90
0
10
20
30
40
50
60
70
80
90
100
-
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PP consumption and capacity
Capacity in 000 tonnesyear Consumption in 000 tonnes
Capacity as a percentage of consumption
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 3
Energy
Petrochemicals amp the Emerging Markets
Refining amp Feedstocks
Agenda
wwwiciscom 4Copyright copy 2016 ICIS
Energy
Global energy demand is growing but not very fasthellip
Coal29
Oil31
Gas21
Non Fossil19
2015
07
09
19
22
13
00 05 10 15 20 25
COAL
OIL
NATURAL GAS
NON FOSSIL
TOTAL
Energy Demand AAGR 2015-2025
Source ICIS Supply and Demand Database
wwwiciscom 5Copyright copy 2016 ICIS
Energy Efficiency and lower carbon intensity challenge the ldquoComfortable Middlerdquo scenario
Peak Coal Approaching Peak Oil not yet but growth is declininghellip
1219
302
241
339
337 30148
262
304 685
Global Incremental Energy Demand (Millions TOE)
Coal
CoalOil
Oil
Gas
Gas
Non Fossil
Non Fossil
2015 2020 2025Source ICIS Supply and Demand Database
wwwiciscom 6Copyright copy 2016 ICIS
Energy continuing over-investment in China
China growth shrinkshellipcoal moves to surplus
1219
118 37438
626 9 2
112
584684
Global Incremental Energy Demand (Millions TOE)
North
AmericaEurope
China
Rest Of
World
2015 2020 2025
North
America
Europe
China
Rest Of
World
Source ICIS Supply and Demand Database
Supply and Demand DatabaseSingle searchable source of historical data on
global petrochemical and energy markets
Historical and forecast data (1978-2030)
Over 100 petrochemical products
Over 12000 re nery units
Over 18500 petrochemical plants
Import export and consumption volumes
Plant capacity production and operating status
Upcoming plants including speculative and announced projects
Data breakdown by country region product or product family
GDP population and consumer price index by country
More than just data the ICIS Supply and Demand Database is a powerful analytics tool which gives end-to-end perspectives across the global petrochemical supply chain including re neries Data is derived by ICISrsquos team of Consultants using a lsquobottom-uprsquo approach ndash reconciling demand with supply production local capacity and net trade Forecasts are validated against economic indicators such as GDP and per capita consumption
Request a one-to-one demo now enquiryiciscomwwwiciscomsupplydemanddata
ICIS APIC Booklet Adsindd 4 11516 306 pm
Supply and Demand DatabaseSingle searchable source of historical data on
global petrochemical and energy markets
Historical and forecast data (1978-2030)
Over 100 petrochemical products
Over 12000 re nery units
Over 18500 petrochemical plants
Import export and consumption volumes
Plant capacity production and operating status
Upcoming plants including speculative and announced projects
Data breakdown by country region product or product family
GDP population and consumer price index by country
More than just data the ICIS Supply and Demand Database is a powerful analytics tool which gives end-to-end perspectives across the global petrochemical supply chain including re neries Data is derived by ICISrsquos team of Consultants using a lsquobottom-uprsquo approach ndash reconciling demand with supply production local capacity and net trade Forecasts are validated against economic indicators such as GDP and per capita consumption
Request a one-to-one demo now enquiryiciscomwwwiciscomsupplydemanddata
ICIS APIC Booklet Adsindd 4 11516 306 pm
Supply and Demand DatabaseSingle searchable source of historical data on
global petrochemical and energy markets
Historical and forecast data (1978-2030)
Over 100 petrochemical products
Over 12000 re nery units
Over 18500 petrochemical plants
Import export and consumption volumes
Plant capacity production and operating status
Upcoming plants including speculative and announced projects
Data breakdown by country region product or product family
GDP population and consumer price index by country
More than just data the ICIS Supply and Demand Database is a powerful analytics tool which gives end-to-end perspectives across the global petrochemical supply chain including re neries Data is derived by ICISrsquos team of Consultants using a lsquobottom-uprsquo approach ndash reconciling demand with supply production local capacity and net trade Forecasts are validated against economic indicators such as GDP and per capita consumption
Request a one-to-one demo now enquiryiciscomwwwiciscomsupplydemanddata
ICIS APIC Booklet Adsindd 4 11516 306 pm
Click here to request a free demo
Refining amp Feedstocks
wwwiciscom 8Copyright copy 2016 ICIS
Chinarsquos over-investment extends to RefiningGas Oil stagnation and new Refineries a surplus of Transport Fuels
But net imports of petrochemical feedstockshellip
0
2
4
6
8
10
12
14
16
0
20
40
60
80
100
120
140
160MT
Refining Capacity vs Demand
Gasoline Demand
Diesel Demand
Crude Capacity (right Scale Million bd)
-125
-67
57
89
54
-150 -100 -50 00 50 100
LPG
Naphtha(net)
Gasoline
Kerosenes
Gas Oils
2015 Net Balances(Million Tonne)
Source ICIS Supply and Demand Database
wwwiciscom 9Copyright copy 2016 ICIS
European Refiners are increasingly pressuredhellipRoad Fuels demand is declining Refineries are rationalized
Basically a net importer of everything but Gasolinehellip
0
2
4
6
8
10
12
14
16
18
0
50
100
150
200
250
300MT
Refining Capacity vs Demand
Gasoline Demand
Diesel Demand
Crude Capacity (right Scale Million bd)
-127
-93
547
-142
-443
-600 -400 -200 00 200 400 600
LPG
Naphtha(net)
Gasoline
Kerosenes
Gas Oils
2015 Net Balances(Million Tonne)
Source ICIS Supply and Demand Database
wwwiciscom 10Copyright copy 2016 ICIS
European Refiners face more challengeshellip
What if a higher penetration of electrical vehicles takes place
0
5
10
15
20
25
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
MILLION VEHICLES
Electric Vehicles Scenarios (EU 15 + EFTA)
Base Case Scenario (assumes Hybrids mostly on ICE)
Higher Penetration Scenario
0
5
10
15
20
25
30
35
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Electric Vehicles Scenarios (EU 15 + EFTA)
Higher Penetration Scenario Car Fleet Share ()
Higher Penetration Scenario New Cars Market Share ()
Source ICIS Supply and Demand Database amp ICIS Consulting
wwwiciscom 11Copyright copy 2016 ICIS
Refinersrsquo options (Europe is first but other will follow) Rationalization (less naphtha) or more Petrochemicals
Impact of a higher penetration of electrical vehicles
0
10
20
30
40
50
60
70
80
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
MILLION TONNE
Demand Trendsin Higher EVs Scenario
Gasoline Demand Diesel Demand
-12
-10
-8
-6
-4
-2
0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
MILLION TONNE
Demand Impactversus Base Scenario
Gasoline Demand Change Diesel Demand Change
Source ICIS Supply and Demand Database amp ICIS Consulting
wwwiciscom 12
34
North America
02
South amp Central America
16
Europe
00Former USSR
00
Africa
00
Middle East
00
North East Asia
16
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 13
34 279
North America
02 57
South amp Central America
16139
Europe
00
58
Former USSR
0071
Africa
00
415
Middle East
00
307
North East Asia
16185
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 14
34 27989
North America
02 57 08
South amp Central America
16139
33
Europe
00
58 174
Former USSR
0071
152
Africa
00
415 406
Middle East
00
307
596
North East Asia
16185 64
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 15
34 27989
151North America
02 57 08 23
South amp Central America
16139
33
490Europe
00
58 17493
Former USSR
0071
152
240
Africa
00
415 406
40Middle East
00
307
596
187
North East Asia
16185 64
270
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 16
US Shale developments in a lower oil price scenario not the original plan
0
2
4
6
8
10
12
14
16
18
20
Jan
-10
May
-10
Sep
-10
Jan
-11
May
-11
Sep
-11
Jan
-12
May
-12
Sep
-12
Jan
-13
May
-13
Sep
-13
Jan
-14
May
-14
Sep
-14
Jan
-15
May
-15
Sep
-15
Jan
-16
May
-16
US Price developments $MMBTU
Natural Gas Crude Oil Ethane Propane
A large amount of ethane remains ldquorejectedrdquo waiting for the new demand But once demand arrives
more production will be required and transport costs featuredhellip
Propane availability suggests ample supply is available but seasonal factors remain in place Steam-
crackersrsquo feedstock flexibility will be a substantial competitive advantage
0
500
1000
1500
2000
2015 2016 2017 2018 2019 2020
US Ethane Balances under unchanged Supply (lsquo000 bd)
To Ethylene Export by Pipeline
Deep Sea exports 2015 Production
Rejection
Source ICIS Consulting amp ICIS Prices
wwwiciscom 17
EU
(127)
ME
350AF
41
Balances Surplus Deficit
35
53
51 75
88
80
35
60
22to Japan
195
NAM
to rest of SAP
39
27to China
LAM
(65)
Rest of SAP amp
Indonesia
(108)
64
53
FUSSR
JAPAN
(114)
SKOREA
(38)
INDIA
(80)
Global LPG Key Trade Flows (2015)
Volumes in Million tonne
CHINA
(106)
US LPG will remain long flows to international markets rapidly increasing
The US is by now the largest
country exporter of Propane in the
World It was a net importer of
LPG just a few years ago
Exports are now flowing to Asia
and Europe
European demand for Ethylene
has doubled and supply is
declining
The Middle East remains the
largest region in terms of exports
Ample avails in international
markets have promoted Asian
PDH developments
China imports are now exceeding
those of Japan
Source ICIS Supply and Demand Database
wwwiciscom 18Copyright copy 2016 ICIS
European Petrochemical Feedstocks
A growing inflow of imported Light NGLs
Ethylene production from LPG is now swinging within a 20-30 range
Will domestic Refiners improve the naphtha balance in a low oil price scenario
-16
-14
-12
-10
-8
-6
-4
-2
0
2MILLION TONNE
EuropeFeedstock Balances
Ethane LPG Naphtha
0
5
10
15
20
25
30
MILLION TONNE
Europe Ethylene Production by Feedstock
Naphtha amp Heavier LPG Ethane
Source ICIS Supply and Demand Database
Petrochemicals and the Emerging
Markets
wwwiciscom 20Copyright copy 2016 ICIS
Petrochemicals the opportunity is there but will require the right business models
Global demand growth is much faster than oilrsquoshellip
and a target for Refiners
Polyolefins50
Key Elastomers4
Polyesters amp
PUrethanes26
Other Key
Plastics20
2015
41
31
44
33
4
00 10 20 30 40 50
Polyolefins
Key Elastomers
Polyesters amp PUrethanes
Other Key Plastics
TOTAL
Petrochemical Demand AAGR 2015-2025
Source ICIS Supply and Demand Database
wwwiciscom 21Copyright copy 2016 ICIS
Global PetrochemicalsChina is important Europe is growinghellip
almost half of 2020-25 EU increase is in Turkey + Poland
685
5 62306
267
558
352
332 791
Global Incremental Petrochemical Demand (Million Tonne)
North
America
Europe China
Rest Of
World
2015 2020 2025
North
America
EuropeChina
Rest Of
World
Source ICIS Supply and Demand Database
wwwiciscom 22Copyright copy 2016 ICIS
Global Petrochemicals
Polyolefins are the workhorsehellip
685
35918 195
113
406
2 235129 791
Global Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Incremental
Oil Demand is 148 MMT
Source ICIS Supply and Demand Database
wwwiciscom 23Copyright copy 2016 ICIS
Petrochemicals in the ldquoRest of the Worldrdquo
Polyolefins most important Aromatics chain grows at the same pace
267
15307 61
46
195
07 78 52 332
Rest of World Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Source ICIS Supply and Demand Database
wwwiciscom 24Copyright copy 2016 ICIS
Beyond Energy geographical influence is shifting to the ldquoRest of the Worldrdquo
Much of the high growth in the rest of the World is on the ldquoOne Belt One Roadrdquohellip
Asia Excl
China50
Africa amp MEast
39
F USSR
4
S America7
Asia Excl
China52
Africa amp MEast
32
F USSR
7
S America9
Asia Excl
China63
Africa amp
MEast19
F USSR
8
S America10
Energy Oil Petrochemicals
Share of 2015-2025 Incremental Demand in the ldquoRest of Worldrdquo
India Indonesia
Vietnam Russia amp
Iran account for
40 of global
growth potentialSource ICIS Supply and Demand Database
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
The Economic Supercycle and
Why It Is Over
John RichardsonICIS Senior Consultant Asia
wwwiciscom 26
What was the economic Supercycle
The end of the Supercycle What it means for petrochemicals
China past and future Its role in the end of the Supercycle
and what happens next
The way forward New opportunities
Agenda
What was the Supercycle
wwwiciscom 28
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 29
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 30
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
What this means for petrochemicals
wwwiciscom 32
The supply-driven model no longer works
A paradigm shift is under way in the global economy as well as in the global petrochemical markets
Having expected this we successfully forecast the slowdown in the Chinese economy and the collapse of oil prices
Stimulus hangover a lot of it badly spent has left big supply overhangs and so the loss of pricing power
Chinarsquos Role In This New Paradigm
The History
wwwiciscom 34
The biggest credit bubble in economic history
President Xi Jinping opening the 3rd Plenum November 2013
ldquoThe good meat is all gone all that is left are hard bones to chewrdquo
Premier Li Keiqiang in his Work Report to the National Peoplersquos Congress March 2016
ldquoThis is the crucial period in which China currently finds itself and during which we must build up powerful new drivers in order to accelerate the development of the new economyrdquo
2014
wwwiciscom 35
China petrochemicals volumes critically important
67
892
2171
378
749
89 120
1088
2560
-
500
1000
1500
2000
2500
3000
00
0 to
nn
es
2015 LLDPE imports
Source ICIS Supply and Demand Database
7 7 77 8 8
8
35 35 35 36 36 36 36
0
5
10
15
20
25
30
35
40
2016 2017 2018 2019 2020 2021 2022
-
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
lsquo00
0 to
nn
es
China versus India PP consumption
World Consumption India Consumption
China Consumption India as a percentage of global total
China as a percentage of global total
wwwiciscom 36
The impact of stimulus on chemicals and polymers
0
200
400
600
800
1000
1200
1400
China Europe Japan SouthKorea
US Taiwan
lsquo00
0 to
nn
esy
ea
r
Average size of PTA capacities
2000 2016
Source ICIS Supply and Demand Database
7872
77
91
114
138
154
164158
0
20
40
60
80
100
120
140
160
180
-
10000
20000
30000
40000
50000
60000
2009 2010 2011 2012 2013 2014 2015 2016 2017
China PTA
Capacity in 000 tonnesyear Consumption in 000 tonnesyear
Capacity as of consumption
wwwiciscom 37
5000
10000
15000
20000
25000
30000
35000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
To
nn
es
China ethylene versus propylene consumption
Ethylene Propylene
China becomes the first country or region in the world where propylene consumption exceeds ethylene
China consumed 13m tonnes of phenol in 2010 versus capacity of 880000 tonnesyear In 2017 ICIS Consulting expects capacity 27m tonnesyear versus 24m tonnes of demand
Acrylic acid capacity in China in 2010 was 11m tonnesyear versus consumption of 1m tonnes In 2017 we are forecasting 35m tonnesyear of capacity versus 17m tonnes of demand
Source ICIS Supply and Demand Database
wwwiciscom 38
Source ICIS Supply and Demand Database
It was about building factories for the sake of building factories to preserve jobs
Little regard was given to conventional analysis of long- term supply and demand
It wasnrsquot about cost per tonne economics
6368 70
7780
8486 87
90
0
10
20
30
40
50
60
70
80
90
100
-
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PP consumption and capacity
Capacity in 000 tonnesyear Consumption in 000 tonnes
Capacity as a percentage of consumption
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 4Copyright copy 2016 ICIS
Energy
Global energy demand is growing but not very fasthellip
Coal29
Oil31
Gas21
Non Fossil19
2015
07
09
19
22
13
00 05 10 15 20 25
COAL
OIL
NATURAL GAS
NON FOSSIL
TOTAL
Energy Demand AAGR 2015-2025
Source ICIS Supply and Demand Database
wwwiciscom 5Copyright copy 2016 ICIS
Energy Efficiency and lower carbon intensity challenge the ldquoComfortable Middlerdquo scenario
Peak Coal Approaching Peak Oil not yet but growth is declininghellip
1219
302
241
339
337 30148
262
304 685
Global Incremental Energy Demand (Millions TOE)
Coal
CoalOil
Oil
Gas
Gas
Non Fossil
Non Fossil
2015 2020 2025Source ICIS Supply and Demand Database
wwwiciscom 6Copyright copy 2016 ICIS
Energy continuing over-investment in China
China growth shrinkshellipcoal moves to surplus
1219
118 37438
626 9 2
112
584684
Global Incremental Energy Demand (Millions TOE)
North
AmericaEurope
China
Rest Of
World
2015 2020 2025
North
America
Europe
China
Rest Of
World
Source ICIS Supply and Demand Database
Supply and Demand DatabaseSingle searchable source of historical data on
global petrochemical and energy markets
Historical and forecast data (1978-2030)
Over 100 petrochemical products
Over 12000 re nery units
Over 18500 petrochemical plants
Import export and consumption volumes
Plant capacity production and operating status
Upcoming plants including speculative and announced projects
Data breakdown by country region product or product family
GDP population and consumer price index by country
More than just data the ICIS Supply and Demand Database is a powerful analytics tool which gives end-to-end perspectives across the global petrochemical supply chain including re neries Data is derived by ICISrsquos team of Consultants using a lsquobottom-uprsquo approach ndash reconciling demand with supply production local capacity and net trade Forecasts are validated against economic indicators such as GDP and per capita consumption
Request a one-to-one demo now enquiryiciscomwwwiciscomsupplydemanddata
ICIS APIC Booklet Adsindd 4 11516 306 pm
Supply and Demand DatabaseSingle searchable source of historical data on
global petrochemical and energy markets
Historical and forecast data (1978-2030)
Over 100 petrochemical products
Over 12000 re nery units
Over 18500 petrochemical plants
Import export and consumption volumes
Plant capacity production and operating status
Upcoming plants including speculative and announced projects
Data breakdown by country region product or product family
GDP population and consumer price index by country
More than just data the ICIS Supply and Demand Database is a powerful analytics tool which gives end-to-end perspectives across the global petrochemical supply chain including re neries Data is derived by ICISrsquos team of Consultants using a lsquobottom-uprsquo approach ndash reconciling demand with supply production local capacity and net trade Forecasts are validated against economic indicators such as GDP and per capita consumption
Request a one-to-one demo now enquiryiciscomwwwiciscomsupplydemanddata
ICIS APIC Booklet Adsindd 4 11516 306 pm
Supply and Demand DatabaseSingle searchable source of historical data on
global petrochemical and energy markets
Historical and forecast data (1978-2030)
Over 100 petrochemical products
Over 12000 re nery units
Over 18500 petrochemical plants
Import export and consumption volumes
Plant capacity production and operating status
Upcoming plants including speculative and announced projects
Data breakdown by country region product or product family
GDP population and consumer price index by country
More than just data the ICIS Supply and Demand Database is a powerful analytics tool which gives end-to-end perspectives across the global petrochemical supply chain including re neries Data is derived by ICISrsquos team of Consultants using a lsquobottom-uprsquo approach ndash reconciling demand with supply production local capacity and net trade Forecasts are validated against economic indicators such as GDP and per capita consumption
Request a one-to-one demo now enquiryiciscomwwwiciscomsupplydemanddata
ICIS APIC Booklet Adsindd 4 11516 306 pm
Click here to request a free demo
Refining amp Feedstocks
wwwiciscom 8Copyright copy 2016 ICIS
Chinarsquos over-investment extends to RefiningGas Oil stagnation and new Refineries a surplus of Transport Fuels
But net imports of petrochemical feedstockshellip
0
2
4
6
8
10
12
14
16
0
20
40
60
80
100
120
140
160MT
Refining Capacity vs Demand
Gasoline Demand
Diesel Demand
Crude Capacity (right Scale Million bd)
-125
-67
57
89
54
-150 -100 -50 00 50 100
LPG
Naphtha(net)
Gasoline
Kerosenes
Gas Oils
2015 Net Balances(Million Tonne)
Source ICIS Supply and Demand Database
wwwiciscom 9Copyright copy 2016 ICIS
European Refiners are increasingly pressuredhellipRoad Fuels demand is declining Refineries are rationalized
Basically a net importer of everything but Gasolinehellip
0
2
4
6
8
10
12
14
16
18
0
50
100
150
200
250
300MT
Refining Capacity vs Demand
Gasoline Demand
Diesel Demand
Crude Capacity (right Scale Million bd)
-127
-93
547
-142
-443
-600 -400 -200 00 200 400 600
LPG
Naphtha(net)
Gasoline
Kerosenes
Gas Oils
2015 Net Balances(Million Tonne)
Source ICIS Supply and Demand Database
wwwiciscom 10Copyright copy 2016 ICIS
European Refiners face more challengeshellip
What if a higher penetration of electrical vehicles takes place
0
5
10
15
20
25
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
MILLION VEHICLES
Electric Vehicles Scenarios (EU 15 + EFTA)
Base Case Scenario (assumes Hybrids mostly on ICE)
Higher Penetration Scenario
0
5
10
15
20
25
30
35
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Electric Vehicles Scenarios (EU 15 + EFTA)
Higher Penetration Scenario Car Fleet Share ()
Higher Penetration Scenario New Cars Market Share ()
Source ICIS Supply and Demand Database amp ICIS Consulting
wwwiciscom 11Copyright copy 2016 ICIS
Refinersrsquo options (Europe is first but other will follow) Rationalization (less naphtha) or more Petrochemicals
Impact of a higher penetration of electrical vehicles
0
10
20
30
40
50
60
70
80
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
MILLION TONNE
Demand Trendsin Higher EVs Scenario
Gasoline Demand Diesel Demand
-12
-10
-8
-6
-4
-2
0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
MILLION TONNE
Demand Impactversus Base Scenario
Gasoline Demand Change Diesel Demand Change
Source ICIS Supply and Demand Database amp ICIS Consulting
wwwiciscom 12
34
North America
02
South amp Central America
16
Europe
00Former USSR
00
Africa
00
Middle East
00
North East Asia
16
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 13
34 279
North America
02 57
South amp Central America
16139
Europe
00
58
Former USSR
0071
Africa
00
415
Middle East
00
307
North East Asia
16185
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 14
34 27989
North America
02 57 08
South amp Central America
16139
33
Europe
00
58 174
Former USSR
0071
152
Africa
00
415 406
Middle East
00
307
596
North East Asia
16185 64
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 15
34 27989
151North America
02 57 08 23
South amp Central America
16139
33
490Europe
00
58 17493
Former USSR
0071
152
240
Africa
00
415 406
40Middle East
00
307
596
187
North East Asia
16185 64
270
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 16
US Shale developments in a lower oil price scenario not the original plan
0
2
4
6
8
10
12
14
16
18
20
Jan
-10
May
-10
Sep
-10
Jan
-11
May
-11
Sep
-11
Jan
-12
May
-12
Sep
-12
Jan
-13
May
-13
Sep
-13
Jan
-14
May
-14
Sep
-14
Jan
-15
May
-15
Sep
-15
Jan
-16
May
-16
US Price developments $MMBTU
Natural Gas Crude Oil Ethane Propane
A large amount of ethane remains ldquorejectedrdquo waiting for the new demand But once demand arrives
more production will be required and transport costs featuredhellip
Propane availability suggests ample supply is available but seasonal factors remain in place Steam-
crackersrsquo feedstock flexibility will be a substantial competitive advantage
0
500
1000
1500
2000
2015 2016 2017 2018 2019 2020
US Ethane Balances under unchanged Supply (lsquo000 bd)
To Ethylene Export by Pipeline
Deep Sea exports 2015 Production
Rejection
Source ICIS Consulting amp ICIS Prices
wwwiciscom 17
EU
(127)
ME
350AF
41
Balances Surplus Deficit
35
53
51 75
88
80
35
60
22to Japan
195
NAM
to rest of SAP
39
27to China
LAM
(65)
Rest of SAP amp
Indonesia
(108)
64
53
FUSSR
JAPAN
(114)
SKOREA
(38)
INDIA
(80)
Global LPG Key Trade Flows (2015)
Volumes in Million tonne
CHINA
(106)
US LPG will remain long flows to international markets rapidly increasing
The US is by now the largest
country exporter of Propane in the
World It was a net importer of
LPG just a few years ago
Exports are now flowing to Asia
and Europe
European demand for Ethylene
has doubled and supply is
declining
The Middle East remains the
largest region in terms of exports
Ample avails in international
markets have promoted Asian
PDH developments
China imports are now exceeding
those of Japan
Source ICIS Supply and Demand Database
wwwiciscom 18Copyright copy 2016 ICIS
European Petrochemical Feedstocks
A growing inflow of imported Light NGLs
Ethylene production from LPG is now swinging within a 20-30 range
Will domestic Refiners improve the naphtha balance in a low oil price scenario
-16
-14
-12
-10
-8
-6
-4
-2
0
2MILLION TONNE
EuropeFeedstock Balances
Ethane LPG Naphtha
0
5
10
15
20
25
30
MILLION TONNE
Europe Ethylene Production by Feedstock
Naphtha amp Heavier LPG Ethane
Source ICIS Supply and Demand Database
Petrochemicals and the Emerging
Markets
wwwiciscom 20Copyright copy 2016 ICIS
Petrochemicals the opportunity is there but will require the right business models
Global demand growth is much faster than oilrsquoshellip
and a target for Refiners
Polyolefins50
Key Elastomers4
Polyesters amp
PUrethanes26
Other Key
Plastics20
2015
41
31
44
33
4
00 10 20 30 40 50
Polyolefins
Key Elastomers
Polyesters amp PUrethanes
Other Key Plastics
TOTAL
Petrochemical Demand AAGR 2015-2025
Source ICIS Supply and Demand Database
wwwiciscom 21Copyright copy 2016 ICIS
Global PetrochemicalsChina is important Europe is growinghellip
almost half of 2020-25 EU increase is in Turkey + Poland
685
5 62306
267
558
352
332 791
Global Incremental Petrochemical Demand (Million Tonne)
North
America
Europe China
Rest Of
World
2015 2020 2025
North
America
EuropeChina
Rest Of
World
Source ICIS Supply and Demand Database
wwwiciscom 22Copyright copy 2016 ICIS
Global Petrochemicals
Polyolefins are the workhorsehellip
685
35918 195
113
406
2 235129 791
Global Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Incremental
Oil Demand is 148 MMT
Source ICIS Supply and Demand Database
wwwiciscom 23Copyright copy 2016 ICIS
Petrochemicals in the ldquoRest of the Worldrdquo
Polyolefins most important Aromatics chain grows at the same pace
267
15307 61
46
195
07 78 52 332
Rest of World Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Source ICIS Supply and Demand Database
wwwiciscom 24Copyright copy 2016 ICIS
Beyond Energy geographical influence is shifting to the ldquoRest of the Worldrdquo
Much of the high growth in the rest of the World is on the ldquoOne Belt One Roadrdquohellip
Asia Excl
China50
Africa amp MEast
39
F USSR
4
S America7
Asia Excl
China52
Africa amp MEast
32
F USSR
7
S America9
Asia Excl
China63
Africa amp
MEast19
F USSR
8
S America10
Energy Oil Petrochemicals
Share of 2015-2025 Incremental Demand in the ldquoRest of Worldrdquo
India Indonesia
Vietnam Russia amp
Iran account for
40 of global
growth potentialSource ICIS Supply and Demand Database
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
The Economic Supercycle and
Why It Is Over
John RichardsonICIS Senior Consultant Asia
wwwiciscom 26
What was the economic Supercycle
The end of the Supercycle What it means for petrochemicals
China past and future Its role in the end of the Supercycle
and what happens next
The way forward New opportunities
Agenda
What was the Supercycle
wwwiciscom 28
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 29
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 30
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
What this means for petrochemicals
wwwiciscom 32
The supply-driven model no longer works
A paradigm shift is under way in the global economy as well as in the global petrochemical markets
Having expected this we successfully forecast the slowdown in the Chinese economy and the collapse of oil prices
Stimulus hangover a lot of it badly spent has left big supply overhangs and so the loss of pricing power
Chinarsquos Role In This New Paradigm
The History
wwwiciscom 34
The biggest credit bubble in economic history
President Xi Jinping opening the 3rd Plenum November 2013
ldquoThe good meat is all gone all that is left are hard bones to chewrdquo
Premier Li Keiqiang in his Work Report to the National Peoplersquos Congress March 2016
ldquoThis is the crucial period in which China currently finds itself and during which we must build up powerful new drivers in order to accelerate the development of the new economyrdquo
2014
wwwiciscom 35
China petrochemicals volumes critically important
67
892
2171
378
749
89 120
1088
2560
-
500
1000
1500
2000
2500
3000
00
0 to
nn
es
2015 LLDPE imports
Source ICIS Supply and Demand Database
7 7 77 8 8
8
35 35 35 36 36 36 36
0
5
10
15
20
25
30
35
40
2016 2017 2018 2019 2020 2021 2022
-
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
lsquo00
0 to
nn
es
China versus India PP consumption
World Consumption India Consumption
China Consumption India as a percentage of global total
China as a percentage of global total
wwwiciscom 36
The impact of stimulus on chemicals and polymers
0
200
400
600
800
1000
1200
1400
China Europe Japan SouthKorea
US Taiwan
lsquo00
0 to
nn
esy
ea
r
Average size of PTA capacities
2000 2016
Source ICIS Supply and Demand Database
7872
77
91
114
138
154
164158
0
20
40
60
80
100
120
140
160
180
-
10000
20000
30000
40000
50000
60000
2009 2010 2011 2012 2013 2014 2015 2016 2017
China PTA
Capacity in 000 tonnesyear Consumption in 000 tonnesyear
Capacity as of consumption
wwwiciscom 37
5000
10000
15000
20000
25000
30000
35000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
To
nn
es
China ethylene versus propylene consumption
Ethylene Propylene
China becomes the first country or region in the world where propylene consumption exceeds ethylene
China consumed 13m tonnes of phenol in 2010 versus capacity of 880000 tonnesyear In 2017 ICIS Consulting expects capacity 27m tonnesyear versus 24m tonnes of demand
Acrylic acid capacity in China in 2010 was 11m tonnesyear versus consumption of 1m tonnes In 2017 we are forecasting 35m tonnesyear of capacity versus 17m tonnes of demand
Source ICIS Supply and Demand Database
wwwiciscom 38
Source ICIS Supply and Demand Database
It was about building factories for the sake of building factories to preserve jobs
Little regard was given to conventional analysis of long- term supply and demand
It wasnrsquot about cost per tonne economics
6368 70
7780
8486 87
90
0
10
20
30
40
50
60
70
80
90
100
-
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PP consumption and capacity
Capacity in 000 tonnesyear Consumption in 000 tonnes
Capacity as a percentage of consumption
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 5Copyright copy 2016 ICIS
Energy Efficiency and lower carbon intensity challenge the ldquoComfortable Middlerdquo scenario
Peak Coal Approaching Peak Oil not yet but growth is declininghellip
1219
302
241
339
337 30148
262
304 685
Global Incremental Energy Demand (Millions TOE)
Coal
CoalOil
Oil
Gas
Gas
Non Fossil
Non Fossil
2015 2020 2025Source ICIS Supply and Demand Database
wwwiciscom 6Copyright copy 2016 ICIS
Energy continuing over-investment in China
China growth shrinkshellipcoal moves to surplus
1219
118 37438
626 9 2
112
584684
Global Incremental Energy Demand (Millions TOE)
North
AmericaEurope
China
Rest Of
World
2015 2020 2025
North
America
Europe
China
Rest Of
World
Source ICIS Supply and Demand Database
Supply and Demand DatabaseSingle searchable source of historical data on
global petrochemical and energy markets
Historical and forecast data (1978-2030)
Over 100 petrochemical products
Over 12000 re nery units
Over 18500 petrochemical plants
Import export and consumption volumes
Plant capacity production and operating status
Upcoming plants including speculative and announced projects
Data breakdown by country region product or product family
GDP population and consumer price index by country
More than just data the ICIS Supply and Demand Database is a powerful analytics tool which gives end-to-end perspectives across the global petrochemical supply chain including re neries Data is derived by ICISrsquos team of Consultants using a lsquobottom-uprsquo approach ndash reconciling demand with supply production local capacity and net trade Forecasts are validated against economic indicators such as GDP and per capita consumption
Request a one-to-one demo now enquiryiciscomwwwiciscomsupplydemanddata
ICIS APIC Booklet Adsindd 4 11516 306 pm
Supply and Demand DatabaseSingle searchable source of historical data on
global petrochemical and energy markets
Historical and forecast data (1978-2030)
Over 100 petrochemical products
Over 12000 re nery units
Over 18500 petrochemical plants
Import export and consumption volumes
Plant capacity production and operating status
Upcoming plants including speculative and announced projects
Data breakdown by country region product or product family
GDP population and consumer price index by country
More than just data the ICIS Supply and Demand Database is a powerful analytics tool which gives end-to-end perspectives across the global petrochemical supply chain including re neries Data is derived by ICISrsquos team of Consultants using a lsquobottom-uprsquo approach ndash reconciling demand with supply production local capacity and net trade Forecasts are validated against economic indicators such as GDP and per capita consumption
Request a one-to-one demo now enquiryiciscomwwwiciscomsupplydemanddata
ICIS APIC Booklet Adsindd 4 11516 306 pm
Supply and Demand DatabaseSingle searchable source of historical data on
global petrochemical and energy markets
Historical and forecast data (1978-2030)
Over 100 petrochemical products
Over 12000 re nery units
Over 18500 petrochemical plants
Import export and consumption volumes
Plant capacity production and operating status
Upcoming plants including speculative and announced projects
Data breakdown by country region product or product family
GDP population and consumer price index by country
More than just data the ICIS Supply and Demand Database is a powerful analytics tool which gives end-to-end perspectives across the global petrochemical supply chain including re neries Data is derived by ICISrsquos team of Consultants using a lsquobottom-uprsquo approach ndash reconciling demand with supply production local capacity and net trade Forecasts are validated against economic indicators such as GDP and per capita consumption
Request a one-to-one demo now enquiryiciscomwwwiciscomsupplydemanddata
ICIS APIC Booklet Adsindd 4 11516 306 pm
Click here to request a free demo
Refining amp Feedstocks
wwwiciscom 8Copyright copy 2016 ICIS
Chinarsquos over-investment extends to RefiningGas Oil stagnation and new Refineries a surplus of Transport Fuels
But net imports of petrochemical feedstockshellip
0
2
4
6
8
10
12
14
16
0
20
40
60
80
100
120
140
160MT
Refining Capacity vs Demand
Gasoline Demand
Diesel Demand
Crude Capacity (right Scale Million bd)
-125
-67
57
89
54
-150 -100 -50 00 50 100
LPG
Naphtha(net)
Gasoline
Kerosenes
Gas Oils
2015 Net Balances(Million Tonne)
Source ICIS Supply and Demand Database
wwwiciscom 9Copyright copy 2016 ICIS
European Refiners are increasingly pressuredhellipRoad Fuels demand is declining Refineries are rationalized
Basically a net importer of everything but Gasolinehellip
0
2
4
6
8
10
12
14
16
18
0
50
100
150
200
250
300MT
Refining Capacity vs Demand
Gasoline Demand
Diesel Demand
Crude Capacity (right Scale Million bd)
-127
-93
547
-142
-443
-600 -400 -200 00 200 400 600
LPG
Naphtha(net)
Gasoline
Kerosenes
Gas Oils
2015 Net Balances(Million Tonne)
Source ICIS Supply and Demand Database
wwwiciscom 10Copyright copy 2016 ICIS
European Refiners face more challengeshellip
What if a higher penetration of electrical vehicles takes place
0
5
10
15
20
25
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
MILLION VEHICLES
Electric Vehicles Scenarios (EU 15 + EFTA)
Base Case Scenario (assumes Hybrids mostly on ICE)
Higher Penetration Scenario
0
5
10
15
20
25
30
35
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Electric Vehicles Scenarios (EU 15 + EFTA)
Higher Penetration Scenario Car Fleet Share ()
Higher Penetration Scenario New Cars Market Share ()
Source ICIS Supply and Demand Database amp ICIS Consulting
wwwiciscom 11Copyright copy 2016 ICIS
Refinersrsquo options (Europe is first but other will follow) Rationalization (less naphtha) or more Petrochemicals
Impact of a higher penetration of electrical vehicles
0
10
20
30
40
50
60
70
80
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
MILLION TONNE
Demand Trendsin Higher EVs Scenario
Gasoline Demand Diesel Demand
-12
-10
-8
-6
-4
-2
0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
MILLION TONNE
Demand Impactversus Base Scenario
Gasoline Demand Change Diesel Demand Change
Source ICIS Supply and Demand Database amp ICIS Consulting
wwwiciscom 12
34
North America
02
South amp Central America
16
Europe
00Former USSR
00
Africa
00
Middle East
00
North East Asia
16
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 13
34 279
North America
02 57
South amp Central America
16139
Europe
00
58
Former USSR
0071
Africa
00
415
Middle East
00
307
North East Asia
16185
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 14
34 27989
North America
02 57 08
South amp Central America
16139
33
Europe
00
58 174
Former USSR
0071
152
Africa
00
415 406
Middle East
00
307
596
North East Asia
16185 64
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 15
34 27989
151North America
02 57 08 23
South amp Central America
16139
33
490Europe
00
58 17493
Former USSR
0071
152
240
Africa
00
415 406
40Middle East
00
307
596
187
North East Asia
16185 64
270
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 16
US Shale developments in a lower oil price scenario not the original plan
0
2
4
6
8
10
12
14
16
18
20
Jan
-10
May
-10
Sep
-10
Jan
-11
May
-11
Sep
-11
Jan
-12
May
-12
Sep
-12
Jan
-13
May
-13
Sep
-13
Jan
-14
May
-14
Sep
-14
Jan
-15
May
-15
Sep
-15
Jan
-16
May
-16
US Price developments $MMBTU
Natural Gas Crude Oil Ethane Propane
A large amount of ethane remains ldquorejectedrdquo waiting for the new demand But once demand arrives
more production will be required and transport costs featuredhellip
Propane availability suggests ample supply is available but seasonal factors remain in place Steam-
crackersrsquo feedstock flexibility will be a substantial competitive advantage
0
500
1000
1500
2000
2015 2016 2017 2018 2019 2020
US Ethane Balances under unchanged Supply (lsquo000 bd)
To Ethylene Export by Pipeline
Deep Sea exports 2015 Production
Rejection
Source ICIS Consulting amp ICIS Prices
wwwiciscom 17
EU
(127)
ME
350AF
41
Balances Surplus Deficit
35
53
51 75
88
80
35
60
22to Japan
195
NAM
to rest of SAP
39
27to China
LAM
(65)
Rest of SAP amp
Indonesia
(108)
64
53
FUSSR
JAPAN
(114)
SKOREA
(38)
INDIA
(80)
Global LPG Key Trade Flows (2015)
Volumes in Million tonne
CHINA
(106)
US LPG will remain long flows to international markets rapidly increasing
The US is by now the largest
country exporter of Propane in the
World It was a net importer of
LPG just a few years ago
Exports are now flowing to Asia
and Europe
European demand for Ethylene
has doubled and supply is
declining
The Middle East remains the
largest region in terms of exports
Ample avails in international
markets have promoted Asian
PDH developments
China imports are now exceeding
those of Japan
Source ICIS Supply and Demand Database
wwwiciscom 18Copyright copy 2016 ICIS
European Petrochemical Feedstocks
A growing inflow of imported Light NGLs
Ethylene production from LPG is now swinging within a 20-30 range
Will domestic Refiners improve the naphtha balance in a low oil price scenario
-16
-14
-12
-10
-8
-6
-4
-2
0
2MILLION TONNE
EuropeFeedstock Balances
Ethane LPG Naphtha
0
5
10
15
20
25
30
MILLION TONNE
Europe Ethylene Production by Feedstock
Naphtha amp Heavier LPG Ethane
Source ICIS Supply and Demand Database
Petrochemicals and the Emerging
Markets
wwwiciscom 20Copyright copy 2016 ICIS
Petrochemicals the opportunity is there but will require the right business models
Global demand growth is much faster than oilrsquoshellip
and a target for Refiners
Polyolefins50
Key Elastomers4
Polyesters amp
PUrethanes26
Other Key
Plastics20
2015
41
31
44
33
4
00 10 20 30 40 50
Polyolefins
Key Elastomers
Polyesters amp PUrethanes
Other Key Plastics
TOTAL
Petrochemical Demand AAGR 2015-2025
Source ICIS Supply and Demand Database
wwwiciscom 21Copyright copy 2016 ICIS
Global PetrochemicalsChina is important Europe is growinghellip
almost half of 2020-25 EU increase is in Turkey + Poland
685
5 62306
267
558
352
332 791
Global Incremental Petrochemical Demand (Million Tonne)
North
America
Europe China
Rest Of
World
2015 2020 2025
North
America
EuropeChina
Rest Of
World
Source ICIS Supply and Demand Database
wwwiciscom 22Copyright copy 2016 ICIS
Global Petrochemicals
Polyolefins are the workhorsehellip
685
35918 195
113
406
2 235129 791
Global Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Incremental
Oil Demand is 148 MMT
Source ICIS Supply and Demand Database
wwwiciscom 23Copyright copy 2016 ICIS
Petrochemicals in the ldquoRest of the Worldrdquo
Polyolefins most important Aromatics chain grows at the same pace
267
15307 61
46
195
07 78 52 332
Rest of World Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Source ICIS Supply and Demand Database
wwwiciscom 24Copyright copy 2016 ICIS
Beyond Energy geographical influence is shifting to the ldquoRest of the Worldrdquo
Much of the high growth in the rest of the World is on the ldquoOne Belt One Roadrdquohellip
Asia Excl
China50
Africa amp MEast
39
F USSR
4
S America7
Asia Excl
China52
Africa amp MEast
32
F USSR
7
S America9
Asia Excl
China63
Africa amp
MEast19
F USSR
8
S America10
Energy Oil Petrochemicals
Share of 2015-2025 Incremental Demand in the ldquoRest of Worldrdquo
India Indonesia
Vietnam Russia amp
Iran account for
40 of global
growth potentialSource ICIS Supply and Demand Database
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
The Economic Supercycle and
Why It Is Over
John RichardsonICIS Senior Consultant Asia
wwwiciscom 26
What was the economic Supercycle
The end of the Supercycle What it means for petrochemicals
China past and future Its role in the end of the Supercycle
and what happens next
The way forward New opportunities
Agenda
What was the Supercycle
wwwiciscom 28
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 29
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 30
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
What this means for petrochemicals
wwwiciscom 32
The supply-driven model no longer works
A paradigm shift is under way in the global economy as well as in the global petrochemical markets
Having expected this we successfully forecast the slowdown in the Chinese economy and the collapse of oil prices
Stimulus hangover a lot of it badly spent has left big supply overhangs and so the loss of pricing power
Chinarsquos Role In This New Paradigm
The History
wwwiciscom 34
The biggest credit bubble in economic history
President Xi Jinping opening the 3rd Plenum November 2013
ldquoThe good meat is all gone all that is left are hard bones to chewrdquo
Premier Li Keiqiang in his Work Report to the National Peoplersquos Congress March 2016
ldquoThis is the crucial period in which China currently finds itself and during which we must build up powerful new drivers in order to accelerate the development of the new economyrdquo
2014
wwwiciscom 35
China petrochemicals volumes critically important
67
892
2171
378
749
89 120
1088
2560
-
500
1000
1500
2000
2500
3000
00
0 to
nn
es
2015 LLDPE imports
Source ICIS Supply and Demand Database
7 7 77 8 8
8
35 35 35 36 36 36 36
0
5
10
15
20
25
30
35
40
2016 2017 2018 2019 2020 2021 2022
-
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
lsquo00
0 to
nn
es
China versus India PP consumption
World Consumption India Consumption
China Consumption India as a percentage of global total
China as a percentage of global total
wwwiciscom 36
The impact of stimulus on chemicals and polymers
0
200
400
600
800
1000
1200
1400
China Europe Japan SouthKorea
US Taiwan
lsquo00
0 to
nn
esy
ea
r
Average size of PTA capacities
2000 2016
Source ICIS Supply and Demand Database
7872
77
91
114
138
154
164158
0
20
40
60
80
100
120
140
160
180
-
10000
20000
30000
40000
50000
60000
2009 2010 2011 2012 2013 2014 2015 2016 2017
China PTA
Capacity in 000 tonnesyear Consumption in 000 tonnesyear
Capacity as of consumption
wwwiciscom 37
5000
10000
15000
20000
25000
30000
35000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
To
nn
es
China ethylene versus propylene consumption
Ethylene Propylene
China becomes the first country or region in the world where propylene consumption exceeds ethylene
China consumed 13m tonnes of phenol in 2010 versus capacity of 880000 tonnesyear In 2017 ICIS Consulting expects capacity 27m tonnesyear versus 24m tonnes of demand
Acrylic acid capacity in China in 2010 was 11m tonnesyear versus consumption of 1m tonnes In 2017 we are forecasting 35m tonnesyear of capacity versus 17m tonnes of demand
Source ICIS Supply and Demand Database
wwwiciscom 38
Source ICIS Supply and Demand Database
It was about building factories for the sake of building factories to preserve jobs
Little regard was given to conventional analysis of long- term supply and demand
It wasnrsquot about cost per tonne economics
6368 70
7780
8486 87
90
0
10
20
30
40
50
60
70
80
90
100
-
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PP consumption and capacity
Capacity in 000 tonnesyear Consumption in 000 tonnes
Capacity as a percentage of consumption
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 6Copyright copy 2016 ICIS
Energy continuing over-investment in China
China growth shrinkshellipcoal moves to surplus
1219
118 37438
626 9 2
112
584684
Global Incremental Energy Demand (Millions TOE)
North
AmericaEurope
China
Rest Of
World
2015 2020 2025
North
America
Europe
China
Rest Of
World
Source ICIS Supply and Demand Database
Supply and Demand DatabaseSingle searchable source of historical data on
global petrochemical and energy markets
Historical and forecast data (1978-2030)
Over 100 petrochemical products
Over 12000 re nery units
Over 18500 petrochemical plants
Import export and consumption volumes
Plant capacity production and operating status
Upcoming plants including speculative and announced projects
Data breakdown by country region product or product family
GDP population and consumer price index by country
More than just data the ICIS Supply and Demand Database is a powerful analytics tool which gives end-to-end perspectives across the global petrochemical supply chain including re neries Data is derived by ICISrsquos team of Consultants using a lsquobottom-uprsquo approach ndash reconciling demand with supply production local capacity and net trade Forecasts are validated against economic indicators such as GDP and per capita consumption
Request a one-to-one demo now enquiryiciscomwwwiciscomsupplydemanddata
ICIS APIC Booklet Adsindd 4 11516 306 pm
Supply and Demand DatabaseSingle searchable source of historical data on
global petrochemical and energy markets
Historical and forecast data (1978-2030)
Over 100 petrochemical products
Over 12000 re nery units
Over 18500 petrochemical plants
Import export and consumption volumes
Plant capacity production and operating status
Upcoming plants including speculative and announced projects
Data breakdown by country region product or product family
GDP population and consumer price index by country
More than just data the ICIS Supply and Demand Database is a powerful analytics tool which gives end-to-end perspectives across the global petrochemical supply chain including re neries Data is derived by ICISrsquos team of Consultants using a lsquobottom-uprsquo approach ndash reconciling demand with supply production local capacity and net trade Forecasts are validated against economic indicators such as GDP and per capita consumption
Request a one-to-one demo now enquiryiciscomwwwiciscomsupplydemanddata
ICIS APIC Booklet Adsindd 4 11516 306 pm
Supply and Demand DatabaseSingle searchable source of historical data on
global petrochemical and energy markets
Historical and forecast data (1978-2030)
Over 100 petrochemical products
Over 12000 re nery units
Over 18500 petrochemical plants
Import export and consumption volumes
Plant capacity production and operating status
Upcoming plants including speculative and announced projects
Data breakdown by country region product or product family
GDP population and consumer price index by country
More than just data the ICIS Supply and Demand Database is a powerful analytics tool which gives end-to-end perspectives across the global petrochemical supply chain including re neries Data is derived by ICISrsquos team of Consultants using a lsquobottom-uprsquo approach ndash reconciling demand with supply production local capacity and net trade Forecasts are validated against economic indicators such as GDP and per capita consumption
Request a one-to-one demo now enquiryiciscomwwwiciscomsupplydemanddata
ICIS APIC Booklet Adsindd 4 11516 306 pm
Click here to request a free demo
Refining amp Feedstocks
wwwiciscom 8Copyright copy 2016 ICIS
Chinarsquos over-investment extends to RefiningGas Oil stagnation and new Refineries a surplus of Transport Fuels
But net imports of petrochemical feedstockshellip
0
2
4
6
8
10
12
14
16
0
20
40
60
80
100
120
140
160MT
Refining Capacity vs Demand
Gasoline Demand
Diesel Demand
Crude Capacity (right Scale Million bd)
-125
-67
57
89
54
-150 -100 -50 00 50 100
LPG
Naphtha(net)
Gasoline
Kerosenes
Gas Oils
2015 Net Balances(Million Tonne)
Source ICIS Supply and Demand Database
wwwiciscom 9Copyright copy 2016 ICIS
European Refiners are increasingly pressuredhellipRoad Fuels demand is declining Refineries are rationalized
Basically a net importer of everything but Gasolinehellip
0
2
4
6
8
10
12
14
16
18
0
50
100
150
200
250
300MT
Refining Capacity vs Demand
Gasoline Demand
Diesel Demand
Crude Capacity (right Scale Million bd)
-127
-93
547
-142
-443
-600 -400 -200 00 200 400 600
LPG
Naphtha(net)
Gasoline
Kerosenes
Gas Oils
2015 Net Balances(Million Tonne)
Source ICIS Supply and Demand Database
wwwiciscom 10Copyright copy 2016 ICIS
European Refiners face more challengeshellip
What if a higher penetration of electrical vehicles takes place
0
5
10
15
20
25
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
MILLION VEHICLES
Electric Vehicles Scenarios (EU 15 + EFTA)
Base Case Scenario (assumes Hybrids mostly on ICE)
Higher Penetration Scenario
0
5
10
15
20
25
30
35
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Electric Vehicles Scenarios (EU 15 + EFTA)
Higher Penetration Scenario Car Fleet Share ()
Higher Penetration Scenario New Cars Market Share ()
Source ICIS Supply and Demand Database amp ICIS Consulting
wwwiciscom 11Copyright copy 2016 ICIS
Refinersrsquo options (Europe is first but other will follow) Rationalization (less naphtha) or more Petrochemicals
Impact of a higher penetration of electrical vehicles
0
10
20
30
40
50
60
70
80
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
MILLION TONNE
Demand Trendsin Higher EVs Scenario
Gasoline Demand Diesel Demand
-12
-10
-8
-6
-4
-2
0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
MILLION TONNE
Demand Impactversus Base Scenario
Gasoline Demand Change Diesel Demand Change
Source ICIS Supply and Demand Database amp ICIS Consulting
wwwiciscom 12
34
North America
02
South amp Central America
16
Europe
00Former USSR
00
Africa
00
Middle East
00
North East Asia
16
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 13
34 279
North America
02 57
South amp Central America
16139
Europe
00
58
Former USSR
0071
Africa
00
415
Middle East
00
307
North East Asia
16185
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 14
34 27989
North America
02 57 08
South amp Central America
16139
33
Europe
00
58 174
Former USSR
0071
152
Africa
00
415 406
Middle East
00
307
596
North East Asia
16185 64
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 15
34 27989
151North America
02 57 08 23
South amp Central America
16139
33
490Europe
00
58 17493
Former USSR
0071
152
240
Africa
00
415 406
40Middle East
00
307
596
187
North East Asia
16185 64
270
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 16
US Shale developments in a lower oil price scenario not the original plan
0
2
4
6
8
10
12
14
16
18
20
Jan
-10
May
-10
Sep
-10
Jan
-11
May
-11
Sep
-11
Jan
-12
May
-12
Sep
-12
Jan
-13
May
-13
Sep
-13
Jan
-14
May
-14
Sep
-14
Jan
-15
May
-15
Sep
-15
Jan
-16
May
-16
US Price developments $MMBTU
Natural Gas Crude Oil Ethane Propane
A large amount of ethane remains ldquorejectedrdquo waiting for the new demand But once demand arrives
more production will be required and transport costs featuredhellip
Propane availability suggests ample supply is available but seasonal factors remain in place Steam-
crackersrsquo feedstock flexibility will be a substantial competitive advantage
0
500
1000
1500
2000
2015 2016 2017 2018 2019 2020
US Ethane Balances under unchanged Supply (lsquo000 bd)
To Ethylene Export by Pipeline
Deep Sea exports 2015 Production
Rejection
Source ICIS Consulting amp ICIS Prices
wwwiciscom 17
EU
(127)
ME
350AF
41
Balances Surplus Deficit
35
53
51 75
88
80
35
60
22to Japan
195
NAM
to rest of SAP
39
27to China
LAM
(65)
Rest of SAP amp
Indonesia
(108)
64
53
FUSSR
JAPAN
(114)
SKOREA
(38)
INDIA
(80)
Global LPG Key Trade Flows (2015)
Volumes in Million tonne
CHINA
(106)
US LPG will remain long flows to international markets rapidly increasing
The US is by now the largest
country exporter of Propane in the
World It was a net importer of
LPG just a few years ago
Exports are now flowing to Asia
and Europe
European demand for Ethylene
has doubled and supply is
declining
The Middle East remains the
largest region in terms of exports
Ample avails in international
markets have promoted Asian
PDH developments
China imports are now exceeding
those of Japan
Source ICIS Supply and Demand Database
wwwiciscom 18Copyright copy 2016 ICIS
European Petrochemical Feedstocks
A growing inflow of imported Light NGLs
Ethylene production from LPG is now swinging within a 20-30 range
Will domestic Refiners improve the naphtha balance in a low oil price scenario
-16
-14
-12
-10
-8
-6
-4
-2
0
2MILLION TONNE
EuropeFeedstock Balances
Ethane LPG Naphtha
0
5
10
15
20
25
30
MILLION TONNE
Europe Ethylene Production by Feedstock
Naphtha amp Heavier LPG Ethane
Source ICIS Supply and Demand Database
Petrochemicals and the Emerging
Markets
wwwiciscom 20Copyright copy 2016 ICIS
Petrochemicals the opportunity is there but will require the right business models
Global demand growth is much faster than oilrsquoshellip
and a target for Refiners
Polyolefins50
Key Elastomers4
Polyesters amp
PUrethanes26
Other Key
Plastics20
2015
41
31
44
33
4
00 10 20 30 40 50
Polyolefins
Key Elastomers
Polyesters amp PUrethanes
Other Key Plastics
TOTAL
Petrochemical Demand AAGR 2015-2025
Source ICIS Supply and Demand Database
wwwiciscom 21Copyright copy 2016 ICIS
Global PetrochemicalsChina is important Europe is growinghellip
almost half of 2020-25 EU increase is in Turkey + Poland
685
5 62306
267
558
352
332 791
Global Incremental Petrochemical Demand (Million Tonne)
North
America
Europe China
Rest Of
World
2015 2020 2025
North
America
EuropeChina
Rest Of
World
Source ICIS Supply and Demand Database
wwwiciscom 22Copyright copy 2016 ICIS
Global Petrochemicals
Polyolefins are the workhorsehellip
685
35918 195
113
406
2 235129 791
Global Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Incremental
Oil Demand is 148 MMT
Source ICIS Supply and Demand Database
wwwiciscom 23Copyright copy 2016 ICIS
Petrochemicals in the ldquoRest of the Worldrdquo
Polyolefins most important Aromatics chain grows at the same pace
267
15307 61
46
195
07 78 52 332
Rest of World Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Source ICIS Supply and Demand Database
wwwiciscom 24Copyright copy 2016 ICIS
Beyond Energy geographical influence is shifting to the ldquoRest of the Worldrdquo
Much of the high growth in the rest of the World is on the ldquoOne Belt One Roadrdquohellip
Asia Excl
China50
Africa amp MEast
39
F USSR
4
S America7
Asia Excl
China52
Africa amp MEast
32
F USSR
7
S America9
Asia Excl
China63
Africa amp
MEast19
F USSR
8
S America10
Energy Oil Petrochemicals
Share of 2015-2025 Incremental Demand in the ldquoRest of Worldrdquo
India Indonesia
Vietnam Russia amp
Iran account for
40 of global
growth potentialSource ICIS Supply and Demand Database
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
The Economic Supercycle and
Why It Is Over
John RichardsonICIS Senior Consultant Asia
wwwiciscom 26
What was the economic Supercycle
The end of the Supercycle What it means for petrochemicals
China past and future Its role in the end of the Supercycle
and what happens next
The way forward New opportunities
Agenda
What was the Supercycle
wwwiciscom 28
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 29
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 30
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
What this means for petrochemicals
wwwiciscom 32
The supply-driven model no longer works
A paradigm shift is under way in the global economy as well as in the global petrochemical markets
Having expected this we successfully forecast the slowdown in the Chinese economy and the collapse of oil prices
Stimulus hangover a lot of it badly spent has left big supply overhangs and so the loss of pricing power
Chinarsquos Role In This New Paradigm
The History
wwwiciscom 34
The biggest credit bubble in economic history
President Xi Jinping opening the 3rd Plenum November 2013
ldquoThe good meat is all gone all that is left are hard bones to chewrdquo
Premier Li Keiqiang in his Work Report to the National Peoplersquos Congress March 2016
ldquoThis is the crucial period in which China currently finds itself and during which we must build up powerful new drivers in order to accelerate the development of the new economyrdquo
2014
wwwiciscom 35
China petrochemicals volumes critically important
67
892
2171
378
749
89 120
1088
2560
-
500
1000
1500
2000
2500
3000
00
0 to
nn
es
2015 LLDPE imports
Source ICIS Supply and Demand Database
7 7 77 8 8
8
35 35 35 36 36 36 36
0
5
10
15
20
25
30
35
40
2016 2017 2018 2019 2020 2021 2022
-
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
lsquo00
0 to
nn
es
China versus India PP consumption
World Consumption India Consumption
China Consumption India as a percentage of global total
China as a percentage of global total
wwwiciscom 36
The impact of stimulus on chemicals and polymers
0
200
400
600
800
1000
1200
1400
China Europe Japan SouthKorea
US Taiwan
lsquo00
0 to
nn
esy
ea
r
Average size of PTA capacities
2000 2016
Source ICIS Supply and Demand Database
7872
77
91
114
138
154
164158
0
20
40
60
80
100
120
140
160
180
-
10000
20000
30000
40000
50000
60000
2009 2010 2011 2012 2013 2014 2015 2016 2017
China PTA
Capacity in 000 tonnesyear Consumption in 000 tonnesyear
Capacity as of consumption
wwwiciscom 37
5000
10000
15000
20000
25000
30000
35000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
To
nn
es
China ethylene versus propylene consumption
Ethylene Propylene
China becomes the first country or region in the world where propylene consumption exceeds ethylene
China consumed 13m tonnes of phenol in 2010 versus capacity of 880000 tonnesyear In 2017 ICIS Consulting expects capacity 27m tonnesyear versus 24m tonnes of demand
Acrylic acid capacity in China in 2010 was 11m tonnesyear versus consumption of 1m tonnes In 2017 we are forecasting 35m tonnesyear of capacity versus 17m tonnes of demand
Source ICIS Supply and Demand Database
wwwiciscom 38
Source ICIS Supply and Demand Database
It was about building factories for the sake of building factories to preserve jobs
Little regard was given to conventional analysis of long- term supply and demand
It wasnrsquot about cost per tonne economics
6368 70
7780
8486 87
90
0
10
20
30
40
50
60
70
80
90
100
-
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PP consumption and capacity
Capacity in 000 tonnesyear Consumption in 000 tonnes
Capacity as a percentage of consumption
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
Supply and Demand DatabaseSingle searchable source of historical data on
global petrochemical and energy markets
Historical and forecast data (1978-2030)
Over 100 petrochemical products
Over 12000 re nery units
Over 18500 petrochemical plants
Import export and consumption volumes
Plant capacity production and operating status
Upcoming plants including speculative and announced projects
Data breakdown by country region product or product family
GDP population and consumer price index by country
More than just data the ICIS Supply and Demand Database is a powerful analytics tool which gives end-to-end perspectives across the global petrochemical supply chain including re neries Data is derived by ICISrsquos team of Consultants using a lsquobottom-uprsquo approach ndash reconciling demand with supply production local capacity and net trade Forecasts are validated against economic indicators such as GDP and per capita consumption
Request a one-to-one demo now enquiryiciscomwwwiciscomsupplydemanddata
ICIS APIC Booklet Adsindd 4 11516 306 pm
Supply and Demand DatabaseSingle searchable source of historical data on
global petrochemical and energy markets
Historical and forecast data (1978-2030)
Over 100 petrochemical products
Over 12000 re nery units
Over 18500 petrochemical plants
Import export and consumption volumes
Plant capacity production and operating status
Upcoming plants including speculative and announced projects
Data breakdown by country region product or product family
GDP population and consumer price index by country
More than just data the ICIS Supply and Demand Database is a powerful analytics tool which gives end-to-end perspectives across the global petrochemical supply chain including re neries Data is derived by ICISrsquos team of Consultants using a lsquobottom-uprsquo approach ndash reconciling demand with supply production local capacity and net trade Forecasts are validated against economic indicators such as GDP and per capita consumption
Request a one-to-one demo now enquiryiciscomwwwiciscomsupplydemanddata
ICIS APIC Booklet Adsindd 4 11516 306 pm
Supply and Demand DatabaseSingle searchable source of historical data on
global petrochemical and energy markets
Historical and forecast data (1978-2030)
Over 100 petrochemical products
Over 12000 re nery units
Over 18500 petrochemical plants
Import export and consumption volumes
Plant capacity production and operating status
Upcoming plants including speculative and announced projects
Data breakdown by country region product or product family
GDP population and consumer price index by country
More than just data the ICIS Supply and Demand Database is a powerful analytics tool which gives end-to-end perspectives across the global petrochemical supply chain including re neries Data is derived by ICISrsquos team of Consultants using a lsquobottom-uprsquo approach ndash reconciling demand with supply production local capacity and net trade Forecasts are validated against economic indicators such as GDP and per capita consumption
Request a one-to-one demo now enquiryiciscomwwwiciscomsupplydemanddata
ICIS APIC Booklet Adsindd 4 11516 306 pm
Click here to request a free demo
Refining amp Feedstocks
wwwiciscom 8Copyright copy 2016 ICIS
Chinarsquos over-investment extends to RefiningGas Oil stagnation and new Refineries a surplus of Transport Fuels
But net imports of petrochemical feedstockshellip
0
2
4
6
8
10
12
14
16
0
20
40
60
80
100
120
140
160MT
Refining Capacity vs Demand
Gasoline Demand
Diesel Demand
Crude Capacity (right Scale Million bd)
-125
-67
57
89
54
-150 -100 -50 00 50 100
LPG
Naphtha(net)
Gasoline
Kerosenes
Gas Oils
2015 Net Balances(Million Tonne)
Source ICIS Supply and Demand Database
wwwiciscom 9Copyright copy 2016 ICIS
European Refiners are increasingly pressuredhellipRoad Fuels demand is declining Refineries are rationalized
Basically a net importer of everything but Gasolinehellip
0
2
4
6
8
10
12
14
16
18
0
50
100
150
200
250
300MT
Refining Capacity vs Demand
Gasoline Demand
Diesel Demand
Crude Capacity (right Scale Million bd)
-127
-93
547
-142
-443
-600 -400 -200 00 200 400 600
LPG
Naphtha(net)
Gasoline
Kerosenes
Gas Oils
2015 Net Balances(Million Tonne)
Source ICIS Supply and Demand Database
wwwiciscom 10Copyright copy 2016 ICIS
European Refiners face more challengeshellip
What if a higher penetration of electrical vehicles takes place
0
5
10
15
20
25
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
MILLION VEHICLES
Electric Vehicles Scenarios (EU 15 + EFTA)
Base Case Scenario (assumes Hybrids mostly on ICE)
Higher Penetration Scenario
0
5
10
15
20
25
30
35
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Electric Vehicles Scenarios (EU 15 + EFTA)
Higher Penetration Scenario Car Fleet Share ()
Higher Penetration Scenario New Cars Market Share ()
Source ICIS Supply and Demand Database amp ICIS Consulting
wwwiciscom 11Copyright copy 2016 ICIS
Refinersrsquo options (Europe is first but other will follow) Rationalization (less naphtha) or more Petrochemicals
Impact of a higher penetration of electrical vehicles
0
10
20
30
40
50
60
70
80
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
MILLION TONNE
Demand Trendsin Higher EVs Scenario
Gasoline Demand Diesel Demand
-12
-10
-8
-6
-4
-2
0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
MILLION TONNE
Demand Impactversus Base Scenario
Gasoline Demand Change Diesel Demand Change
Source ICIS Supply and Demand Database amp ICIS Consulting
wwwiciscom 12
34
North America
02
South amp Central America
16
Europe
00Former USSR
00
Africa
00
Middle East
00
North East Asia
16
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 13
34 279
North America
02 57
South amp Central America
16139
Europe
00
58
Former USSR
0071
Africa
00
415
Middle East
00
307
North East Asia
16185
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 14
34 27989
North America
02 57 08
South amp Central America
16139
33
Europe
00
58 174
Former USSR
0071
152
Africa
00
415 406
Middle East
00
307
596
North East Asia
16185 64
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 15
34 27989
151North America
02 57 08 23
South amp Central America
16139
33
490Europe
00
58 17493
Former USSR
0071
152
240
Africa
00
415 406
40Middle East
00
307
596
187
North East Asia
16185 64
270
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 16
US Shale developments in a lower oil price scenario not the original plan
0
2
4
6
8
10
12
14
16
18
20
Jan
-10
May
-10
Sep
-10
Jan
-11
May
-11
Sep
-11
Jan
-12
May
-12
Sep
-12
Jan
-13
May
-13
Sep
-13
Jan
-14
May
-14
Sep
-14
Jan
-15
May
-15
Sep
-15
Jan
-16
May
-16
US Price developments $MMBTU
Natural Gas Crude Oil Ethane Propane
A large amount of ethane remains ldquorejectedrdquo waiting for the new demand But once demand arrives
more production will be required and transport costs featuredhellip
Propane availability suggests ample supply is available but seasonal factors remain in place Steam-
crackersrsquo feedstock flexibility will be a substantial competitive advantage
0
500
1000
1500
2000
2015 2016 2017 2018 2019 2020
US Ethane Balances under unchanged Supply (lsquo000 bd)
To Ethylene Export by Pipeline
Deep Sea exports 2015 Production
Rejection
Source ICIS Consulting amp ICIS Prices
wwwiciscom 17
EU
(127)
ME
350AF
41
Balances Surplus Deficit
35
53
51 75
88
80
35
60
22to Japan
195
NAM
to rest of SAP
39
27to China
LAM
(65)
Rest of SAP amp
Indonesia
(108)
64
53
FUSSR
JAPAN
(114)
SKOREA
(38)
INDIA
(80)
Global LPG Key Trade Flows (2015)
Volumes in Million tonne
CHINA
(106)
US LPG will remain long flows to international markets rapidly increasing
The US is by now the largest
country exporter of Propane in the
World It was a net importer of
LPG just a few years ago
Exports are now flowing to Asia
and Europe
European demand for Ethylene
has doubled and supply is
declining
The Middle East remains the
largest region in terms of exports
Ample avails in international
markets have promoted Asian
PDH developments
China imports are now exceeding
those of Japan
Source ICIS Supply and Demand Database
wwwiciscom 18Copyright copy 2016 ICIS
European Petrochemical Feedstocks
A growing inflow of imported Light NGLs
Ethylene production from LPG is now swinging within a 20-30 range
Will domestic Refiners improve the naphtha balance in a low oil price scenario
-16
-14
-12
-10
-8
-6
-4
-2
0
2MILLION TONNE
EuropeFeedstock Balances
Ethane LPG Naphtha
0
5
10
15
20
25
30
MILLION TONNE
Europe Ethylene Production by Feedstock
Naphtha amp Heavier LPG Ethane
Source ICIS Supply and Demand Database
Petrochemicals and the Emerging
Markets
wwwiciscom 20Copyright copy 2016 ICIS
Petrochemicals the opportunity is there but will require the right business models
Global demand growth is much faster than oilrsquoshellip
and a target for Refiners
Polyolefins50
Key Elastomers4
Polyesters amp
PUrethanes26
Other Key
Plastics20
2015
41
31
44
33
4
00 10 20 30 40 50
Polyolefins
Key Elastomers
Polyesters amp PUrethanes
Other Key Plastics
TOTAL
Petrochemical Demand AAGR 2015-2025
Source ICIS Supply and Demand Database
wwwiciscom 21Copyright copy 2016 ICIS
Global PetrochemicalsChina is important Europe is growinghellip
almost half of 2020-25 EU increase is in Turkey + Poland
685
5 62306
267
558
352
332 791
Global Incremental Petrochemical Demand (Million Tonne)
North
America
Europe China
Rest Of
World
2015 2020 2025
North
America
EuropeChina
Rest Of
World
Source ICIS Supply and Demand Database
wwwiciscom 22Copyright copy 2016 ICIS
Global Petrochemicals
Polyolefins are the workhorsehellip
685
35918 195
113
406
2 235129 791
Global Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Incremental
Oil Demand is 148 MMT
Source ICIS Supply and Demand Database
wwwiciscom 23Copyright copy 2016 ICIS
Petrochemicals in the ldquoRest of the Worldrdquo
Polyolefins most important Aromatics chain grows at the same pace
267
15307 61
46
195
07 78 52 332
Rest of World Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Source ICIS Supply and Demand Database
wwwiciscom 24Copyright copy 2016 ICIS
Beyond Energy geographical influence is shifting to the ldquoRest of the Worldrdquo
Much of the high growth in the rest of the World is on the ldquoOne Belt One Roadrdquohellip
Asia Excl
China50
Africa amp MEast
39
F USSR
4
S America7
Asia Excl
China52
Africa amp MEast
32
F USSR
7
S America9
Asia Excl
China63
Africa amp
MEast19
F USSR
8
S America10
Energy Oil Petrochemicals
Share of 2015-2025 Incremental Demand in the ldquoRest of Worldrdquo
India Indonesia
Vietnam Russia amp
Iran account for
40 of global
growth potentialSource ICIS Supply and Demand Database
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
The Economic Supercycle and
Why It Is Over
John RichardsonICIS Senior Consultant Asia
wwwiciscom 26
What was the economic Supercycle
The end of the Supercycle What it means for petrochemicals
China past and future Its role in the end of the Supercycle
and what happens next
The way forward New opportunities
Agenda
What was the Supercycle
wwwiciscom 28
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 29
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 30
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
What this means for petrochemicals
wwwiciscom 32
The supply-driven model no longer works
A paradigm shift is under way in the global economy as well as in the global petrochemical markets
Having expected this we successfully forecast the slowdown in the Chinese economy and the collapse of oil prices
Stimulus hangover a lot of it badly spent has left big supply overhangs and so the loss of pricing power
Chinarsquos Role In This New Paradigm
The History
wwwiciscom 34
The biggest credit bubble in economic history
President Xi Jinping opening the 3rd Plenum November 2013
ldquoThe good meat is all gone all that is left are hard bones to chewrdquo
Premier Li Keiqiang in his Work Report to the National Peoplersquos Congress March 2016
ldquoThis is the crucial period in which China currently finds itself and during which we must build up powerful new drivers in order to accelerate the development of the new economyrdquo
2014
wwwiciscom 35
China petrochemicals volumes critically important
67
892
2171
378
749
89 120
1088
2560
-
500
1000
1500
2000
2500
3000
00
0 to
nn
es
2015 LLDPE imports
Source ICIS Supply and Demand Database
7 7 77 8 8
8
35 35 35 36 36 36 36
0
5
10
15
20
25
30
35
40
2016 2017 2018 2019 2020 2021 2022
-
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
lsquo00
0 to
nn
es
China versus India PP consumption
World Consumption India Consumption
China Consumption India as a percentage of global total
China as a percentage of global total
wwwiciscom 36
The impact of stimulus on chemicals and polymers
0
200
400
600
800
1000
1200
1400
China Europe Japan SouthKorea
US Taiwan
lsquo00
0 to
nn
esy
ea
r
Average size of PTA capacities
2000 2016
Source ICIS Supply and Demand Database
7872
77
91
114
138
154
164158
0
20
40
60
80
100
120
140
160
180
-
10000
20000
30000
40000
50000
60000
2009 2010 2011 2012 2013 2014 2015 2016 2017
China PTA
Capacity in 000 tonnesyear Consumption in 000 tonnesyear
Capacity as of consumption
wwwiciscom 37
5000
10000
15000
20000
25000
30000
35000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
To
nn
es
China ethylene versus propylene consumption
Ethylene Propylene
China becomes the first country or region in the world where propylene consumption exceeds ethylene
China consumed 13m tonnes of phenol in 2010 versus capacity of 880000 tonnesyear In 2017 ICIS Consulting expects capacity 27m tonnesyear versus 24m tonnes of demand
Acrylic acid capacity in China in 2010 was 11m tonnesyear versus consumption of 1m tonnes In 2017 we are forecasting 35m tonnesyear of capacity versus 17m tonnes of demand
Source ICIS Supply and Demand Database
wwwiciscom 38
Source ICIS Supply and Demand Database
It was about building factories for the sake of building factories to preserve jobs
Little regard was given to conventional analysis of long- term supply and demand
It wasnrsquot about cost per tonne economics
6368 70
7780
8486 87
90
0
10
20
30
40
50
60
70
80
90
100
-
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PP consumption and capacity
Capacity in 000 tonnesyear Consumption in 000 tonnes
Capacity as a percentage of consumption
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
Refining amp Feedstocks
wwwiciscom 8Copyright copy 2016 ICIS
Chinarsquos over-investment extends to RefiningGas Oil stagnation and new Refineries a surplus of Transport Fuels
But net imports of petrochemical feedstockshellip
0
2
4
6
8
10
12
14
16
0
20
40
60
80
100
120
140
160MT
Refining Capacity vs Demand
Gasoline Demand
Diesel Demand
Crude Capacity (right Scale Million bd)
-125
-67
57
89
54
-150 -100 -50 00 50 100
LPG
Naphtha(net)
Gasoline
Kerosenes
Gas Oils
2015 Net Balances(Million Tonne)
Source ICIS Supply and Demand Database
wwwiciscom 9Copyright copy 2016 ICIS
European Refiners are increasingly pressuredhellipRoad Fuels demand is declining Refineries are rationalized
Basically a net importer of everything but Gasolinehellip
0
2
4
6
8
10
12
14
16
18
0
50
100
150
200
250
300MT
Refining Capacity vs Demand
Gasoline Demand
Diesel Demand
Crude Capacity (right Scale Million bd)
-127
-93
547
-142
-443
-600 -400 -200 00 200 400 600
LPG
Naphtha(net)
Gasoline
Kerosenes
Gas Oils
2015 Net Balances(Million Tonne)
Source ICIS Supply and Demand Database
wwwiciscom 10Copyright copy 2016 ICIS
European Refiners face more challengeshellip
What if a higher penetration of electrical vehicles takes place
0
5
10
15
20
25
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
MILLION VEHICLES
Electric Vehicles Scenarios (EU 15 + EFTA)
Base Case Scenario (assumes Hybrids mostly on ICE)
Higher Penetration Scenario
0
5
10
15
20
25
30
35
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Electric Vehicles Scenarios (EU 15 + EFTA)
Higher Penetration Scenario Car Fleet Share ()
Higher Penetration Scenario New Cars Market Share ()
Source ICIS Supply and Demand Database amp ICIS Consulting
wwwiciscom 11Copyright copy 2016 ICIS
Refinersrsquo options (Europe is first but other will follow) Rationalization (less naphtha) or more Petrochemicals
Impact of a higher penetration of electrical vehicles
0
10
20
30
40
50
60
70
80
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
MILLION TONNE
Demand Trendsin Higher EVs Scenario
Gasoline Demand Diesel Demand
-12
-10
-8
-6
-4
-2
0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
MILLION TONNE
Demand Impactversus Base Scenario
Gasoline Demand Change Diesel Demand Change
Source ICIS Supply and Demand Database amp ICIS Consulting
wwwiciscom 12
34
North America
02
South amp Central America
16
Europe
00Former USSR
00
Africa
00
Middle East
00
North East Asia
16
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 13
34 279
North America
02 57
South amp Central America
16139
Europe
00
58
Former USSR
0071
Africa
00
415
Middle East
00
307
North East Asia
16185
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 14
34 27989
North America
02 57 08
South amp Central America
16139
33
Europe
00
58 174
Former USSR
0071
152
Africa
00
415 406
Middle East
00
307
596
North East Asia
16185 64
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 15
34 27989
151North America
02 57 08 23
South amp Central America
16139
33
490Europe
00
58 17493
Former USSR
0071
152
240
Africa
00
415 406
40Middle East
00
307
596
187
North East Asia
16185 64
270
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 16
US Shale developments in a lower oil price scenario not the original plan
0
2
4
6
8
10
12
14
16
18
20
Jan
-10
May
-10
Sep
-10
Jan
-11
May
-11
Sep
-11
Jan
-12
May
-12
Sep
-12
Jan
-13
May
-13
Sep
-13
Jan
-14
May
-14
Sep
-14
Jan
-15
May
-15
Sep
-15
Jan
-16
May
-16
US Price developments $MMBTU
Natural Gas Crude Oil Ethane Propane
A large amount of ethane remains ldquorejectedrdquo waiting for the new demand But once demand arrives
more production will be required and transport costs featuredhellip
Propane availability suggests ample supply is available but seasonal factors remain in place Steam-
crackersrsquo feedstock flexibility will be a substantial competitive advantage
0
500
1000
1500
2000
2015 2016 2017 2018 2019 2020
US Ethane Balances under unchanged Supply (lsquo000 bd)
To Ethylene Export by Pipeline
Deep Sea exports 2015 Production
Rejection
Source ICIS Consulting amp ICIS Prices
wwwiciscom 17
EU
(127)
ME
350AF
41
Balances Surplus Deficit
35
53
51 75
88
80
35
60
22to Japan
195
NAM
to rest of SAP
39
27to China
LAM
(65)
Rest of SAP amp
Indonesia
(108)
64
53
FUSSR
JAPAN
(114)
SKOREA
(38)
INDIA
(80)
Global LPG Key Trade Flows (2015)
Volumes in Million tonne
CHINA
(106)
US LPG will remain long flows to international markets rapidly increasing
The US is by now the largest
country exporter of Propane in the
World It was a net importer of
LPG just a few years ago
Exports are now flowing to Asia
and Europe
European demand for Ethylene
has doubled and supply is
declining
The Middle East remains the
largest region in terms of exports
Ample avails in international
markets have promoted Asian
PDH developments
China imports are now exceeding
those of Japan
Source ICIS Supply and Demand Database
wwwiciscom 18Copyright copy 2016 ICIS
European Petrochemical Feedstocks
A growing inflow of imported Light NGLs
Ethylene production from LPG is now swinging within a 20-30 range
Will domestic Refiners improve the naphtha balance in a low oil price scenario
-16
-14
-12
-10
-8
-6
-4
-2
0
2MILLION TONNE
EuropeFeedstock Balances
Ethane LPG Naphtha
0
5
10
15
20
25
30
MILLION TONNE
Europe Ethylene Production by Feedstock
Naphtha amp Heavier LPG Ethane
Source ICIS Supply and Demand Database
Petrochemicals and the Emerging
Markets
wwwiciscom 20Copyright copy 2016 ICIS
Petrochemicals the opportunity is there but will require the right business models
Global demand growth is much faster than oilrsquoshellip
and a target for Refiners
Polyolefins50
Key Elastomers4
Polyesters amp
PUrethanes26
Other Key
Plastics20
2015
41
31
44
33
4
00 10 20 30 40 50
Polyolefins
Key Elastomers
Polyesters amp PUrethanes
Other Key Plastics
TOTAL
Petrochemical Demand AAGR 2015-2025
Source ICIS Supply and Demand Database
wwwiciscom 21Copyright copy 2016 ICIS
Global PetrochemicalsChina is important Europe is growinghellip
almost half of 2020-25 EU increase is in Turkey + Poland
685
5 62306
267
558
352
332 791
Global Incremental Petrochemical Demand (Million Tonne)
North
America
Europe China
Rest Of
World
2015 2020 2025
North
America
EuropeChina
Rest Of
World
Source ICIS Supply and Demand Database
wwwiciscom 22Copyright copy 2016 ICIS
Global Petrochemicals
Polyolefins are the workhorsehellip
685
35918 195
113
406
2 235129 791
Global Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Incremental
Oil Demand is 148 MMT
Source ICIS Supply and Demand Database
wwwiciscom 23Copyright copy 2016 ICIS
Petrochemicals in the ldquoRest of the Worldrdquo
Polyolefins most important Aromatics chain grows at the same pace
267
15307 61
46
195
07 78 52 332
Rest of World Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Source ICIS Supply and Demand Database
wwwiciscom 24Copyright copy 2016 ICIS
Beyond Energy geographical influence is shifting to the ldquoRest of the Worldrdquo
Much of the high growth in the rest of the World is on the ldquoOne Belt One Roadrdquohellip
Asia Excl
China50
Africa amp MEast
39
F USSR
4
S America7
Asia Excl
China52
Africa amp MEast
32
F USSR
7
S America9
Asia Excl
China63
Africa amp
MEast19
F USSR
8
S America10
Energy Oil Petrochemicals
Share of 2015-2025 Incremental Demand in the ldquoRest of Worldrdquo
India Indonesia
Vietnam Russia amp
Iran account for
40 of global
growth potentialSource ICIS Supply and Demand Database
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
The Economic Supercycle and
Why It Is Over
John RichardsonICIS Senior Consultant Asia
wwwiciscom 26
What was the economic Supercycle
The end of the Supercycle What it means for petrochemicals
China past and future Its role in the end of the Supercycle
and what happens next
The way forward New opportunities
Agenda
What was the Supercycle
wwwiciscom 28
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 29
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 30
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
What this means for petrochemicals
wwwiciscom 32
The supply-driven model no longer works
A paradigm shift is under way in the global economy as well as in the global petrochemical markets
Having expected this we successfully forecast the slowdown in the Chinese economy and the collapse of oil prices
Stimulus hangover a lot of it badly spent has left big supply overhangs and so the loss of pricing power
Chinarsquos Role In This New Paradigm
The History
wwwiciscom 34
The biggest credit bubble in economic history
President Xi Jinping opening the 3rd Plenum November 2013
ldquoThe good meat is all gone all that is left are hard bones to chewrdquo
Premier Li Keiqiang in his Work Report to the National Peoplersquos Congress March 2016
ldquoThis is the crucial period in which China currently finds itself and during which we must build up powerful new drivers in order to accelerate the development of the new economyrdquo
2014
wwwiciscom 35
China petrochemicals volumes critically important
67
892
2171
378
749
89 120
1088
2560
-
500
1000
1500
2000
2500
3000
00
0 to
nn
es
2015 LLDPE imports
Source ICIS Supply and Demand Database
7 7 77 8 8
8
35 35 35 36 36 36 36
0
5
10
15
20
25
30
35
40
2016 2017 2018 2019 2020 2021 2022
-
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
lsquo00
0 to
nn
es
China versus India PP consumption
World Consumption India Consumption
China Consumption India as a percentage of global total
China as a percentage of global total
wwwiciscom 36
The impact of stimulus on chemicals and polymers
0
200
400
600
800
1000
1200
1400
China Europe Japan SouthKorea
US Taiwan
lsquo00
0 to
nn
esy
ea
r
Average size of PTA capacities
2000 2016
Source ICIS Supply and Demand Database
7872
77
91
114
138
154
164158
0
20
40
60
80
100
120
140
160
180
-
10000
20000
30000
40000
50000
60000
2009 2010 2011 2012 2013 2014 2015 2016 2017
China PTA
Capacity in 000 tonnesyear Consumption in 000 tonnesyear
Capacity as of consumption
wwwiciscom 37
5000
10000
15000
20000
25000
30000
35000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
To
nn
es
China ethylene versus propylene consumption
Ethylene Propylene
China becomes the first country or region in the world where propylene consumption exceeds ethylene
China consumed 13m tonnes of phenol in 2010 versus capacity of 880000 tonnesyear In 2017 ICIS Consulting expects capacity 27m tonnesyear versus 24m tonnes of demand
Acrylic acid capacity in China in 2010 was 11m tonnesyear versus consumption of 1m tonnes In 2017 we are forecasting 35m tonnesyear of capacity versus 17m tonnes of demand
Source ICIS Supply and Demand Database
wwwiciscom 38
Source ICIS Supply and Demand Database
It was about building factories for the sake of building factories to preserve jobs
Little regard was given to conventional analysis of long- term supply and demand
It wasnrsquot about cost per tonne economics
6368 70
7780
8486 87
90
0
10
20
30
40
50
60
70
80
90
100
-
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PP consumption and capacity
Capacity in 000 tonnesyear Consumption in 000 tonnes
Capacity as a percentage of consumption
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 8Copyright copy 2016 ICIS
Chinarsquos over-investment extends to RefiningGas Oil stagnation and new Refineries a surplus of Transport Fuels
But net imports of petrochemical feedstockshellip
0
2
4
6
8
10
12
14
16
0
20
40
60
80
100
120
140
160MT
Refining Capacity vs Demand
Gasoline Demand
Diesel Demand
Crude Capacity (right Scale Million bd)
-125
-67
57
89
54
-150 -100 -50 00 50 100
LPG
Naphtha(net)
Gasoline
Kerosenes
Gas Oils
2015 Net Balances(Million Tonne)
Source ICIS Supply and Demand Database
wwwiciscom 9Copyright copy 2016 ICIS
European Refiners are increasingly pressuredhellipRoad Fuels demand is declining Refineries are rationalized
Basically a net importer of everything but Gasolinehellip
0
2
4
6
8
10
12
14
16
18
0
50
100
150
200
250
300MT
Refining Capacity vs Demand
Gasoline Demand
Diesel Demand
Crude Capacity (right Scale Million bd)
-127
-93
547
-142
-443
-600 -400 -200 00 200 400 600
LPG
Naphtha(net)
Gasoline
Kerosenes
Gas Oils
2015 Net Balances(Million Tonne)
Source ICIS Supply and Demand Database
wwwiciscom 10Copyright copy 2016 ICIS
European Refiners face more challengeshellip
What if a higher penetration of electrical vehicles takes place
0
5
10
15
20
25
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
MILLION VEHICLES
Electric Vehicles Scenarios (EU 15 + EFTA)
Base Case Scenario (assumes Hybrids mostly on ICE)
Higher Penetration Scenario
0
5
10
15
20
25
30
35
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Electric Vehicles Scenarios (EU 15 + EFTA)
Higher Penetration Scenario Car Fleet Share ()
Higher Penetration Scenario New Cars Market Share ()
Source ICIS Supply and Demand Database amp ICIS Consulting
wwwiciscom 11Copyright copy 2016 ICIS
Refinersrsquo options (Europe is first but other will follow) Rationalization (less naphtha) or more Petrochemicals
Impact of a higher penetration of electrical vehicles
0
10
20
30
40
50
60
70
80
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
MILLION TONNE
Demand Trendsin Higher EVs Scenario
Gasoline Demand Diesel Demand
-12
-10
-8
-6
-4
-2
0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
MILLION TONNE
Demand Impactversus Base Scenario
Gasoline Demand Change Diesel Demand Change
Source ICIS Supply and Demand Database amp ICIS Consulting
wwwiciscom 12
34
North America
02
South amp Central America
16
Europe
00Former USSR
00
Africa
00
Middle East
00
North East Asia
16
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 13
34 279
North America
02 57
South amp Central America
16139
Europe
00
58
Former USSR
0071
Africa
00
415
Middle East
00
307
North East Asia
16185
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 14
34 27989
North America
02 57 08
South amp Central America
16139
33
Europe
00
58 174
Former USSR
0071
152
Africa
00
415 406
Middle East
00
307
596
North East Asia
16185 64
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 15
34 27989
151North America
02 57 08 23
South amp Central America
16139
33
490Europe
00
58 17493
Former USSR
0071
152
240
Africa
00
415 406
40Middle East
00
307
596
187
North East Asia
16185 64
270
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 16
US Shale developments in a lower oil price scenario not the original plan
0
2
4
6
8
10
12
14
16
18
20
Jan
-10
May
-10
Sep
-10
Jan
-11
May
-11
Sep
-11
Jan
-12
May
-12
Sep
-12
Jan
-13
May
-13
Sep
-13
Jan
-14
May
-14
Sep
-14
Jan
-15
May
-15
Sep
-15
Jan
-16
May
-16
US Price developments $MMBTU
Natural Gas Crude Oil Ethane Propane
A large amount of ethane remains ldquorejectedrdquo waiting for the new demand But once demand arrives
more production will be required and transport costs featuredhellip
Propane availability suggests ample supply is available but seasonal factors remain in place Steam-
crackersrsquo feedstock flexibility will be a substantial competitive advantage
0
500
1000
1500
2000
2015 2016 2017 2018 2019 2020
US Ethane Balances under unchanged Supply (lsquo000 bd)
To Ethylene Export by Pipeline
Deep Sea exports 2015 Production
Rejection
Source ICIS Consulting amp ICIS Prices
wwwiciscom 17
EU
(127)
ME
350AF
41
Balances Surplus Deficit
35
53
51 75
88
80
35
60
22to Japan
195
NAM
to rest of SAP
39
27to China
LAM
(65)
Rest of SAP amp
Indonesia
(108)
64
53
FUSSR
JAPAN
(114)
SKOREA
(38)
INDIA
(80)
Global LPG Key Trade Flows (2015)
Volumes in Million tonne
CHINA
(106)
US LPG will remain long flows to international markets rapidly increasing
The US is by now the largest
country exporter of Propane in the
World It was a net importer of
LPG just a few years ago
Exports are now flowing to Asia
and Europe
European demand for Ethylene
has doubled and supply is
declining
The Middle East remains the
largest region in terms of exports
Ample avails in international
markets have promoted Asian
PDH developments
China imports are now exceeding
those of Japan
Source ICIS Supply and Demand Database
wwwiciscom 18Copyright copy 2016 ICIS
European Petrochemical Feedstocks
A growing inflow of imported Light NGLs
Ethylene production from LPG is now swinging within a 20-30 range
Will domestic Refiners improve the naphtha balance in a low oil price scenario
-16
-14
-12
-10
-8
-6
-4
-2
0
2MILLION TONNE
EuropeFeedstock Balances
Ethane LPG Naphtha
0
5
10
15
20
25
30
MILLION TONNE
Europe Ethylene Production by Feedstock
Naphtha amp Heavier LPG Ethane
Source ICIS Supply and Demand Database
Petrochemicals and the Emerging
Markets
wwwiciscom 20Copyright copy 2016 ICIS
Petrochemicals the opportunity is there but will require the right business models
Global demand growth is much faster than oilrsquoshellip
and a target for Refiners
Polyolefins50
Key Elastomers4
Polyesters amp
PUrethanes26
Other Key
Plastics20
2015
41
31
44
33
4
00 10 20 30 40 50
Polyolefins
Key Elastomers
Polyesters amp PUrethanes
Other Key Plastics
TOTAL
Petrochemical Demand AAGR 2015-2025
Source ICIS Supply and Demand Database
wwwiciscom 21Copyright copy 2016 ICIS
Global PetrochemicalsChina is important Europe is growinghellip
almost half of 2020-25 EU increase is in Turkey + Poland
685
5 62306
267
558
352
332 791
Global Incremental Petrochemical Demand (Million Tonne)
North
America
Europe China
Rest Of
World
2015 2020 2025
North
America
EuropeChina
Rest Of
World
Source ICIS Supply and Demand Database
wwwiciscom 22Copyright copy 2016 ICIS
Global Petrochemicals
Polyolefins are the workhorsehellip
685
35918 195
113
406
2 235129 791
Global Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Incremental
Oil Demand is 148 MMT
Source ICIS Supply and Demand Database
wwwiciscom 23Copyright copy 2016 ICIS
Petrochemicals in the ldquoRest of the Worldrdquo
Polyolefins most important Aromatics chain grows at the same pace
267
15307 61
46
195
07 78 52 332
Rest of World Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Source ICIS Supply and Demand Database
wwwiciscom 24Copyright copy 2016 ICIS
Beyond Energy geographical influence is shifting to the ldquoRest of the Worldrdquo
Much of the high growth in the rest of the World is on the ldquoOne Belt One Roadrdquohellip
Asia Excl
China50
Africa amp MEast
39
F USSR
4
S America7
Asia Excl
China52
Africa amp MEast
32
F USSR
7
S America9
Asia Excl
China63
Africa amp
MEast19
F USSR
8
S America10
Energy Oil Petrochemicals
Share of 2015-2025 Incremental Demand in the ldquoRest of Worldrdquo
India Indonesia
Vietnam Russia amp
Iran account for
40 of global
growth potentialSource ICIS Supply and Demand Database
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
The Economic Supercycle and
Why It Is Over
John RichardsonICIS Senior Consultant Asia
wwwiciscom 26
What was the economic Supercycle
The end of the Supercycle What it means for petrochemicals
China past and future Its role in the end of the Supercycle
and what happens next
The way forward New opportunities
Agenda
What was the Supercycle
wwwiciscom 28
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 29
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 30
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
What this means for petrochemicals
wwwiciscom 32
The supply-driven model no longer works
A paradigm shift is under way in the global economy as well as in the global petrochemical markets
Having expected this we successfully forecast the slowdown in the Chinese economy and the collapse of oil prices
Stimulus hangover a lot of it badly spent has left big supply overhangs and so the loss of pricing power
Chinarsquos Role In This New Paradigm
The History
wwwiciscom 34
The biggest credit bubble in economic history
President Xi Jinping opening the 3rd Plenum November 2013
ldquoThe good meat is all gone all that is left are hard bones to chewrdquo
Premier Li Keiqiang in his Work Report to the National Peoplersquos Congress March 2016
ldquoThis is the crucial period in which China currently finds itself and during which we must build up powerful new drivers in order to accelerate the development of the new economyrdquo
2014
wwwiciscom 35
China petrochemicals volumes critically important
67
892
2171
378
749
89 120
1088
2560
-
500
1000
1500
2000
2500
3000
00
0 to
nn
es
2015 LLDPE imports
Source ICIS Supply and Demand Database
7 7 77 8 8
8
35 35 35 36 36 36 36
0
5
10
15
20
25
30
35
40
2016 2017 2018 2019 2020 2021 2022
-
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
lsquo00
0 to
nn
es
China versus India PP consumption
World Consumption India Consumption
China Consumption India as a percentage of global total
China as a percentage of global total
wwwiciscom 36
The impact of stimulus on chemicals and polymers
0
200
400
600
800
1000
1200
1400
China Europe Japan SouthKorea
US Taiwan
lsquo00
0 to
nn
esy
ea
r
Average size of PTA capacities
2000 2016
Source ICIS Supply and Demand Database
7872
77
91
114
138
154
164158
0
20
40
60
80
100
120
140
160
180
-
10000
20000
30000
40000
50000
60000
2009 2010 2011 2012 2013 2014 2015 2016 2017
China PTA
Capacity in 000 tonnesyear Consumption in 000 tonnesyear
Capacity as of consumption
wwwiciscom 37
5000
10000
15000
20000
25000
30000
35000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
To
nn
es
China ethylene versus propylene consumption
Ethylene Propylene
China becomes the first country or region in the world where propylene consumption exceeds ethylene
China consumed 13m tonnes of phenol in 2010 versus capacity of 880000 tonnesyear In 2017 ICIS Consulting expects capacity 27m tonnesyear versus 24m tonnes of demand
Acrylic acid capacity in China in 2010 was 11m tonnesyear versus consumption of 1m tonnes In 2017 we are forecasting 35m tonnesyear of capacity versus 17m tonnes of demand
Source ICIS Supply and Demand Database
wwwiciscom 38
Source ICIS Supply and Demand Database
It was about building factories for the sake of building factories to preserve jobs
Little regard was given to conventional analysis of long- term supply and demand
It wasnrsquot about cost per tonne economics
6368 70
7780
8486 87
90
0
10
20
30
40
50
60
70
80
90
100
-
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PP consumption and capacity
Capacity in 000 tonnesyear Consumption in 000 tonnes
Capacity as a percentage of consumption
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 9Copyright copy 2016 ICIS
European Refiners are increasingly pressuredhellipRoad Fuels demand is declining Refineries are rationalized
Basically a net importer of everything but Gasolinehellip
0
2
4
6
8
10
12
14
16
18
0
50
100
150
200
250
300MT
Refining Capacity vs Demand
Gasoline Demand
Diesel Demand
Crude Capacity (right Scale Million bd)
-127
-93
547
-142
-443
-600 -400 -200 00 200 400 600
LPG
Naphtha(net)
Gasoline
Kerosenes
Gas Oils
2015 Net Balances(Million Tonne)
Source ICIS Supply and Demand Database
wwwiciscom 10Copyright copy 2016 ICIS
European Refiners face more challengeshellip
What if a higher penetration of electrical vehicles takes place
0
5
10
15
20
25
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
MILLION VEHICLES
Electric Vehicles Scenarios (EU 15 + EFTA)
Base Case Scenario (assumes Hybrids mostly on ICE)
Higher Penetration Scenario
0
5
10
15
20
25
30
35
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Electric Vehicles Scenarios (EU 15 + EFTA)
Higher Penetration Scenario Car Fleet Share ()
Higher Penetration Scenario New Cars Market Share ()
Source ICIS Supply and Demand Database amp ICIS Consulting
wwwiciscom 11Copyright copy 2016 ICIS
Refinersrsquo options (Europe is first but other will follow) Rationalization (less naphtha) or more Petrochemicals
Impact of a higher penetration of electrical vehicles
0
10
20
30
40
50
60
70
80
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
MILLION TONNE
Demand Trendsin Higher EVs Scenario
Gasoline Demand Diesel Demand
-12
-10
-8
-6
-4
-2
0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
MILLION TONNE
Demand Impactversus Base Scenario
Gasoline Demand Change Diesel Demand Change
Source ICIS Supply and Demand Database amp ICIS Consulting
wwwiciscom 12
34
North America
02
South amp Central America
16
Europe
00Former USSR
00
Africa
00
Middle East
00
North East Asia
16
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 13
34 279
North America
02 57
South amp Central America
16139
Europe
00
58
Former USSR
0071
Africa
00
415
Middle East
00
307
North East Asia
16185
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 14
34 27989
North America
02 57 08
South amp Central America
16139
33
Europe
00
58 174
Former USSR
0071
152
Africa
00
415 406
Middle East
00
307
596
North East Asia
16185 64
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 15
34 27989
151North America
02 57 08 23
South amp Central America
16139
33
490Europe
00
58 17493
Former USSR
0071
152
240
Africa
00
415 406
40Middle East
00
307
596
187
North East Asia
16185 64
270
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 16
US Shale developments in a lower oil price scenario not the original plan
0
2
4
6
8
10
12
14
16
18
20
Jan
-10
May
-10
Sep
-10
Jan
-11
May
-11
Sep
-11
Jan
-12
May
-12
Sep
-12
Jan
-13
May
-13
Sep
-13
Jan
-14
May
-14
Sep
-14
Jan
-15
May
-15
Sep
-15
Jan
-16
May
-16
US Price developments $MMBTU
Natural Gas Crude Oil Ethane Propane
A large amount of ethane remains ldquorejectedrdquo waiting for the new demand But once demand arrives
more production will be required and transport costs featuredhellip
Propane availability suggests ample supply is available but seasonal factors remain in place Steam-
crackersrsquo feedstock flexibility will be a substantial competitive advantage
0
500
1000
1500
2000
2015 2016 2017 2018 2019 2020
US Ethane Balances under unchanged Supply (lsquo000 bd)
To Ethylene Export by Pipeline
Deep Sea exports 2015 Production
Rejection
Source ICIS Consulting amp ICIS Prices
wwwiciscom 17
EU
(127)
ME
350AF
41
Balances Surplus Deficit
35
53
51 75
88
80
35
60
22to Japan
195
NAM
to rest of SAP
39
27to China
LAM
(65)
Rest of SAP amp
Indonesia
(108)
64
53
FUSSR
JAPAN
(114)
SKOREA
(38)
INDIA
(80)
Global LPG Key Trade Flows (2015)
Volumes in Million tonne
CHINA
(106)
US LPG will remain long flows to international markets rapidly increasing
The US is by now the largest
country exporter of Propane in the
World It was a net importer of
LPG just a few years ago
Exports are now flowing to Asia
and Europe
European demand for Ethylene
has doubled and supply is
declining
The Middle East remains the
largest region in terms of exports
Ample avails in international
markets have promoted Asian
PDH developments
China imports are now exceeding
those of Japan
Source ICIS Supply and Demand Database
wwwiciscom 18Copyright copy 2016 ICIS
European Petrochemical Feedstocks
A growing inflow of imported Light NGLs
Ethylene production from LPG is now swinging within a 20-30 range
Will domestic Refiners improve the naphtha balance in a low oil price scenario
-16
-14
-12
-10
-8
-6
-4
-2
0
2MILLION TONNE
EuropeFeedstock Balances
Ethane LPG Naphtha
0
5
10
15
20
25
30
MILLION TONNE
Europe Ethylene Production by Feedstock
Naphtha amp Heavier LPG Ethane
Source ICIS Supply and Demand Database
Petrochemicals and the Emerging
Markets
wwwiciscom 20Copyright copy 2016 ICIS
Petrochemicals the opportunity is there but will require the right business models
Global demand growth is much faster than oilrsquoshellip
and a target for Refiners
Polyolefins50
Key Elastomers4
Polyesters amp
PUrethanes26
Other Key
Plastics20
2015
41
31
44
33
4
00 10 20 30 40 50
Polyolefins
Key Elastomers
Polyesters amp PUrethanes
Other Key Plastics
TOTAL
Petrochemical Demand AAGR 2015-2025
Source ICIS Supply and Demand Database
wwwiciscom 21Copyright copy 2016 ICIS
Global PetrochemicalsChina is important Europe is growinghellip
almost half of 2020-25 EU increase is in Turkey + Poland
685
5 62306
267
558
352
332 791
Global Incremental Petrochemical Demand (Million Tonne)
North
America
Europe China
Rest Of
World
2015 2020 2025
North
America
EuropeChina
Rest Of
World
Source ICIS Supply and Demand Database
wwwiciscom 22Copyright copy 2016 ICIS
Global Petrochemicals
Polyolefins are the workhorsehellip
685
35918 195
113
406
2 235129 791
Global Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Incremental
Oil Demand is 148 MMT
Source ICIS Supply and Demand Database
wwwiciscom 23Copyright copy 2016 ICIS
Petrochemicals in the ldquoRest of the Worldrdquo
Polyolefins most important Aromatics chain grows at the same pace
267
15307 61
46
195
07 78 52 332
Rest of World Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Source ICIS Supply and Demand Database
wwwiciscom 24Copyright copy 2016 ICIS
Beyond Energy geographical influence is shifting to the ldquoRest of the Worldrdquo
Much of the high growth in the rest of the World is on the ldquoOne Belt One Roadrdquohellip
Asia Excl
China50
Africa amp MEast
39
F USSR
4
S America7
Asia Excl
China52
Africa amp MEast
32
F USSR
7
S America9
Asia Excl
China63
Africa amp
MEast19
F USSR
8
S America10
Energy Oil Petrochemicals
Share of 2015-2025 Incremental Demand in the ldquoRest of Worldrdquo
India Indonesia
Vietnam Russia amp
Iran account for
40 of global
growth potentialSource ICIS Supply and Demand Database
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
The Economic Supercycle and
Why It Is Over
John RichardsonICIS Senior Consultant Asia
wwwiciscom 26
What was the economic Supercycle
The end of the Supercycle What it means for petrochemicals
China past and future Its role in the end of the Supercycle
and what happens next
The way forward New opportunities
Agenda
What was the Supercycle
wwwiciscom 28
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 29
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 30
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
What this means for petrochemicals
wwwiciscom 32
The supply-driven model no longer works
A paradigm shift is under way in the global economy as well as in the global petrochemical markets
Having expected this we successfully forecast the slowdown in the Chinese economy and the collapse of oil prices
Stimulus hangover a lot of it badly spent has left big supply overhangs and so the loss of pricing power
Chinarsquos Role In This New Paradigm
The History
wwwiciscom 34
The biggest credit bubble in economic history
President Xi Jinping opening the 3rd Plenum November 2013
ldquoThe good meat is all gone all that is left are hard bones to chewrdquo
Premier Li Keiqiang in his Work Report to the National Peoplersquos Congress March 2016
ldquoThis is the crucial period in which China currently finds itself and during which we must build up powerful new drivers in order to accelerate the development of the new economyrdquo
2014
wwwiciscom 35
China petrochemicals volumes critically important
67
892
2171
378
749
89 120
1088
2560
-
500
1000
1500
2000
2500
3000
00
0 to
nn
es
2015 LLDPE imports
Source ICIS Supply and Demand Database
7 7 77 8 8
8
35 35 35 36 36 36 36
0
5
10
15
20
25
30
35
40
2016 2017 2018 2019 2020 2021 2022
-
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
lsquo00
0 to
nn
es
China versus India PP consumption
World Consumption India Consumption
China Consumption India as a percentage of global total
China as a percentage of global total
wwwiciscom 36
The impact of stimulus on chemicals and polymers
0
200
400
600
800
1000
1200
1400
China Europe Japan SouthKorea
US Taiwan
lsquo00
0 to
nn
esy
ea
r
Average size of PTA capacities
2000 2016
Source ICIS Supply and Demand Database
7872
77
91
114
138
154
164158
0
20
40
60
80
100
120
140
160
180
-
10000
20000
30000
40000
50000
60000
2009 2010 2011 2012 2013 2014 2015 2016 2017
China PTA
Capacity in 000 tonnesyear Consumption in 000 tonnesyear
Capacity as of consumption
wwwiciscom 37
5000
10000
15000
20000
25000
30000
35000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
To
nn
es
China ethylene versus propylene consumption
Ethylene Propylene
China becomes the first country or region in the world where propylene consumption exceeds ethylene
China consumed 13m tonnes of phenol in 2010 versus capacity of 880000 tonnesyear In 2017 ICIS Consulting expects capacity 27m tonnesyear versus 24m tonnes of demand
Acrylic acid capacity in China in 2010 was 11m tonnesyear versus consumption of 1m tonnes In 2017 we are forecasting 35m tonnesyear of capacity versus 17m tonnes of demand
Source ICIS Supply and Demand Database
wwwiciscom 38
Source ICIS Supply and Demand Database
It was about building factories for the sake of building factories to preserve jobs
Little regard was given to conventional analysis of long- term supply and demand
It wasnrsquot about cost per tonne economics
6368 70
7780
8486 87
90
0
10
20
30
40
50
60
70
80
90
100
-
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PP consumption and capacity
Capacity in 000 tonnesyear Consumption in 000 tonnes
Capacity as a percentage of consumption
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 10Copyright copy 2016 ICIS
European Refiners face more challengeshellip
What if a higher penetration of electrical vehicles takes place
0
5
10
15
20
25
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
MILLION VEHICLES
Electric Vehicles Scenarios (EU 15 + EFTA)
Base Case Scenario (assumes Hybrids mostly on ICE)
Higher Penetration Scenario
0
5
10
15
20
25
30
35
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Electric Vehicles Scenarios (EU 15 + EFTA)
Higher Penetration Scenario Car Fleet Share ()
Higher Penetration Scenario New Cars Market Share ()
Source ICIS Supply and Demand Database amp ICIS Consulting
wwwiciscom 11Copyright copy 2016 ICIS
Refinersrsquo options (Europe is first but other will follow) Rationalization (less naphtha) or more Petrochemicals
Impact of a higher penetration of electrical vehicles
0
10
20
30
40
50
60
70
80
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
MILLION TONNE
Demand Trendsin Higher EVs Scenario
Gasoline Demand Diesel Demand
-12
-10
-8
-6
-4
-2
0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
MILLION TONNE
Demand Impactversus Base Scenario
Gasoline Demand Change Diesel Demand Change
Source ICIS Supply and Demand Database amp ICIS Consulting
wwwiciscom 12
34
North America
02
South amp Central America
16
Europe
00Former USSR
00
Africa
00
Middle East
00
North East Asia
16
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 13
34 279
North America
02 57
South amp Central America
16139
Europe
00
58
Former USSR
0071
Africa
00
415
Middle East
00
307
North East Asia
16185
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 14
34 27989
North America
02 57 08
South amp Central America
16139
33
Europe
00
58 174
Former USSR
0071
152
Africa
00
415 406
Middle East
00
307
596
North East Asia
16185 64
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 15
34 27989
151North America
02 57 08 23
South amp Central America
16139
33
490Europe
00
58 17493
Former USSR
0071
152
240
Africa
00
415 406
40Middle East
00
307
596
187
North East Asia
16185 64
270
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 16
US Shale developments in a lower oil price scenario not the original plan
0
2
4
6
8
10
12
14
16
18
20
Jan
-10
May
-10
Sep
-10
Jan
-11
May
-11
Sep
-11
Jan
-12
May
-12
Sep
-12
Jan
-13
May
-13
Sep
-13
Jan
-14
May
-14
Sep
-14
Jan
-15
May
-15
Sep
-15
Jan
-16
May
-16
US Price developments $MMBTU
Natural Gas Crude Oil Ethane Propane
A large amount of ethane remains ldquorejectedrdquo waiting for the new demand But once demand arrives
more production will be required and transport costs featuredhellip
Propane availability suggests ample supply is available but seasonal factors remain in place Steam-
crackersrsquo feedstock flexibility will be a substantial competitive advantage
0
500
1000
1500
2000
2015 2016 2017 2018 2019 2020
US Ethane Balances under unchanged Supply (lsquo000 bd)
To Ethylene Export by Pipeline
Deep Sea exports 2015 Production
Rejection
Source ICIS Consulting amp ICIS Prices
wwwiciscom 17
EU
(127)
ME
350AF
41
Balances Surplus Deficit
35
53
51 75
88
80
35
60
22to Japan
195
NAM
to rest of SAP
39
27to China
LAM
(65)
Rest of SAP amp
Indonesia
(108)
64
53
FUSSR
JAPAN
(114)
SKOREA
(38)
INDIA
(80)
Global LPG Key Trade Flows (2015)
Volumes in Million tonne
CHINA
(106)
US LPG will remain long flows to international markets rapidly increasing
The US is by now the largest
country exporter of Propane in the
World It was a net importer of
LPG just a few years ago
Exports are now flowing to Asia
and Europe
European demand for Ethylene
has doubled and supply is
declining
The Middle East remains the
largest region in terms of exports
Ample avails in international
markets have promoted Asian
PDH developments
China imports are now exceeding
those of Japan
Source ICIS Supply and Demand Database
wwwiciscom 18Copyright copy 2016 ICIS
European Petrochemical Feedstocks
A growing inflow of imported Light NGLs
Ethylene production from LPG is now swinging within a 20-30 range
Will domestic Refiners improve the naphtha balance in a low oil price scenario
-16
-14
-12
-10
-8
-6
-4
-2
0
2MILLION TONNE
EuropeFeedstock Balances
Ethane LPG Naphtha
0
5
10
15
20
25
30
MILLION TONNE
Europe Ethylene Production by Feedstock
Naphtha amp Heavier LPG Ethane
Source ICIS Supply and Demand Database
Petrochemicals and the Emerging
Markets
wwwiciscom 20Copyright copy 2016 ICIS
Petrochemicals the opportunity is there but will require the right business models
Global demand growth is much faster than oilrsquoshellip
and a target for Refiners
Polyolefins50
Key Elastomers4
Polyesters amp
PUrethanes26
Other Key
Plastics20
2015
41
31
44
33
4
00 10 20 30 40 50
Polyolefins
Key Elastomers
Polyesters amp PUrethanes
Other Key Plastics
TOTAL
Petrochemical Demand AAGR 2015-2025
Source ICIS Supply and Demand Database
wwwiciscom 21Copyright copy 2016 ICIS
Global PetrochemicalsChina is important Europe is growinghellip
almost half of 2020-25 EU increase is in Turkey + Poland
685
5 62306
267
558
352
332 791
Global Incremental Petrochemical Demand (Million Tonne)
North
America
Europe China
Rest Of
World
2015 2020 2025
North
America
EuropeChina
Rest Of
World
Source ICIS Supply and Demand Database
wwwiciscom 22Copyright copy 2016 ICIS
Global Petrochemicals
Polyolefins are the workhorsehellip
685
35918 195
113
406
2 235129 791
Global Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Incremental
Oil Demand is 148 MMT
Source ICIS Supply and Demand Database
wwwiciscom 23Copyright copy 2016 ICIS
Petrochemicals in the ldquoRest of the Worldrdquo
Polyolefins most important Aromatics chain grows at the same pace
267
15307 61
46
195
07 78 52 332
Rest of World Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Source ICIS Supply and Demand Database
wwwiciscom 24Copyright copy 2016 ICIS
Beyond Energy geographical influence is shifting to the ldquoRest of the Worldrdquo
Much of the high growth in the rest of the World is on the ldquoOne Belt One Roadrdquohellip
Asia Excl
China50
Africa amp MEast
39
F USSR
4
S America7
Asia Excl
China52
Africa amp MEast
32
F USSR
7
S America9
Asia Excl
China63
Africa amp
MEast19
F USSR
8
S America10
Energy Oil Petrochemicals
Share of 2015-2025 Incremental Demand in the ldquoRest of Worldrdquo
India Indonesia
Vietnam Russia amp
Iran account for
40 of global
growth potentialSource ICIS Supply and Demand Database
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
The Economic Supercycle and
Why It Is Over
John RichardsonICIS Senior Consultant Asia
wwwiciscom 26
What was the economic Supercycle
The end of the Supercycle What it means for petrochemicals
China past and future Its role in the end of the Supercycle
and what happens next
The way forward New opportunities
Agenda
What was the Supercycle
wwwiciscom 28
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 29
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 30
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
What this means for petrochemicals
wwwiciscom 32
The supply-driven model no longer works
A paradigm shift is under way in the global economy as well as in the global petrochemical markets
Having expected this we successfully forecast the slowdown in the Chinese economy and the collapse of oil prices
Stimulus hangover a lot of it badly spent has left big supply overhangs and so the loss of pricing power
Chinarsquos Role In This New Paradigm
The History
wwwiciscom 34
The biggest credit bubble in economic history
President Xi Jinping opening the 3rd Plenum November 2013
ldquoThe good meat is all gone all that is left are hard bones to chewrdquo
Premier Li Keiqiang in his Work Report to the National Peoplersquos Congress March 2016
ldquoThis is the crucial period in which China currently finds itself and during which we must build up powerful new drivers in order to accelerate the development of the new economyrdquo
2014
wwwiciscom 35
China petrochemicals volumes critically important
67
892
2171
378
749
89 120
1088
2560
-
500
1000
1500
2000
2500
3000
00
0 to
nn
es
2015 LLDPE imports
Source ICIS Supply and Demand Database
7 7 77 8 8
8
35 35 35 36 36 36 36
0
5
10
15
20
25
30
35
40
2016 2017 2018 2019 2020 2021 2022
-
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
lsquo00
0 to
nn
es
China versus India PP consumption
World Consumption India Consumption
China Consumption India as a percentage of global total
China as a percentage of global total
wwwiciscom 36
The impact of stimulus on chemicals and polymers
0
200
400
600
800
1000
1200
1400
China Europe Japan SouthKorea
US Taiwan
lsquo00
0 to
nn
esy
ea
r
Average size of PTA capacities
2000 2016
Source ICIS Supply and Demand Database
7872
77
91
114
138
154
164158
0
20
40
60
80
100
120
140
160
180
-
10000
20000
30000
40000
50000
60000
2009 2010 2011 2012 2013 2014 2015 2016 2017
China PTA
Capacity in 000 tonnesyear Consumption in 000 tonnesyear
Capacity as of consumption
wwwiciscom 37
5000
10000
15000
20000
25000
30000
35000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
To
nn
es
China ethylene versus propylene consumption
Ethylene Propylene
China becomes the first country or region in the world where propylene consumption exceeds ethylene
China consumed 13m tonnes of phenol in 2010 versus capacity of 880000 tonnesyear In 2017 ICIS Consulting expects capacity 27m tonnesyear versus 24m tonnes of demand
Acrylic acid capacity in China in 2010 was 11m tonnesyear versus consumption of 1m tonnes In 2017 we are forecasting 35m tonnesyear of capacity versus 17m tonnes of demand
Source ICIS Supply and Demand Database
wwwiciscom 38
Source ICIS Supply and Demand Database
It was about building factories for the sake of building factories to preserve jobs
Little regard was given to conventional analysis of long- term supply and demand
It wasnrsquot about cost per tonne economics
6368 70
7780
8486 87
90
0
10
20
30
40
50
60
70
80
90
100
-
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PP consumption and capacity
Capacity in 000 tonnesyear Consumption in 000 tonnes
Capacity as a percentage of consumption
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 11Copyright copy 2016 ICIS
Refinersrsquo options (Europe is first but other will follow) Rationalization (less naphtha) or more Petrochemicals
Impact of a higher penetration of electrical vehicles
0
10
20
30
40
50
60
70
80
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
MILLION TONNE
Demand Trendsin Higher EVs Scenario
Gasoline Demand Diesel Demand
-12
-10
-8
-6
-4
-2
0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
MILLION TONNE
Demand Impactversus Base Scenario
Gasoline Demand Change Diesel Demand Change
Source ICIS Supply and Demand Database amp ICIS Consulting
wwwiciscom 12
34
North America
02
South amp Central America
16
Europe
00Former USSR
00
Africa
00
Middle East
00
North East Asia
16
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 13
34 279
North America
02 57
South amp Central America
16139
Europe
00
58
Former USSR
0071
Africa
00
415
Middle East
00
307
North East Asia
16185
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 14
34 27989
North America
02 57 08
South amp Central America
16139
33
Europe
00
58 174
Former USSR
0071
152
Africa
00
415 406
Middle East
00
307
596
North East Asia
16185 64
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 15
34 27989
151North America
02 57 08 23
South amp Central America
16139
33
490Europe
00
58 17493
Former USSR
0071
152
240
Africa
00
415 406
40Middle East
00
307
596
187
North East Asia
16185 64
270
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 16
US Shale developments in a lower oil price scenario not the original plan
0
2
4
6
8
10
12
14
16
18
20
Jan
-10
May
-10
Sep
-10
Jan
-11
May
-11
Sep
-11
Jan
-12
May
-12
Sep
-12
Jan
-13
May
-13
Sep
-13
Jan
-14
May
-14
Sep
-14
Jan
-15
May
-15
Sep
-15
Jan
-16
May
-16
US Price developments $MMBTU
Natural Gas Crude Oil Ethane Propane
A large amount of ethane remains ldquorejectedrdquo waiting for the new demand But once demand arrives
more production will be required and transport costs featuredhellip
Propane availability suggests ample supply is available but seasonal factors remain in place Steam-
crackersrsquo feedstock flexibility will be a substantial competitive advantage
0
500
1000
1500
2000
2015 2016 2017 2018 2019 2020
US Ethane Balances under unchanged Supply (lsquo000 bd)
To Ethylene Export by Pipeline
Deep Sea exports 2015 Production
Rejection
Source ICIS Consulting amp ICIS Prices
wwwiciscom 17
EU
(127)
ME
350AF
41
Balances Surplus Deficit
35
53
51 75
88
80
35
60
22to Japan
195
NAM
to rest of SAP
39
27to China
LAM
(65)
Rest of SAP amp
Indonesia
(108)
64
53
FUSSR
JAPAN
(114)
SKOREA
(38)
INDIA
(80)
Global LPG Key Trade Flows (2015)
Volumes in Million tonne
CHINA
(106)
US LPG will remain long flows to international markets rapidly increasing
The US is by now the largest
country exporter of Propane in the
World It was a net importer of
LPG just a few years ago
Exports are now flowing to Asia
and Europe
European demand for Ethylene
has doubled and supply is
declining
The Middle East remains the
largest region in terms of exports
Ample avails in international
markets have promoted Asian
PDH developments
China imports are now exceeding
those of Japan
Source ICIS Supply and Demand Database
wwwiciscom 18Copyright copy 2016 ICIS
European Petrochemical Feedstocks
A growing inflow of imported Light NGLs
Ethylene production from LPG is now swinging within a 20-30 range
Will domestic Refiners improve the naphtha balance in a low oil price scenario
-16
-14
-12
-10
-8
-6
-4
-2
0
2MILLION TONNE
EuropeFeedstock Balances
Ethane LPG Naphtha
0
5
10
15
20
25
30
MILLION TONNE
Europe Ethylene Production by Feedstock
Naphtha amp Heavier LPG Ethane
Source ICIS Supply and Demand Database
Petrochemicals and the Emerging
Markets
wwwiciscom 20Copyright copy 2016 ICIS
Petrochemicals the opportunity is there but will require the right business models
Global demand growth is much faster than oilrsquoshellip
and a target for Refiners
Polyolefins50
Key Elastomers4
Polyesters amp
PUrethanes26
Other Key
Plastics20
2015
41
31
44
33
4
00 10 20 30 40 50
Polyolefins
Key Elastomers
Polyesters amp PUrethanes
Other Key Plastics
TOTAL
Petrochemical Demand AAGR 2015-2025
Source ICIS Supply and Demand Database
wwwiciscom 21Copyright copy 2016 ICIS
Global PetrochemicalsChina is important Europe is growinghellip
almost half of 2020-25 EU increase is in Turkey + Poland
685
5 62306
267
558
352
332 791
Global Incremental Petrochemical Demand (Million Tonne)
North
America
Europe China
Rest Of
World
2015 2020 2025
North
America
EuropeChina
Rest Of
World
Source ICIS Supply and Demand Database
wwwiciscom 22Copyright copy 2016 ICIS
Global Petrochemicals
Polyolefins are the workhorsehellip
685
35918 195
113
406
2 235129 791
Global Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Incremental
Oil Demand is 148 MMT
Source ICIS Supply and Demand Database
wwwiciscom 23Copyright copy 2016 ICIS
Petrochemicals in the ldquoRest of the Worldrdquo
Polyolefins most important Aromatics chain grows at the same pace
267
15307 61
46
195
07 78 52 332
Rest of World Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Source ICIS Supply and Demand Database
wwwiciscom 24Copyright copy 2016 ICIS
Beyond Energy geographical influence is shifting to the ldquoRest of the Worldrdquo
Much of the high growth in the rest of the World is on the ldquoOne Belt One Roadrdquohellip
Asia Excl
China50
Africa amp MEast
39
F USSR
4
S America7
Asia Excl
China52
Africa amp MEast
32
F USSR
7
S America9
Asia Excl
China63
Africa amp
MEast19
F USSR
8
S America10
Energy Oil Petrochemicals
Share of 2015-2025 Incremental Demand in the ldquoRest of Worldrdquo
India Indonesia
Vietnam Russia amp
Iran account for
40 of global
growth potentialSource ICIS Supply and Demand Database
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
The Economic Supercycle and
Why It Is Over
John RichardsonICIS Senior Consultant Asia
wwwiciscom 26
What was the economic Supercycle
The end of the Supercycle What it means for petrochemicals
China past and future Its role in the end of the Supercycle
and what happens next
The way forward New opportunities
Agenda
What was the Supercycle
wwwiciscom 28
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 29
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 30
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
What this means for petrochemicals
wwwiciscom 32
The supply-driven model no longer works
A paradigm shift is under way in the global economy as well as in the global petrochemical markets
Having expected this we successfully forecast the slowdown in the Chinese economy and the collapse of oil prices
Stimulus hangover a lot of it badly spent has left big supply overhangs and so the loss of pricing power
Chinarsquos Role In This New Paradigm
The History
wwwiciscom 34
The biggest credit bubble in economic history
President Xi Jinping opening the 3rd Plenum November 2013
ldquoThe good meat is all gone all that is left are hard bones to chewrdquo
Premier Li Keiqiang in his Work Report to the National Peoplersquos Congress March 2016
ldquoThis is the crucial period in which China currently finds itself and during which we must build up powerful new drivers in order to accelerate the development of the new economyrdquo
2014
wwwiciscom 35
China petrochemicals volumes critically important
67
892
2171
378
749
89 120
1088
2560
-
500
1000
1500
2000
2500
3000
00
0 to
nn
es
2015 LLDPE imports
Source ICIS Supply and Demand Database
7 7 77 8 8
8
35 35 35 36 36 36 36
0
5
10
15
20
25
30
35
40
2016 2017 2018 2019 2020 2021 2022
-
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
lsquo00
0 to
nn
es
China versus India PP consumption
World Consumption India Consumption
China Consumption India as a percentage of global total
China as a percentage of global total
wwwiciscom 36
The impact of stimulus on chemicals and polymers
0
200
400
600
800
1000
1200
1400
China Europe Japan SouthKorea
US Taiwan
lsquo00
0 to
nn
esy
ea
r
Average size of PTA capacities
2000 2016
Source ICIS Supply and Demand Database
7872
77
91
114
138
154
164158
0
20
40
60
80
100
120
140
160
180
-
10000
20000
30000
40000
50000
60000
2009 2010 2011 2012 2013 2014 2015 2016 2017
China PTA
Capacity in 000 tonnesyear Consumption in 000 tonnesyear
Capacity as of consumption
wwwiciscom 37
5000
10000
15000
20000
25000
30000
35000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
To
nn
es
China ethylene versus propylene consumption
Ethylene Propylene
China becomes the first country or region in the world where propylene consumption exceeds ethylene
China consumed 13m tonnes of phenol in 2010 versus capacity of 880000 tonnesyear In 2017 ICIS Consulting expects capacity 27m tonnesyear versus 24m tonnes of demand
Acrylic acid capacity in China in 2010 was 11m tonnesyear versus consumption of 1m tonnes In 2017 we are forecasting 35m tonnesyear of capacity versus 17m tonnes of demand
Source ICIS Supply and Demand Database
wwwiciscom 38
Source ICIS Supply and Demand Database
It was about building factories for the sake of building factories to preserve jobs
Little regard was given to conventional analysis of long- term supply and demand
It wasnrsquot about cost per tonne economics
6368 70
7780
8486 87
90
0
10
20
30
40
50
60
70
80
90
100
-
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PP consumption and capacity
Capacity in 000 tonnesyear Consumption in 000 tonnes
Capacity as a percentage of consumption
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 12
34
North America
02
South amp Central America
16
Europe
00Former USSR
00
Africa
00
Middle East
00
North East Asia
16
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 13
34 279
North America
02 57
South amp Central America
16139
Europe
00
58
Former USSR
0071
Africa
00
415
Middle East
00
307
North East Asia
16185
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 14
34 27989
North America
02 57 08
South amp Central America
16139
33
Europe
00
58 174
Former USSR
0071
152
Africa
00
415 406
Middle East
00
307
596
North East Asia
16185 64
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 15
34 27989
151North America
02 57 08 23
South amp Central America
16139
33
490Europe
00
58 17493
Former USSR
0071
152
240
Africa
00
415 406
40Middle East
00
307
596
187
North East Asia
16185 64
270
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 16
US Shale developments in a lower oil price scenario not the original plan
0
2
4
6
8
10
12
14
16
18
20
Jan
-10
May
-10
Sep
-10
Jan
-11
May
-11
Sep
-11
Jan
-12
May
-12
Sep
-12
Jan
-13
May
-13
Sep
-13
Jan
-14
May
-14
Sep
-14
Jan
-15
May
-15
Sep
-15
Jan
-16
May
-16
US Price developments $MMBTU
Natural Gas Crude Oil Ethane Propane
A large amount of ethane remains ldquorejectedrdquo waiting for the new demand But once demand arrives
more production will be required and transport costs featuredhellip
Propane availability suggests ample supply is available but seasonal factors remain in place Steam-
crackersrsquo feedstock flexibility will be a substantial competitive advantage
0
500
1000
1500
2000
2015 2016 2017 2018 2019 2020
US Ethane Balances under unchanged Supply (lsquo000 bd)
To Ethylene Export by Pipeline
Deep Sea exports 2015 Production
Rejection
Source ICIS Consulting amp ICIS Prices
wwwiciscom 17
EU
(127)
ME
350AF
41
Balances Surplus Deficit
35
53
51 75
88
80
35
60
22to Japan
195
NAM
to rest of SAP
39
27to China
LAM
(65)
Rest of SAP amp
Indonesia
(108)
64
53
FUSSR
JAPAN
(114)
SKOREA
(38)
INDIA
(80)
Global LPG Key Trade Flows (2015)
Volumes in Million tonne
CHINA
(106)
US LPG will remain long flows to international markets rapidly increasing
The US is by now the largest
country exporter of Propane in the
World It was a net importer of
LPG just a few years ago
Exports are now flowing to Asia
and Europe
European demand for Ethylene
has doubled and supply is
declining
The Middle East remains the
largest region in terms of exports
Ample avails in international
markets have promoted Asian
PDH developments
China imports are now exceeding
those of Japan
Source ICIS Supply and Demand Database
wwwiciscom 18Copyright copy 2016 ICIS
European Petrochemical Feedstocks
A growing inflow of imported Light NGLs
Ethylene production from LPG is now swinging within a 20-30 range
Will domestic Refiners improve the naphtha balance in a low oil price scenario
-16
-14
-12
-10
-8
-6
-4
-2
0
2MILLION TONNE
EuropeFeedstock Balances
Ethane LPG Naphtha
0
5
10
15
20
25
30
MILLION TONNE
Europe Ethylene Production by Feedstock
Naphtha amp Heavier LPG Ethane
Source ICIS Supply and Demand Database
Petrochemicals and the Emerging
Markets
wwwiciscom 20Copyright copy 2016 ICIS
Petrochemicals the opportunity is there but will require the right business models
Global demand growth is much faster than oilrsquoshellip
and a target for Refiners
Polyolefins50
Key Elastomers4
Polyesters amp
PUrethanes26
Other Key
Plastics20
2015
41
31
44
33
4
00 10 20 30 40 50
Polyolefins
Key Elastomers
Polyesters amp PUrethanes
Other Key Plastics
TOTAL
Petrochemical Demand AAGR 2015-2025
Source ICIS Supply and Demand Database
wwwiciscom 21Copyright copy 2016 ICIS
Global PetrochemicalsChina is important Europe is growinghellip
almost half of 2020-25 EU increase is in Turkey + Poland
685
5 62306
267
558
352
332 791
Global Incremental Petrochemical Demand (Million Tonne)
North
America
Europe China
Rest Of
World
2015 2020 2025
North
America
EuropeChina
Rest Of
World
Source ICIS Supply and Demand Database
wwwiciscom 22Copyright copy 2016 ICIS
Global Petrochemicals
Polyolefins are the workhorsehellip
685
35918 195
113
406
2 235129 791
Global Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Incremental
Oil Demand is 148 MMT
Source ICIS Supply and Demand Database
wwwiciscom 23Copyright copy 2016 ICIS
Petrochemicals in the ldquoRest of the Worldrdquo
Polyolefins most important Aromatics chain grows at the same pace
267
15307 61
46
195
07 78 52 332
Rest of World Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Source ICIS Supply and Demand Database
wwwiciscom 24Copyright copy 2016 ICIS
Beyond Energy geographical influence is shifting to the ldquoRest of the Worldrdquo
Much of the high growth in the rest of the World is on the ldquoOne Belt One Roadrdquohellip
Asia Excl
China50
Africa amp MEast
39
F USSR
4
S America7
Asia Excl
China52
Africa amp MEast
32
F USSR
7
S America9
Asia Excl
China63
Africa amp
MEast19
F USSR
8
S America10
Energy Oil Petrochemicals
Share of 2015-2025 Incremental Demand in the ldquoRest of Worldrdquo
India Indonesia
Vietnam Russia amp
Iran account for
40 of global
growth potentialSource ICIS Supply and Demand Database
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
The Economic Supercycle and
Why It Is Over
John RichardsonICIS Senior Consultant Asia
wwwiciscom 26
What was the economic Supercycle
The end of the Supercycle What it means for petrochemicals
China past and future Its role in the end of the Supercycle
and what happens next
The way forward New opportunities
Agenda
What was the Supercycle
wwwiciscom 28
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 29
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 30
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
What this means for petrochemicals
wwwiciscom 32
The supply-driven model no longer works
A paradigm shift is under way in the global economy as well as in the global petrochemical markets
Having expected this we successfully forecast the slowdown in the Chinese economy and the collapse of oil prices
Stimulus hangover a lot of it badly spent has left big supply overhangs and so the loss of pricing power
Chinarsquos Role In This New Paradigm
The History
wwwiciscom 34
The biggest credit bubble in economic history
President Xi Jinping opening the 3rd Plenum November 2013
ldquoThe good meat is all gone all that is left are hard bones to chewrdquo
Premier Li Keiqiang in his Work Report to the National Peoplersquos Congress March 2016
ldquoThis is the crucial period in which China currently finds itself and during which we must build up powerful new drivers in order to accelerate the development of the new economyrdquo
2014
wwwiciscom 35
China petrochemicals volumes critically important
67
892
2171
378
749
89 120
1088
2560
-
500
1000
1500
2000
2500
3000
00
0 to
nn
es
2015 LLDPE imports
Source ICIS Supply and Demand Database
7 7 77 8 8
8
35 35 35 36 36 36 36
0
5
10
15
20
25
30
35
40
2016 2017 2018 2019 2020 2021 2022
-
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
lsquo00
0 to
nn
es
China versus India PP consumption
World Consumption India Consumption
China Consumption India as a percentage of global total
China as a percentage of global total
wwwiciscom 36
The impact of stimulus on chemicals and polymers
0
200
400
600
800
1000
1200
1400
China Europe Japan SouthKorea
US Taiwan
lsquo00
0 to
nn
esy
ea
r
Average size of PTA capacities
2000 2016
Source ICIS Supply and Demand Database
7872
77
91
114
138
154
164158
0
20
40
60
80
100
120
140
160
180
-
10000
20000
30000
40000
50000
60000
2009 2010 2011 2012 2013 2014 2015 2016 2017
China PTA
Capacity in 000 tonnesyear Consumption in 000 tonnesyear
Capacity as of consumption
wwwiciscom 37
5000
10000
15000
20000
25000
30000
35000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
To
nn
es
China ethylene versus propylene consumption
Ethylene Propylene
China becomes the first country or region in the world where propylene consumption exceeds ethylene
China consumed 13m tonnes of phenol in 2010 versus capacity of 880000 tonnesyear In 2017 ICIS Consulting expects capacity 27m tonnesyear versus 24m tonnes of demand
Acrylic acid capacity in China in 2010 was 11m tonnesyear versus consumption of 1m tonnes In 2017 we are forecasting 35m tonnesyear of capacity versus 17m tonnes of demand
Source ICIS Supply and Demand Database
wwwiciscom 38
Source ICIS Supply and Demand Database
It was about building factories for the sake of building factories to preserve jobs
Little regard was given to conventional analysis of long- term supply and demand
It wasnrsquot about cost per tonne economics
6368 70
7780
8486 87
90
0
10
20
30
40
50
60
70
80
90
100
-
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PP consumption and capacity
Capacity in 000 tonnesyear Consumption in 000 tonnes
Capacity as a percentage of consumption
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 13
34 279
North America
02 57
South amp Central America
16139
Europe
00
58
Former USSR
0071
Africa
00
415
Middle East
00
307
North East Asia
16185
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 14
34 27989
North America
02 57 08
South amp Central America
16139
33
Europe
00
58 174
Former USSR
0071
152
Africa
00
415 406
Middle East
00
307
596
North East Asia
16185 64
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 15
34 27989
151North America
02 57 08 23
South amp Central America
16139
33
490Europe
00
58 17493
Former USSR
0071
152
240
Africa
00
415 406
40Middle East
00
307
596
187
North East Asia
16185 64
270
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 16
US Shale developments in a lower oil price scenario not the original plan
0
2
4
6
8
10
12
14
16
18
20
Jan
-10
May
-10
Sep
-10
Jan
-11
May
-11
Sep
-11
Jan
-12
May
-12
Sep
-12
Jan
-13
May
-13
Sep
-13
Jan
-14
May
-14
Sep
-14
Jan
-15
May
-15
Sep
-15
Jan
-16
May
-16
US Price developments $MMBTU
Natural Gas Crude Oil Ethane Propane
A large amount of ethane remains ldquorejectedrdquo waiting for the new demand But once demand arrives
more production will be required and transport costs featuredhellip
Propane availability suggests ample supply is available but seasonal factors remain in place Steam-
crackersrsquo feedstock flexibility will be a substantial competitive advantage
0
500
1000
1500
2000
2015 2016 2017 2018 2019 2020
US Ethane Balances under unchanged Supply (lsquo000 bd)
To Ethylene Export by Pipeline
Deep Sea exports 2015 Production
Rejection
Source ICIS Consulting amp ICIS Prices
wwwiciscom 17
EU
(127)
ME
350AF
41
Balances Surplus Deficit
35
53
51 75
88
80
35
60
22to Japan
195
NAM
to rest of SAP
39
27to China
LAM
(65)
Rest of SAP amp
Indonesia
(108)
64
53
FUSSR
JAPAN
(114)
SKOREA
(38)
INDIA
(80)
Global LPG Key Trade Flows (2015)
Volumes in Million tonne
CHINA
(106)
US LPG will remain long flows to international markets rapidly increasing
The US is by now the largest
country exporter of Propane in the
World It was a net importer of
LPG just a few years ago
Exports are now flowing to Asia
and Europe
European demand for Ethylene
has doubled and supply is
declining
The Middle East remains the
largest region in terms of exports
Ample avails in international
markets have promoted Asian
PDH developments
China imports are now exceeding
those of Japan
Source ICIS Supply and Demand Database
wwwiciscom 18Copyright copy 2016 ICIS
European Petrochemical Feedstocks
A growing inflow of imported Light NGLs
Ethylene production from LPG is now swinging within a 20-30 range
Will domestic Refiners improve the naphtha balance in a low oil price scenario
-16
-14
-12
-10
-8
-6
-4
-2
0
2MILLION TONNE
EuropeFeedstock Balances
Ethane LPG Naphtha
0
5
10
15
20
25
30
MILLION TONNE
Europe Ethylene Production by Feedstock
Naphtha amp Heavier LPG Ethane
Source ICIS Supply and Demand Database
Petrochemicals and the Emerging
Markets
wwwiciscom 20Copyright copy 2016 ICIS
Petrochemicals the opportunity is there but will require the right business models
Global demand growth is much faster than oilrsquoshellip
and a target for Refiners
Polyolefins50
Key Elastomers4
Polyesters amp
PUrethanes26
Other Key
Plastics20
2015
41
31
44
33
4
00 10 20 30 40 50
Polyolefins
Key Elastomers
Polyesters amp PUrethanes
Other Key Plastics
TOTAL
Petrochemical Demand AAGR 2015-2025
Source ICIS Supply and Demand Database
wwwiciscom 21Copyright copy 2016 ICIS
Global PetrochemicalsChina is important Europe is growinghellip
almost half of 2020-25 EU increase is in Turkey + Poland
685
5 62306
267
558
352
332 791
Global Incremental Petrochemical Demand (Million Tonne)
North
America
Europe China
Rest Of
World
2015 2020 2025
North
America
EuropeChina
Rest Of
World
Source ICIS Supply and Demand Database
wwwiciscom 22Copyright copy 2016 ICIS
Global Petrochemicals
Polyolefins are the workhorsehellip
685
35918 195
113
406
2 235129 791
Global Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Incremental
Oil Demand is 148 MMT
Source ICIS Supply and Demand Database
wwwiciscom 23Copyright copy 2016 ICIS
Petrochemicals in the ldquoRest of the Worldrdquo
Polyolefins most important Aromatics chain grows at the same pace
267
15307 61
46
195
07 78 52 332
Rest of World Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Source ICIS Supply and Demand Database
wwwiciscom 24Copyright copy 2016 ICIS
Beyond Energy geographical influence is shifting to the ldquoRest of the Worldrdquo
Much of the high growth in the rest of the World is on the ldquoOne Belt One Roadrdquohellip
Asia Excl
China50
Africa amp MEast
39
F USSR
4
S America7
Asia Excl
China52
Africa amp MEast
32
F USSR
7
S America9
Asia Excl
China63
Africa amp
MEast19
F USSR
8
S America10
Energy Oil Petrochemicals
Share of 2015-2025 Incremental Demand in the ldquoRest of Worldrdquo
India Indonesia
Vietnam Russia amp
Iran account for
40 of global
growth potentialSource ICIS Supply and Demand Database
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
The Economic Supercycle and
Why It Is Over
John RichardsonICIS Senior Consultant Asia
wwwiciscom 26
What was the economic Supercycle
The end of the Supercycle What it means for petrochemicals
China past and future Its role in the end of the Supercycle
and what happens next
The way forward New opportunities
Agenda
What was the Supercycle
wwwiciscom 28
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 29
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 30
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
What this means for petrochemicals
wwwiciscom 32
The supply-driven model no longer works
A paradigm shift is under way in the global economy as well as in the global petrochemical markets
Having expected this we successfully forecast the slowdown in the Chinese economy and the collapse of oil prices
Stimulus hangover a lot of it badly spent has left big supply overhangs and so the loss of pricing power
Chinarsquos Role In This New Paradigm
The History
wwwiciscom 34
The biggest credit bubble in economic history
President Xi Jinping opening the 3rd Plenum November 2013
ldquoThe good meat is all gone all that is left are hard bones to chewrdquo
Premier Li Keiqiang in his Work Report to the National Peoplersquos Congress March 2016
ldquoThis is the crucial period in which China currently finds itself and during which we must build up powerful new drivers in order to accelerate the development of the new economyrdquo
2014
wwwiciscom 35
China petrochemicals volumes critically important
67
892
2171
378
749
89 120
1088
2560
-
500
1000
1500
2000
2500
3000
00
0 to
nn
es
2015 LLDPE imports
Source ICIS Supply and Demand Database
7 7 77 8 8
8
35 35 35 36 36 36 36
0
5
10
15
20
25
30
35
40
2016 2017 2018 2019 2020 2021 2022
-
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
lsquo00
0 to
nn
es
China versus India PP consumption
World Consumption India Consumption
China Consumption India as a percentage of global total
China as a percentage of global total
wwwiciscom 36
The impact of stimulus on chemicals and polymers
0
200
400
600
800
1000
1200
1400
China Europe Japan SouthKorea
US Taiwan
lsquo00
0 to
nn
esy
ea
r
Average size of PTA capacities
2000 2016
Source ICIS Supply and Demand Database
7872
77
91
114
138
154
164158
0
20
40
60
80
100
120
140
160
180
-
10000
20000
30000
40000
50000
60000
2009 2010 2011 2012 2013 2014 2015 2016 2017
China PTA
Capacity in 000 tonnesyear Consumption in 000 tonnesyear
Capacity as of consumption
wwwiciscom 37
5000
10000
15000
20000
25000
30000
35000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
To
nn
es
China ethylene versus propylene consumption
Ethylene Propylene
China becomes the first country or region in the world where propylene consumption exceeds ethylene
China consumed 13m tonnes of phenol in 2010 versus capacity of 880000 tonnesyear In 2017 ICIS Consulting expects capacity 27m tonnesyear versus 24m tonnes of demand
Acrylic acid capacity in China in 2010 was 11m tonnesyear versus consumption of 1m tonnes In 2017 we are forecasting 35m tonnesyear of capacity versus 17m tonnes of demand
Source ICIS Supply and Demand Database
wwwiciscom 38
Source ICIS Supply and Demand Database
It was about building factories for the sake of building factories to preserve jobs
Little regard was given to conventional analysis of long- term supply and demand
It wasnrsquot about cost per tonne economics
6368 70
7780
8486 87
90
0
10
20
30
40
50
60
70
80
90
100
-
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PP consumption and capacity
Capacity in 000 tonnesyear Consumption in 000 tonnes
Capacity as a percentage of consumption
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 14
34 27989
North America
02 57 08
South amp Central America
16139
33
Europe
00
58 174
Former USSR
0071
152
Africa
00
415 406
Middle East
00
307
596
North East Asia
16185 64
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 15
34 27989
151North America
02 57 08 23
South amp Central America
16139
33
490Europe
00
58 17493
Former USSR
0071
152
240
Africa
00
415 406
40Middle East
00
307
596
187
North East Asia
16185 64
270
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 16
US Shale developments in a lower oil price scenario not the original plan
0
2
4
6
8
10
12
14
16
18
20
Jan
-10
May
-10
Sep
-10
Jan
-11
May
-11
Sep
-11
Jan
-12
May
-12
Sep
-12
Jan
-13
May
-13
Sep
-13
Jan
-14
May
-14
Sep
-14
Jan
-15
May
-15
Sep
-15
Jan
-16
May
-16
US Price developments $MMBTU
Natural Gas Crude Oil Ethane Propane
A large amount of ethane remains ldquorejectedrdquo waiting for the new demand But once demand arrives
more production will be required and transport costs featuredhellip
Propane availability suggests ample supply is available but seasonal factors remain in place Steam-
crackersrsquo feedstock flexibility will be a substantial competitive advantage
0
500
1000
1500
2000
2015 2016 2017 2018 2019 2020
US Ethane Balances under unchanged Supply (lsquo000 bd)
To Ethylene Export by Pipeline
Deep Sea exports 2015 Production
Rejection
Source ICIS Consulting amp ICIS Prices
wwwiciscom 17
EU
(127)
ME
350AF
41
Balances Surplus Deficit
35
53
51 75
88
80
35
60
22to Japan
195
NAM
to rest of SAP
39
27to China
LAM
(65)
Rest of SAP amp
Indonesia
(108)
64
53
FUSSR
JAPAN
(114)
SKOREA
(38)
INDIA
(80)
Global LPG Key Trade Flows (2015)
Volumes in Million tonne
CHINA
(106)
US LPG will remain long flows to international markets rapidly increasing
The US is by now the largest
country exporter of Propane in the
World It was a net importer of
LPG just a few years ago
Exports are now flowing to Asia
and Europe
European demand for Ethylene
has doubled and supply is
declining
The Middle East remains the
largest region in terms of exports
Ample avails in international
markets have promoted Asian
PDH developments
China imports are now exceeding
those of Japan
Source ICIS Supply and Demand Database
wwwiciscom 18Copyright copy 2016 ICIS
European Petrochemical Feedstocks
A growing inflow of imported Light NGLs
Ethylene production from LPG is now swinging within a 20-30 range
Will domestic Refiners improve the naphtha balance in a low oil price scenario
-16
-14
-12
-10
-8
-6
-4
-2
0
2MILLION TONNE
EuropeFeedstock Balances
Ethane LPG Naphtha
0
5
10
15
20
25
30
MILLION TONNE
Europe Ethylene Production by Feedstock
Naphtha amp Heavier LPG Ethane
Source ICIS Supply and Demand Database
Petrochemicals and the Emerging
Markets
wwwiciscom 20Copyright copy 2016 ICIS
Petrochemicals the opportunity is there but will require the right business models
Global demand growth is much faster than oilrsquoshellip
and a target for Refiners
Polyolefins50
Key Elastomers4
Polyesters amp
PUrethanes26
Other Key
Plastics20
2015
41
31
44
33
4
00 10 20 30 40 50
Polyolefins
Key Elastomers
Polyesters amp PUrethanes
Other Key Plastics
TOTAL
Petrochemical Demand AAGR 2015-2025
Source ICIS Supply and Demand Database
wwwiciscom 21Copyright copy 2016 ICIS
Global PetrochemicalsChina is important Europe is growinghellip
almost half of 2020-25 EU increase is in Turkey + Poland
685
5 62306
267
558
352
332 791
Global Incremental Petrochemical Demand (Million Tonne)
North
America
Europe China
Rest Of
World
2015 2020 2025
North
America
EuropeChina
Rest Of
World
Source ICIS Supply and Demand Database
wwwiciscom 22Copyright copy 2016 ICIS
Global Petrochemicals
Polyolefins are the workhorsehellip
685
35918 195
113
406
2 235129 791
Global Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Incremental
Oil Demand is 148 MMT
Source ICIS Supply and Demand Database
wwwiciscom 23Copyright copy 2016 ICIS
Petrochemicals in the ldquoRest of the Worldrdquo
Polyolefins most important Aromatics chain grows at the same pace
267
15307 61
46
195
07 78 52 332
Rest of World Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Source ICIS Supply and Demand Database
wwwiciscom 24Copyright copy 2016 ICIS
Beyond Energy geographical influence is shifting to the ldquoRest of the Worldrdquo
Much of the high growth in the rest of the World is on the ldquoOne Belt One Roadrdquohellip
Asia Excl
China50
Africa amp MEast
39
F USSR
4
S America7
Asia Excl
China52
Africa amp MEast
32
F USSR
7
S America9
Asia Excl
China63
Africa amp
MEast19
F USSR
8
S America10
Energy Oil Petrochemicals
Share of 2015-2025 Incremental Demand in the ldquoRest of Worldrdquo
India Indonesia
Vietnam Russia amp
Iran account for
40 of global
growth potentialSource ICIS Supply and Demand Database
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
The Economic Supercycle and
Why It Is Over
John RichardsonICIS Senior Consultant Asia
wwwiciscom 26
What was the economic Supercycle
The end of the Supercycle What it means for petrochemicals
China past and future Its role in the end of the Supercycle
and what happens next
The way forward New opportunities
Agenda
What was the Supercycle
wwwiciscom 28
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 29
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 30
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
What this means for petrochemicals
wwwiciscom 32
The supply-driven model no longer works
A paradigm shift is under way in the global economy as well as in the global petrochemical markets
Having expected this we successfully forecast the slowdown in the Chinese economy and the collapse of oil prices
Stimulus hangover a lot of it badly spent has left big supply overhangs and so the loss of pricing power
Chinarsquos Role In This New Paradigm
The History
wwwiciscom 34
The biggest credit bubble in economic history
President Xi Jinping opening the 3rd Plenum November 2013
ldquoThe good meat is all gone all that is left are hard bones to chewrdquo
Premier Li Keiqiang in his Work Report to the National Peoplersquos Congress March 2016
ldquoThis is the crucial period in which China currently finds itself and during which we must build up powerful new drivers in order to accelerate the development of the new economyrdquo
2014
wwwiciscom 35
China petrochemicals volumes critically important
67
892
2171
378
749
89 120
1088
2560
-
500
1000
1500
2000
2500
3000
00
0 to
nn
es
2015 LLDPE imports
Source ICIS Supply and Demand Database
7 7 77 8 8
8
35 35 35 36 36 36 36
0
5
10
15
20
25
30
35
40
2016 2017 2018 2019 2020 2021 2022
-
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
lsquo00
0 to
nn
es
China versus India PP consumption
World Consumption India Consumption
China Consumption India as a percentage of global total
China as a percentage of global total
wwwiciscom 36
The impact of stimulus on chemicals and polymers
0
200
400
600
800
1000
1200
1400
China Europe Japan SouthKorea
US Taiwan
lsquo00
0 to
nn
esy
ea
r
Average size of PTA capacities
2000 2016
Source ICIS Supply and Demand Database
7872
77
91
114
138
154
164158
0
20
40
60
80
100
120
140
160
180
-
10000
20000
30000
40000
50000
60000
2009 2010 2011 2012 2013 2014 2015 2016 2017
China PTA
Capacity in 000 tonnesyear Consumption in 000 tonnesyear
Capacity as of consumption
wwwiciscom 37
5000
10000
15000
20000
25000
30000
35000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
To
nn
es
China ethylene versus propylene consumption
Ethylene Propylene
China becomes the first country or region in the world where propylene consumption exceeds ethylene
China consumed 13m tonnes of phenol in 2010 versus capacity of 880000 tonnesyear In 2017 ICIS Consulting expects capacity 27m tonnesyear versus 24m tonnes of demand
Acrylic acid capacity in China in 2010 was 11m tonnesyear versus consumption of 1m tonnes In 2017 we are forecasting 35m tonnesyear of capacity versus 17m tonnes of demand
Source ICIS Supply and Demand Database
wwwiciscom 38
Source ICIS Supply and Demand Database
It was about building factories for the sake of building factories to preserve jobs
Little regard was given to conventional analysis of long- term supply and demand
It wasnrsquot about cost per tonne economics
6368 70
7780
8486 87
90
0
10
20
30
40
50
60
70
80
90
100
-
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PP consumption and capacity
Capacity in 000 tonnesyear Consumption in 000 tonnes
Capacity as a percentage of consumption
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 15
34 27989
151North America
02 57 08 23
South amp Central America
16139
33
490Europe
00
58 17493
Former USSR
0071
152
240
Africa
00
415 406
40Middle East
00
307
596
187
North East Asia
16185 64
270
Asia amp Pacific
ETHANE LPG NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANELPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
ETHANE
LPG NAPHTHA
GASOLINE
ETHANE
LPGNAPHTHA
GASOLINE
ETHANE
LPG
NAPHTHA
GASOLINE
Shale Developments have promoted investments for new NGLs Feedstocks export flows (beyond petrochemicals)
Europe will be a growing targetSource ICIS Supply and Demand Database
Feedstocks Regional deficitssurpluses in 2020
wwwiciscom 16
US Shale developments in a lower oil price scenario not the original plan
0
2
4
6
8
10
12
14
16
18
20
Jan
-10
May
-10
Sep
-10
Jan
-11
May
-11
Sep
-11
Jan
-12
May
-12
Sep
-12
Jan
-13
May
-13
Sep
-13
Jan
-14
May
-14
Sep
-14
Jan
-15
May
-15
Sep
-15
Jan
-16
May
-16
US Price developments $MMBTU
Natural Gas Crude Oil Ethane Propane
A large amount of ethane remains ldquorejectedrdquo waiting for the new demand But once demand arrives
more production will be required and transport costs featuredhellip
Propane availability suggests ample supply is available but seasonal factors remain in place Steam-
crackersrsquo feedstock flexibility will be a substantial competitive advantage
0
500
1000
1500
2000
2015 2016 2017 2018 2019 2020
US Ethane Balances under unchanged Supply (lsquo000 bd)
To Ethylene Export by Pipeline
Deep Sea exports 2015 Production
Rejection
Source ICIS Consulting amp ICIS Prices
wwwiciscom 17
EU
(127)
ME
350AF
41
Balances Surplus Deficit
35
53
51 75
88
80
35
60
22to Japan
195
NAM
to rest of SAP
39
27to China
LAM
(65)
Rest of SAP amp
Indonesia
(108)
64
53
FUSSR
JAPAN
(114)
SKOREA
(38)
INDIA
(80)
Global LPG Key Trade Flows (2015)
Volumes in Million tonne
CHINA
(106)
US LPG will remain long flows to international markets rapidly increasing
The US is by now the largest
country exporter of Propane in the
World It was a net importer of
LPG just a few years ago
Exports are now flowing to Asia
and Europe
European demand for Ethylene
has doubled and supply is
declining
The Middle East remains the
largest region in terms of exports
Ample avails in international
markets have promoted Asian
PDH developments
China imports are now exceeding
those of Japan
Source ICIS Supply and Demand Database
wwwiciscom 18Copyright copy 2016 ICIS
European Petrochemical Feedstocks
A growing inflow of imported Light NGLs
Ethylene production from LPG is now swinging within a 20-30 range
Will domestic Refiners improve the naphtha balance in a low oil price scenario
-16
-14
-12
-10
-8
-6
-4
-2
0
2MILLION TONNE
EuropeFeedstock Balances
Ethane LPG Naphtha
0
5
10
15
20
25
30
MILLION TONNE
Europe Ethylene Production by Feedstock
Naphtha amp Heavier LPG Ethane
Source ICIS Supply and Demand Database
Petrochemicals and the Emerging
Markets
wwwiciscom 20Copyright copy 2016 ICIS
Petrochemicals the opportunity is there but will require the right business models
Global demand growth is much faster than oilrsquoshellip
and a target for Refiners
Polyolefins50
Key Elastomers4
Polyesters amp
PUrethanes26
Other Key
Plastics20
2015
41
31
44
33
4
00 10 20 30 40 50
Polyolefins
Key Elastomers
Polyesters amp PUrethanes
Other Key Plastics
TOTAL
Petrochemical Demand AAGR 2015-2025
Source ICIS Supply and Demand Database
wwwiciscom 21Copyright copy 2016 ICIS
Global PetrochemicalsChina is important Europe is growinghellip
almost half of 2020-25 EU increase is in Turkey + Poland
685
5 62306
267
558
352
332 791
Global Incremental Petrochemical Demand (Million Tonne)
North
America
Europe China
Rest Of
World
2015 2020 2025
North
America
EuropeChina
Rest Of
World
Source ICIS Supply and Demand Database
wwwiciscom 22Copyright copy 2016 ICIS
Global Petrochemicals
Polyolefins are the workhorsehellip
685
35918 195
113
406
2 235129 791
Global Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Incremental
Oil Demand is 148 MMT
Source ICIS Supply and Demand Database
wwwiciscom 23Copyright copy 2016 ICIS
Petrochemicals in the ldquoRest of the Worldrdquo
Polyolefins most important Aromatics chain grows at the same pace
267
15307 61
46
195
07 78 52 332
Rest of World Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Source ICIS Supply and Demand Database
wwwiciscom 24Copyright copy 2016 ICIS
Beyond Energy geographical influence is shifting to the ldquoRest of the Worldrdquo
Much of the high growth in the rest of the World is on the ldquoOne Belt One Roadrdquohellip
Asia Excl
China50
Africa amp MEast
39
F USSR
4
S America7
Asia Excl
China52
Africa amp MEast
32
F USSR
7
S America9
Asia Excl
China63
Africa amp
MEast19
F USSR
8
S America10
Energy Oil Petrochemicals
Share of 2015-2025 Incremental Demand in the ldquoRest of Worldrdquo
India Indonesia
Vietnam Russia amp
Iran account for
40 of global
growth potentialSource ICIS Supply and Demand Database
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
The Economic Supercycle and
Why It Is Over
John RichardsonICIS Senior Consultant Asia
wwwiciscom 26
What was the economic Supercycle
The end of the Supercycle What it means for petrochemicals
China past and future Its role in the end of the Supercycle
and what happens next
The way forward New opportunities
Agenda
What was the Supercycle
wwwiciscom 28
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 29
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 30
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
What this means for petrochemicals
wwwiciscom 32
The supply-driven model no longer works
A paradigm shift is under way in the global economy as well as in the global petrochemical markets
Having expected this we successfully forecast the slowdown in the Chinese economy and the collapse of oil prices
Stimulus hangover a lot of it badly spent has left big supply overhangs and so the loss of pricing power
Chinarsquos Role In This New Paradigm
The History
wwwiciscom 34
The biggest credit bubble in economic history
President Xi Jinping opening the 3rd Plenum November 2013
ldquoThe good meat is all gone all that is left are hard bones to chewrdquo
Premier Li Keiqiang in his Work Report to the National Peoplersquos Congress March 2016
ldquoThis is the crucial period in which China currently finds itself and during which we must build up powerful new drivers in order to accelerate the development of the new economyrdquo
2014
wwwiciscom 35
China petrochemicals volumes critically important
67
892
2171
378
749
89 120
1088
2560
-
500
1000
1500
2000
2500
3000
00
0 to
nn
es
2015 LLDPE imports
Source ICIS Supply and Demand Database
7 7 77 8 8
8
35 35 35 36 36 36 36
0
5
10
15
20
25
30
35
40
2016 2017 2018 2019 2020 2021 2022
-
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
lsquo00
0 to
nn
es
China versus India PP consumption
World Consumption India Consumption
China Consumption India as a percentage of global total
China as a percentage of global total
wwwiciscom 36
The impact of stimulus on chemicals and polymers
0
200
400
600
800
1000
1200
1400
China Europe Japan SouthKorea
US Taiwan
lsquo00
0 to
nn
esy
ea
r
Average size of PTA capacities
2000 2016
Source ICIS Supply and Demand Database
7872
77
91
114
138
154
164158
0
20
40
60
80
100
120
140
160
180
-
10000
20000
30000
40000
50000
60000
2009 2010 2011 2012 2013 2014 2015 2016 2017
China PTA
Capacity in 000 tonnesyear Consumption in 000 tonnesyear
Capacity as of consumption
wwwiciscom 37
5000
10000
15000
20000
25000
30000
35000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
To
nn
es
China ethylene versus propylene consumption
Ethylene Propylene
China becomes the first country or region in the world where propylene consumption exceeds ethylene
China consumed 13m tonnes of phenol in 2010 versus capacity of 880000 tonnesyear In 2017 ICIS Consulting expects capacity 27m tonnesyear versus 24m tonnes of demand
Acrylic acid capacity in China in 2010 was 11m tonnesyear versus consumption of 1m tonnes In 2017 we are forecasting 35m tonnesyear of capacity versus 17m tonnes of demand
Source ICIS Supply and Demand Database
wwwiciscom 38
Source ICIS Supply and Demand Database
It was about building factories for the sake of building factories to preserve jobs
Little regard was given to conventional analysis of long- term supply and demand
It wasnrsquot about cost per tonne economics
6368 70
7780
8486 87
90
0
10
20
30
40
50
60
70
80
90
100
-
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PP consumption and capacity
Capacity in 000 tonnesyear Consumption in 000 tonnes
Capacity as a percentage of consumption
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 16
US Shale developments in a lower oil price scenario not the original plan
0
2
4
6
8
10
12
14
16
18
20
Jan
-10
May
-10
Sep
-10
Jan
-11
May
-11
Sep
-11
Jan
-12
May
-12
Sep
-12
Jan
-13
May
-13
Sep
-13
Jan
-14
May
-14
Sep
-14
Jan
-15
May
-15
Sep
-15
Jan
-16
May
-16
US Price developments $MMBTU
Natural Gas Crude Oil Ethane Propane
A large amount of ethane remains ldquorejectedrdquo waiting for the new demand But once demand arrives
more production will be required and transport costs featuredhellip
Propane availability suggests ample supply is available but seasonal factors remain in place Steam-
crackersrsquo feedstock flexibility will be a substantial competitive advantage
0
500
1000
1500
2000
2015 2016 2017 2018 2019 2020
US Ethane Balances under unchanged Supply (lsquo000 bd)
To Ethylene Export by Pipeline
Deep Sea exports 2015 Production
Rejection
Source ICIS Consulting amp ICIS Prices
wwwiciscom 17
EU
(127)
ME
350AF
41
Balances Surplus Deficit
35
53
51 75
88
80
35
60
22to Japan
195
NAM
to rest of SAP
39
27to China
LAM
(65)
Rest of SAP amp
Indonesia
(108)
64
53
FUSSR
JAPAN
(114)
SKOREA
(38)
INDIA
(80)
Global LPG Key Trade Flows (2015)
Volumes in Million tonne
CHINA
(106)
US LPG will remain long flows to international markets rapidly increasing
The US is by now the largest
country exporter of Propane in the
World It was a net importer of
LPG just a few years ago
Exports are now flowing to Asia
and Europe
European demand for Ethylene
has doubled and supply is
declining
The Middle East remains the
largest region in terms of exports
Ample avails in international
markets have promoted Asian
PDH developments
China imports are now exceeding
those of Japan
Source ICIS Supply and Demand Database
wwwiciscom 18Copyright copy 2016 ICIS
European Petrochemical Feedstocks
A growing inflow of imported Light NGLs
Ethylene production from LPG is now swinging within a 20-30 range
Will domestic Refiners improve the naphtha balance in a low oil price scenario
-16
-14
-12
-10
-8
-6
-4
-2
0
2MILLION TONNE
EuropeFeedstock Balances
Ethane LPG Naphtha
0
5
10
15
20
25
30
MILLION TONNE
Europe Ethylene Production by Feedstock
Naphtha amp Heavier LPG Ethane
Source ICIS Supply and Demand Database
Petrochemicals and the Emerging
Markets
wwwiciscom 20Copyright copy 2016 ICIS
Petrochemicals the opportunity is there but will require the right business models
Global demand growth is much faster than oilrsquoshellip
and a target for Refiners
Polyolefins50
Key Elastomers4
Polyesters amp
PUrethanes26
Other Key
Plastics20
2015
41
31
44
33
4
00 10 20 30 40 50
Polyolefins
Key Elastomers
Polyesters amp PUrethanes
Other Key Plastics
TOTAL
Petrochemical Demand AAGR 2015-2025
Source ICIS Supply and Demand Database
wwwiciscom 21Copyright copy 2016 ICIS
Global PetrochemicalsChina is important Europe is growinghellip
almost half of 2020-25 EU increase is in Turkey + Poland
685
5 62306
267
558
352
332 791
Global Incremental Petrochemical Demand (Million Tonne)
North
America
Europe China
Rest Of
World
2015 2020 2025
North
America
EuropeChina
Rest Of
World
Source ICIS Supply and Demand Database
wwwiciscom 22Copyright copy 2016 ICIS
Global Petrochemicals
Polyolefins are the workhorsehellip
685
35918 195
113
406
2 235129 791
Global Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Incremental
Oil Demand is 148 MMT
Source ICIS Supply and Demand Database
wwwiciscom 23Copyright copy 2016 ICIS
Petrochemicals in the ldquoRest of the Worldrdquo
Polyolefins most important Aromatics chain grows at the same pace
267
15307 61
46
195
07 78 52 332
Rest of World Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Source ICIS Supply and Demand Database
wwwiciscom 24Copyright copy 2016 ICIS
Beyond Energy geographical influence is shifting to the ldquoRest of the Worldrdquo
Much of the high growth in the rest of the World is on the ldquoOne Belt One Roadrdquohellip
Asia Excl
China50
Africa amp MEast
39
F USSR
4
S America7
Asia Excl
China52
Africa amp MEast
32
F USSR
7
S America9
Asia Excl
China63
Africa amp
MEast19
F USSR
8
S America10
Energy Oil Petrochemicals
Share of 2015-2025 Incremental Demand in the ldquoRest of Worldrdquo
India Indonesia
Vietnam Russia amp
Iran account for
40 of global
growth potentialSource ICIS Supply and Demand Database
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
The Economic Supercycle and
Why It Is Over
John RichardsonICIS Senior Consultant Asia
wwwiciscom 26
What was the economic Supercycle
The end of the Supercycle What it means for petrochemicals
China past and future Its role in the end of the Supercycle
and what happens next
The way forward New opportunities
Agenda
What was the Supercycle
wwwiciscom 28
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 29
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 30
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
What this means for petrochemicals
wwwiciscom 32
The supply-driven model no longer works
A paradigm shift is under way in the global economy as well as in the global petrochemical markets
Having expected this we successfully forecast the slowdown in the Chinese economy and the collapse of oil prices
Stimulus hangover a lot of it badly spent has left big supply overhangs and so the loss of pricing power
Chinarsquos Role In This New Paradigm
The History
wwwiciscom 34
The biggest credit bubble in economic history
President Xi Jinping opening the 3rd Plenum November 2013
ldquoThe good meat is all gone all that is left are hard bones to chewrdquo
Premier Li Keiqiang in his Work Report to the National Peoplersquos Congress March 2016
ldquoThis is the crucial period in which China currently finds itself and during which we must build up powerful new drivers in order to accelerate the development of the new economyrdquo
2014
wwwiciscom 35
China petrochemicals volumes critically important
67
892
2171
378
749
89 120
1088
2560
-
500
1000
1500
2000
2500
3000
00
0 to
nn
es
2015 LLDPE imports
Source ICIS Supply and Demand Database
7 7 77 8 8
8
35 35 35 36 36 36 36
0
5
10
15
20
25
30
35
40
2016 2017 2018 2019 2020 2021 2022
-
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
lsquo00
0 to
nn
es
China versus India PP consumption
World Consumption India Consumption
China Consumption India as a percentage of global total
China as a percentage of global total
wwwiciscom 36
The impact of stimulus on chemicals and polymers
0
200
400
600
800
1000
1200
1400
China Europe Japan SouthKorea
US Taiwan
lsquo00
0 to
nn
esy
ea
r
Average size of PTA capacities
2000 2016
Source ICIS Supply and Demand Database
7872
77
91
114
138
154
164158
0
20
40
60
80
100
120
140
160
180
-
10000
20000
30000
40000
50000
60000
2009 2010 2011 2012 2013 2014 2015 2016 2017
China PTA
Capacity in 000 tonnesyear Consumption in 000 tonnesyear
Capacity as of consumption
wwwiciscom 37
5000
10000
15000
20000
25000
30000
35000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
To
nn
es
China ethylene versus propylene consumption
Ethylene Propylene
China becomes the first country or region in the world where propylene consumption exceeds ethylene
China consumed 13m tonnes of phenol in 2010 versus capacity of 880000 tonnesyear In 2017 ICIS Consulting expects capacity 27m tonnesyear versus 24m tonnes of demand
Acrylic acid capacity in China in 2010 was 11m tonnesyear versus consumption of 1m tonnes In 2017 we are forecasting 35m tonnesyear of capacity versus 17m tonnes of demand
Source ICIS Supply and Demand Database
wwwiciscom 38
Source ICIS Supply and Demand Database
It was about building factories for the sake of building factories to preserve jobs
Little regard was given to conventional analysis of long- term supply and demand
It wasnrsquot about cost per tonne economics
6368 70
7780
8486 87
90
0
10
20
30
40
50
60
70
80
90
100
-
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PP consumption and capacity
Capacity in 000 tonnesyear Consumption in 000 tonnes
Capacity as a percentage of consumption
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 17
EU
(127)
ME
350AF
41
Balances Surplus Deficit
35
53
51 75
88
80
35
60
22to Japan
195
NAM
to rest of SAP
39
27to China
LAM
(65)
Rest of SAP amp
Indonesia
(108)
64
53
FUSSR
JAPAN
(114)
SKOREA
(38)
INDIA
(80)
Global LPG Key Trade Flows (2015)
Volumes in Million tonne
CHINA
(106)
US LPG will remain long flows to international markets rapidly increasing
The US is by now the largest
country exporter of Propane in the
World It was a net importer of
LPG just a few years ago
Exports are now flowing to Asia
and Europe
European demand for Ethylene
has doubled and supply is
declining
The Middle East remains the
largest region in terms of exports
Ample avails in international
markets have promoted Asian
PDH developments
China imports are now exceeding
those of Japan
Source ICIS Supply and Demand Database
wwwiciscom 18Copyright copy 2016 ICIS
European Petrochemical Feedstocks
A growing inflow of imported Light NGLs
Ethylene production from LPG is now swinging within a 20-30 range
Will domestic Refiners improve the naphtha balance in a low oil price scenario
-16
-14
-12
-10
-8
-6
-4
-2
0
2MILLION TONNE
EuropeFeedstock Balances
Ethane LPG Naphtha
0
5
10
15
20
25
30
MILLION TONNE
Europe Ethylene Production by Feedstock
Naphtha amp Heavier LPG Ethane
Source ICIS Supply and Demand Database
Petrochemicals and the Emerging
Markets
wwwiciscom 20Copyright copy 2016 ICIS
Petrochemicals the opportunity is there but will require the right business models
Global demand growth is much faster than oilrsquoshellip
and a target for Refiners
Polyolefins50
Key Elastomers4
Polyesters amp
PUrethanes26
Other Key
Plastics20
2015
41
31
44
33
4
00 10 20 30 40 50
Polyolefins
Key Elastomers
Polyesters amp PUrethanes
Other Key Plastics
TOTAL
Petrochemical Demand AAGR 2015-2025
Source ICIS Supply and Demand Database
wwwiciscom 21Copyright copy 2016 ICIS
Global PetrochemicalsChina is important Europe is growinghellip
almost half of 2020-25 EU increase is in Turkey + Poland
685
5 62306
267
558
352
332 791
Global Incremental Petrochemical Demand (Million Tonne)
North
America
Europe China
Rest Of
World
2015 2020 2025
North
America
EuropeChina
Rest Of
World
Source ICIS Supply and Demand Database
wwwiciscom 22Copyright copy 2016 ICIS
Global Petrochemicals
Polyolefins are the workhorsehellip
685
35918 195
113
406
2 235129 791
Global Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Incremental
Oil Demand is 148 MMT
Source ICIS Supply and Demand Database
wwwiciscom 23Copyright copy 2016 ICIS
Petrochemicals in the ldquoRest of the Worldrdquo
Polyolefins most important Aromatics chain grows at the same pace
267
15307 61
46
195
07 78 52 332
Rest of World Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Source ICIS Supply and Demand Database
wwwiciscom 24Copyright copy 2016 ICIS
Beyond Energy geographical influence is shifting to the ldquoRest of the Worldrdquo
Much of the high growth in the rest of the World is on the ldquoOne Belt One Roadrdquohellip
Asia Excl
China50
Africa amp MEast
39
F USSR
4
S America7
Asia Excl
China52
Africa amp MEast
32
F USSR
7
S America9
Asia Excl
China63
Africa amp
MEast19
F USSR
8
S America10
Energy Oil Petrochemicals
Share of 2015-2025 Incremental Demand in the ldquoRest of Worldrdquo
India Indonesia
Vietnam Russia amp
Iran account for
40 of global
growth potentialSource ICIS Supply and Demand Database
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
The Economic Supercycle and
Why It Is Over
John RichardsonICIS Senior Consultant Asia
wwwiciscom 26
What was the economic Supercycle
The end of the Supercycle What it means for petrochemicals
China past and future Its role in the end of the Supercycle
and what happens next
The way forward New opportunities
Agenda
What was the Supercycle
wwwiciscom 28
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 29
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 30
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
What this means for petrochemicals
wwwiciscom 32
The supply-driven model no longer works
A paradigm shift is under way in the global economy as well as in the global petrochemical markets
Having expected this we successfully forecast the slowdown in the Chinese economy and the collapse of oil prices
Stimulus hangover a lot of it badly spent has left big supply overhangs and so the loss of pricing power
Chinarsquos Role In This New Paradigm
The History
wwwiciscom 34
The biggest credit bubble in economic history
President Xi Jinping opening the 3rd Plenum November 2013
ldquoThe good meat is all gone all that is left are hard bones to chewrdquo
Premier Li Keiqiang in his Work Report to the National Peoplersquos Congress March 2016
ldquoThis is the crucial period in which China currently finds itself and during which we must build up powerful new drivers in order to accelerate the development of the new economyrdquo
2014
wwwiciscom 35
China petrochemicals volumes critically important
67
892
2171
378
749
89 120
1088
2560
-
500
1000
1500
2000
2500
3000
00
0 to
nn
es
2015 LLDPE imports
Source ICIS Supply and Demand Database
7 7 77 8 8
8
35 35 35 36 36 36 36
0
5
10
15
20
25
30
35
40
2016 2017 2018 2019 2020 2021 2022
-
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
lsquo00
0 to
nn
es
China versus India PP consumption
World Consumption India Consumption
China Consumption India as a percentage of global total
China as a percentage of global total
wwwiciscom 36
The impact of stimulus on chemicals and polymers
0
200
400
600
800
1000
1200
1400
China Europe Japan SouthKorea
US Taiwan
lsquo00
0 to
nn
esy
ea
r
Average size of PTA capacities
2000 2016
Source ICIS Supply and Demand Database
7872
77
91
114
138
154
164158
0
20
40
60
80
100
120
140
160
180
-
10000
20000
30000
40000
50000
60000
2009 2010 2011 2012 2013 2014 2015 2016 2017
China PTA
Capacity in 000 tonnesyear Consumption in 000 tonnesyear
Capacity as of consumption
wwwiciscom 37
5000
10000
15000
20000
25000
30000
35000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
To
nn
es
China ethylene versus propylene consumption
Ethylene Propylene
China becomes the first country or region in the world where propylene consumption exceeds ethylene
China consumed 13m tonnes of phenol in 2010 versus capacity of 880000 tonnesyear In 2017 ICIS Consulting expects capacity 27m tonnesyear versus 24m tonnes of demand
Acrylic acid capacity in China in 2010 was 11m tonnesyear versus consumption of 1m tonnes In 2017 we are forecasting 35m tonnesyear of capacity versus 17m tonnes of demand
Source ICIS Supply and Demand Database
wwwiciscom 38
Source ICIS Supply and Demand Database
It was about building factories for the sake of building factories to preserve jobs
Little regard was given to conventional analysis of long- term supply and demand
It wasnrsquot about cost per tonne economics
6368 70
7780
8486 87
90
0
10
20
30
40
50
60
70
80
90
100
-
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PP consumption and capacity
Capacity in 000 tonnesyear Consumption in 000 tonnes
Capacity as a percentage of consumption
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 18Copyright copy 2016 ICIS
European Petrochemical Feedstocks
A growing inflow of imported Light NGLs
Ethylene production from LPG is now swinging within a 20-30 range
Will domestic Refiners improve the naphtha balance in a low oil price scenario
-16
-14
-12
-10
-8
-6
-4
-2
0
2MILLION TONNE
EuropeFeedstock Balances
Ethane LPG Naphtha
0
5
10
15
20
25
30
MILLION TONNE
Europe Ethylene Production by Feedstock
Naphtha amp Heavier LPG Ethane
Source ICIS Supply and Demand Database
Petrochemicals and the Emerging
Markets
wwwiciscom 20Copyright copy 2016 ICIS
Petrochemicals the opportunity is there but will require the right business models
Global demand growth is much faster than oilrsquoshellip
and a target for Refiners
Polyolefins50
Key Elastomers4
Polyesters amp
PUrethanes26
Other Key
Plastics20
2015
41
31
44
33
4
00 10 20 30 40 50
Polyolefins
Key Elastomers
Polyesters amp PUrethanes
Other Key Plastics
TOTAL
Petrochemical Demand AAGR 2015-2025
Source ICIS Supply and Demand Database
wwwiciscom 21Copyright copy 2016 ICIS
Global PetrochemicalsChina is important Europe is growinghellip
almost half of 2020-25 EU increase is in Turkey + Poland
685
5 62306
267
558
352
332 791
Global Incremental Petrochemical Demand (Million Tonne)
North
America
Europe China
Rest Of
World
2015 2020 2025
North
America
EuropeChina
Rest Of
World
Source ICIS Supply and Demand Database
wwwiciscom 22Copyright copy 2016 ICIS
Global Petrochemicals
Polyolefins are the workhorsehellip
685
35918 195
113
406
2 235129 791
Global Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Incremental
Oil Demand is 148 MMT
Source ICIS Supply and Demand Database
wwwiciscom 23Copyright copy 2016 ICIS
Petrochemicals in the ldquoRest of the Worldrdquo
Polyolefins most important Aromatics chain grows at the same pace
267
15307 61
46
195
07 78 52 332
Rest of World Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Source ICIS Supply and Demand Database
wwwiciscom 24Copyright copy 2016 ICIS
Beyond Energy geographical influence is shifting to the ldquoRest of the Worldrdquo
Much of the high growth in the rest of the World is on the ldquoOne Belt One Roadrdquohellip
Asia Excl
China50
Africa amp MEast
39
F USSR
4
S America7
Asia Excl
China52
Africa amp MEast
32
F USSR
7
S America9
Asia Excl
China63
Africa amp
MEast19
F USSR
8
S America10
Energy Oil Petrochemicals
Share of 2015-2025 Incremental Demand in the ldquoRest of Worldrdquo
India Indonesia
Vietnam Russia amp
Iran account for
40 of global
growth potentialSource ICIS Supply and Demand Database
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
The Economic Supercycle and
Why It Is Over
John RichardsonICIS Senior Consultant Asia
wwwiciscom 26
What was the economic Supercycle
The end of the Supercycle What it means for petrochemicals
China past and future Its role in the end of the Supercycle
and what happens next
The way forward New opportunities
Agenda
What was the Supercycle
wwwiciscom 28
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 29
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 30
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
What this means for petrochemicals
wwwiciscom 32
The supply-driven model no longer works
A paradigm shift is under way in the global economy as well as in the global petrochemical markets
Having expected this we successfully forecast the slowdown in the Chinese economy and the collapse of oil prices
Stimulus hangover a lot of it badly spent has left big supply overhangs and so the loss of pricing power
Chinarsquos Role In This New Paradigm
The History
wwwiciscom 34
The biggest credit bubble in economic history
President Xi Jinping opening the 3rd Plenum November 2013
ldquoThe good meat is all gone all that is left are hard bones to chewrdquo
Premier Li Keiqiang in his Work Report to the National Peoplersquos Congress March 2016
ldquoThis is the crucial period in which China currently finds itself and during which we must build up powerful new drivers in order to accelerate the development of the new economyrdquo
2014
wwwiciscom 35
China petrochemicals volumes critically important
67
892
2171
378
749
89 120
1088
2560
-
500
1000
1500
2000
2500
3000
00
0 to
nn
es
2015 LLDPE imports
Source ICIS Supply and Demand Database
7 7 77 8 8
8
35 35 35 36 36 36 36
0
5
10
15
20
25
30
35
40
2016 2017 2018 2019 2020 2021 2022
-
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
lsquo00
0 to
nn
es
China versus India PP consumption
World Consumption India Consumption
China Consumption India as a percentage of global total
China as a percentage of global total
wwwiciscom 36
The impact of stimulus on chemicals and polymers
0
200
400
600
800
1000
1200
1400
China Europe Japan SouthKorea
US Taiwan
lsquo00
0 to
nn
esy
ea
r
Average size of PTA capacities
2000 2016
Source ICIS Supply and Demand Database
7872
77
91
114
138
154
164158
0
20
40
60
80
100
120
140
160
180
-
10000
20000
30000
40000
50000
60000
2009 2010 2011 2012 2013 2014 2015 2016 2017
China PTA
Capacity in 000 tonnesyear Consumption in 000 tonnesyear
Capacity as of consumption
wwwiciscom 37
5000
10000
15000
20000
25000
30000
35000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
To
nn
es
China ethylene versus propylene consumption
Ethylene Propylene
China becomes the first country or region in the world where propylene consumption exceeds ethylene
China consumed 13m tonnes of phenol in 2010 versus capacity of 880000 tonnesyear In 2017 ICIS Consulting expects capacity 27m tonnesyear versus 24m tonnes of demand
Acrylic acid capacity in China in 2010 was 11m tonnesyear versus consumption of 1m tonnes In 2017 we are forecasting 35m tonnesyear of capacity versus 17m tonnes of demand
Source ICIS Supply and Demand Database
wwwiciscom 38
Source ICIS Supply and Demand Database
It was about building factories for the sake of building factories to preserve jobs
Little regard was given to conventional analysis of long- term supply and demand
It wasnrsquot about cost per tonne economics
6368 70
7780
8486 87
90
0
10
20
30
40
50
60
70
80
90
100
-
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PP consumption and capacity
Capacity in 000 tonnesyear Consumption in 000 tonnes
Capacity as a percentage of consumption
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
Petrochemicals and the Emerging
Markets
wwwiciscom 20Copyright copy 2016 ICIS
Petrochemicals the opportunity is there but will require the right business models
Global demand growth is much faster than oilrsquoshellip
and a target for Refiners
Polyolefins50
Key Elastomers4
Polyesters amp
PUrethanes26
Other Key
Plastics20
2015
41
31
44
33
4
00 10 20 30 40 50
Polyolefins
Key Elastomers
Polyesters amp PUrethanes
Other Key Plastics
TOTAL
Petrochemical Demand AAGR 2015-2025
Source ICIS Supply and Demand Database
wwwiciscom 21Copyright copy 2016 ICIS
Global PetrochemicalsChina is important Europe is growinghellip
almost half of 2020-25 EU increase is in Turkey + Poland
685
5 62306
267
558
352
332 791
Global Incremental Petrochemical Demand (Million Tonne)
North
America
Europe China
Rest Of
World
2015 2020 2025
North
America
EuropeChina
Rest Of
World
Source ICIS Supply and Demand Database
wwwiciscom 22Copyright copy 2016 ICIS
Global Petrochemicals
Polyolefins are the workhorsehellip
685
35918 195
113
406
2 235129 791
Global Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Incremental
Oil Demand is 148 MMT
Source ICIS Supply and Demand Database
wwwiciscom 23Copyright copy 2016 ICIS
Petrochemicals in the ldquoRest of the Worldrdquo
Polyolefins most important Aromatics chain grows at the same pace
267
15307 61
46
195
07 78 52 332
Rest of World Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Source ICIS Supply and Demand Database
wwwiciscom 24Copyright copy 2016 ICIS
Beyond Energy geographical influence is shifting to the ldquoRest of the Worldrdquo
Much of the high growth in the rest of the World is on the ldquoOne Belt One Roadrdquohellip
Asia Excl
China50
Africa amp MEast
39
F USSR
4
S America7
Asia Excl
China52
Africa amp MEast
32
F USSR
7
S America9
Asia Excl
China63
Africa amp
MEast19
F USSR
8
S America10
Energy Oil Petrochemicals
Share of 2015-2025 Incremental Demand in the ldquoRest of Worldrdquo
India Indonesia
Vietnam Russia amp
Iran account for
40 of global
growth potentialSource ICIS Supply and Demand Database
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
The Economic Supercycle and
Why It Is Over
John RichardsonICIS Senior Consultant Asia
wwwiciscom 26
What was the economic Supercycle
The end of the Supercycle What it means for petrochemicals
China past and future Its role in the end of the Supercycle
and what happens next
The way forward New opportunities
Agenda
What was the Supercycle
wwwiciscom 28
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 29
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 30
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
What this means for petrochemicals
wwwiciscom 32
The supply-driven model no longer works
A paradigm shift is under way in the global economy as well as in the global petrochemical markets
Having expected this we successfully forecast the slowdown in the Chinese economy and the collapse of oil prices
Stimulus hangover a lot of it badly spent has left big supply overhangs and so the loss of pricing power
Chinarsquos Role In This New Paradigm
The History
wwwiciscom 34
The biggest credit bubble in economic history
President Xi Jinping opening the 3rd Plenum November 2013
ldquoThe good meat is all gone all that is left are hard bones to chewrdquo
Premier Li Keiqiang in his Work Report to the National Peoplersquos Congress March 2016
ldquoThis is the crucial period in which China currently finds itself and during which we must build up powerful new drivers in order to accelerate the development of the new economyrdquo
2014
wwwiciscom 35
China petrochemicals volumes critically important
67
892
2171
378
749
89 120
1088
2560
-
500
1000
1500
2000
2500
3000
00
0 to
nn
es
2015 LLDPE imports
Source ICIS Supply and Demand Database
7 7 77 8 8
8
35 35 35 36 36 36 36
0
5
10
15
20
25
30
35
40
2016 2017 2018 2019 2020 2021 2022
-
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
lsquo00
0 to
nn
es
China versus India PP consumption
World Consumption India Consumption
China Consumption India as a percentage of global total
China as a percentage of global total
wwwiciscom 36
The impact of stimulus on chemicals and polymers
0
200
400
600
800
1000
1200
1400
China Europe Japan SouthKorea
US Taiwan
lsquo00
0 to
nn
esy
ea
r
Average size of PTA capacities
2000 2016
Source ICIS Supply and Demand Database
7872
77
91
114
138
154
164158
0
20
40
60
80
100
120
140
160
180
-
10000
20000
30000
40000
50000
60000
2009 2010 2011 2012 2013 2014 2015 2016 2017
China PTA
Capacity in 000 tonnesyear Consumption in 000 tonnesyear
Capacity as of consumption
wwwiciscom 37
5000
10000
15000
20000
25000
30000
35000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
To
nn
es
China ethylene versus propylene consumption
Ethylene Propylene
China becomes the first country or region in the world where propylene consumption exceeds ethylene
China consumed 13m tonnes of phenol in 2010 versus capacity of 880000 tonnesyear In 2017 ICIS Consulting expects capacity 27m tonnesyear versus 24m tonnes of demand
Acrylic acid capacity in China in 2010 was 11m tonnesyear versus consumption of 1m tonnes In 2017 we are forecasting 35m tonnesyear of capacity versus 17m tonnes of demand
Source ICIS Supply and Demand Database
wwwiciscom 38
Source ICIS Supply and Demand Database
It was about building factories for the sake of building factories to preserve jobs
Little regard was given to conventional analysis of long- term supply and demand
It wasnrsquot about cost per tonne economics
6368 70
7780
8486 87
90
0
10
20
30
40
50
60
70
80
90
100
-
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PP consumption and capacity
Capacity in 000 tonnesyear Consumption in 000 tonnes
Capacity as a percentage of consumption
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 20Copyright copy 2016 ICIS
Petrochemicals the opportunity is there but will require the right business models
Global demand growth is much faster than oilrsquoshellip
and a target for Refiners
Polyolefins50
Key Elastomers4
Polyesters amp
PUrethanes26
Other Key
Plastics20
2015
41
31
44
33
4
00 10 20 30 40 50
Polyolefins
Key Elastomers
Polyesters amp PUrethanes
Other Key Plastics
TOTAL
Petrochemical Demand AAGR 2015-2025
Source ICIS Supply and Demand Database
wwwiciscom 21Copyright copy 2016 ICIS
Global PetrochemicalsChina is important Europe is growinghellip
almost half of 2020-25 EU increase is in Turkey + Poland
685
5 62306
267
558
352
332 791
Global Incremental Petrochemical Demand (Million Tonne)
North
America
Europe China
Rest Of
World
2015 2020 2025
North
America
EuropeChina
Rest Of
World
Source ICIS Supply and Demand Database
wwwiciscom 22Copyright copy 2016 ICIS
Global Petrochemicals
Polyolefins are the workhorsehellip
685
35918 195
113
406
2 235129 791
Global Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Incremental
Oil Demand is 148 MMT
Source ICIS Supply and Demand Database
wwwiciscom 23Copyright copy 2016 ICIS
Petrochemicals in the ldquoRest of the Worldrdquo
Polyolefins most important Aromatics chain grows at the same pace
267
15307 61
46
195
07 78 52 332
Rest of World Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Source ICIS Supply and Demand Database
wwwiciscom 24Copyright copy 2016 ICIS
Beyond Energy geographical influence is shifting to the ldquoRest of the Worldrdquo
Much of the high growth in the rest of the World is on the ldquoOne Belt One Roadrdquohellip
Asia Excl
China50
Africa amp MEast
39
F USSR
4
S America7
Asia Excl
China52
Africa amp MEast
32
F USSR
7
S America9
Asia Excl
China63
Africa amp
MEast19
F USSR
8
S America10
Energy Oil Petrochemicals
Share of 2015-2025 Incremental Demand in the ldquoRest of Worldrdquo
India Indonesia
Vietnam Russia amp
Iran account for
40 of global
growth potentialSource ICIS Supply and Demand Database
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
The Economic Supercycle and
Why It Is Over
John RichardsonICIS Senior Consultant Asia
wwwiciscom 26
What was the economic Supercycle
The end of the Supercycle What it means for petrochemicals
China past and future Its role in the end of the Supercycle
and what happens next
The way forward New opportunities
Agenda
What was the Supercycle
wwwiciscom 28
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 29
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 30
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
What this means for petrochemicals
wwwiciscom 32
The supply-driven model no longer works
A paradigm shift is under way in the global economy as well as in the global petrochemical markets
Having expected this we successfully forecast the slowdown in the Chinese economy and the collapse of oil prices
Stimulus hangover a lot of it badly spent has left big supply overhangs and so the loss of pricing power
Chinarsquos Role In This New Paradigm
The History
wwwiciscom 34
The biggest credit bubble in economic history
President Xi Jinping opening the 3rd Plenum November 2013
ldquoThe good meat is all gone all that is left are hard bones to chewrdquo
Premier Li Keiqiang in his Work Report to the National Peoplersquos Congress March 2016
ldquoThis is the crucial period in which China currently finds itself and during which we must build up powerful new drivers in order to accelerate the development of the new economyrdquo
2014
wwwiciscom 35
China petrochemicals volumes critically important
67
892
2171
378
749
89 120
1088
2560
-
500
1000
1500
2000
2500
3000
00
0 to
nn
es
2015 LLDPE imports
Source ICIS Supply and Demand Database
7 7 77 8 8
8
35 35 35 36 36 36 36
0
5
10
15
20
25
30
35
40
2016 2017 2018 2019 2020 2021 2022
-
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
lsquo00
0 to
nn
es
China versus India PP consumption
World Consumption India Consumption
China Consumption India as a percentage of global total
China as a percentage of global total
wwwiciscom 36
The impact of stimulus on chemicals and polymers
0
200
400
600
800
1000
1200
1400
China Europe Japan SouthKorea
US Taiwan
lsquo00
0 to
nn
esy
ea
r
Average size of PTA capacities
2000 2016
Source ICIS Supply and Demand Database
7872
77
91
114
138
154
164158
0
20
40
60
80
100
120
140
160
180
-
10000
20000
30000
40000
50000
60000
2009 2010 2011 2012 2013 2014 2015 2016 2017
China PTA
Capacity in 000 tonnesyear Consumption in 000 tonnesyear
Capacity as of consumption
wwwiciscom 37
5000
10000
15000
20000
25000
30000
35000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
To
nn
es
China ethylene versus propylene consumption
Ethylene Propylene
China becomes the first country or region in the world where propylene consumption exceeds ethylene
China consumed 13m tonnes of phenol in 2010 versus capacity of 880000 tonnesyear In 2017 ICIS Consulting expects capacity 27m tonnesyear versus 24m tonnes of demand
Acrylic acid capacity in China in 2010 was 11m tonnesyear versus consumption of 1m tonnes In 2017 we are forecasting 35m tonnesyear of capacity versus 17m tonnes of demand
Source ICIS Supply and Demand Database
wwwiciscom 38
Source ICIS Supply and Demand Database
It was about building factories for the sake of building factories to preserve jobs
Little regard was given to conventional analysis of long- term supply and demand
It wasnrsquot about cost per tonne economics
6368 70
7780
8486 87
90
0
10
20
30
40
50
60
70
80
90
100
-
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PP consumption and capacity
Capacity in 000 tonnesyear Consumption in 000 tonnes
Capacity as a percentage of consumption
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 21Copyright copy 2016 ICIS
Global PetrochemicalsChina is important Europe is growinghellip
almost half of 2020-25 EU increase is in Turkey + Poland
685
5 62306
267
558
352
332 791
Global Incremental Petrochemical Demand (Million Tonne)
North
America
Europe China
Rest Of
World
2015 2020 2025
North
America
EuropeChina
Rest Of
World
Source ICIS Supply and Demand Database
wwwiciscom 22Copyright copy 2016 ICIS
Global Petrochemicals
Polyolefins are the workhorsehellip
685
35918 195
113
406
2 235129 791
Global Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Incremental
Oil Demand is 148 MMT
Source ICIS Supply and Demand Database
wwwiciscom 23Copyright copy 2016 ICIS
Petrochemicals in the ldquoRest of the Worldrdquo
Polyolefins most important Aromatics chain grows at the same pace
267
15307 61
46
195
07 78 52 332
Rest of World Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Source ICIS Supply and Demand Database
wwwiciscom 24Copyright copy 2016 ICIS
Beyond Energy geographical influence is shifting to the ldquoRest of the Worldrdquo
Much of the high growth in the rest of the World is on the ldquoOne Belt One Roadrdquohellip
Asia Excl
China50
Africa amp MEast
39
F USSR
4
S America7
Asia Excl
China52
Africa amp MEast
32
F USSR
7
S America9
Asia Excl
China63
Africa amp
MEast19
F USSR
8
S America10
Energy Oil Petrochemicals
Share of 2015-2025 Incremental Demand in the ldquoRest of Worldrdquo
India Indonesia
Vietnam Russia amp
Iran account for
40 of global
growth potentialSource ICIS Supply and Demand Database
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
The Economic Supercycle and
Why It Is Over
John RichardsonICIS Senior Consultant Asia
wwwiciscom 26
What was the economic Supercycle
The end of the Supercycle What it means for petrochemicals
China past and future Its role in the end of the Supercycle
and what happens next
The way forward New opportunities
Agenda
What was the Supercycle
wwwiciscom 28
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 29
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 30
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
What this means for petrochemicals
wwwiciscom 32
The supply-driven model no longer works
A paradigm shift is under way in the global economy as well as in the global petrochemical markets
Having expected this we successfully forecast the slowdown in the Chinese economy and the collapse of oil prices
Stimulus hangover a lot of it badly spent has left big supply overhangs and so the loss of pricing power
Chinarsquos Role In This New Paradigm
The History
wwwiciscom 34
The biggest credit bubble in economic history
President Xi Jinping opening the 3rd Plenum November 2013
ldquoThe good meat is all gone all that is left are hard bones to chewrdquo
Premier Li Keiqiang in his Work Report to the National Peoplersquos Congress March 2016
ldquoThis is the crucial period in which China currently finds itself and during which we must build up powerful new drivers in order to accelerate the development of the new economyrdquo
2014
wwwiciscom 35
China petrochemicals volumes critically important
67
892
2171
378
749
89 120
1088
2560
-
500
1000
1500
2000
2500
3000
00
0 to
nn
es
2015 LLDPE imports
Source ICIS Supply and Demand Database
7 7 77 8 8
8
35 35 35 36 36 36 36
0
5
10
15
20
25
30
35
40
2016 2017 2018 2019 2020 2021 2022
-
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
lsquo00
0 to
nn
es
China versus India PP consumption
World Consumption India Consumption
China Consumption India as a percentage of global total
China as a percentage of global total
wwwiciscom 36
The impact of stimulus on chemicals and polymers
0
200
400
600
800
1000
1200
1400
China Europe Japan SouthKorea
US Taiwan
lsquo00
0 to
nn
esy
ea
r
Average size of PTA capacities
2000 2016
Source ICIS Supply and Demand Database
7872
77
91
114
138
154
164158
0
20
40
60
80
100
120
140
160
180
-
10000
20000
30000
40000
50000
60000
2009 2010 2011 2012 2013 2014 2015 2016 2017
China PTA
Capacity in 000 tonnesyear Consumption in 000 tonnesyear
Capacity as of consumption
wwwiciscom 37
5000
10000
15000
20000
25000
30000
35000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
To
nn
es
China ethylene versus propylene consumption
Ethylene Propylene
China becomes the first country or region in the world where propylene consumption exceeds ethylene
China consumed 13m tonnes of phenol in 2010 versus capacity of 880000 tonnesyear In 2017 ICIS Consulting expects capacity 27m tonnesyear versus 24m tonnes of demand
Acrylic acid capacity in China in 2010 was 11m tonnesyear versus consumption of 1m tonnes In 2017 we are forecasting 35m tonnesyear of capacity versus 17m tonnes of demand
Source ICIS Supply and Demand Database
wwwiciscom 38
Source ICIS Supply and Demand Database
It was about building factories for the sake of building factories to preserve jobs
Little regard was given to conventional analysis of long- term supply and demand
It wasnrsquot about cost per tonne economics
6368 70
7780
8486 87
90
0
10
20
30
40
50
60
70
80
90
100
-
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PP consumption and capacity
Capacity in 000 tonnesyear Consumption in 000 tonnes
Capacity as a percentage of consumption
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 22Copyright copy 2016 ICIS
Global Petrochemicals
Polyolefins are the workhorsehellip
685
35918 195
113
406
2 235129 791
Global Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Incremental
Oil Demand is 148 MMT
Source ICIS Supply and Demand Database
wwwiciscom 23Copyright copy 2016 ICIS
Petrochemicals in the ldquoRest of the Worldrdquo
Polyolefins most important Aromatics chain grows at the same pace
267
15307 61
46
195
07 78 52 332
Rest of World Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Source ICIS Supply and Demand Database
wwwiciscom 24Copyright copy 2016 ICIS
Beyond Energy geographical influence is shifting to the ldquoRest of the Worldrdquo
Much of the high growth in the rest of the World is on the ldquoOne Belt One Roadrdquohellip
Asia Excl
China50
Africa amp MEast
39
F USSR
4
S America7
Asia Excl
China52
Africa amp MEast
32
F USSR
7
S America9
Asia Excl
China63
Africa amp
MEast19
F USSR
8
S America10
Energy Oil Petrochemicals
Share of 2015-2025 Incremental Demand in the ldquoRest of Worldrdquo
India Indonesia
Vietnam Russia amp
Iran account for
40 of global
growth potentialSource ICIS Supply and Demand Database
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
The Economic Supercycle and
Why It Is Over
John RichardsonICIS Senior Consultant Asia
wwwiciscom 26
What was the economic Supercycle
The end of the Supercycle What it means for petrochemicals
China past and future Its role in the end of the Supercycle
and what happens next
The way forward New opportunities
Agenda
What was the Supercycle
wwwiciscom 28
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 29
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 30
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
What this means for petrochemicals
wwwiciscom 32
The supply-driven model no longer works
A paradigm shift is under way in the global economy as well as in the global petrochemical markets
Having expected this we successfully forecast the slowdown in the Chinese economy and the collapse of oil prices
Stimulus hangover a lot of it badly spent has left big supply overhangs and so the loss of pricing power
Chinarsquos Role In This New Paradigm
The History
wwwiciscom 34
The biggest credit bubble in economic history
President Xi Jinping opening the 3rd Plenum November 2013
ldquoThe good meat is all gone all that is left are hard bones to chewrdquo
Premier Li Keiqiang in his Work Report to the National Peoplersquos Congress March 2016
ldquoThis is the crucial period in which China currently finds itself and during which we must build up powerful new drivers in order to accelerate the development of the new economyrdquo
2014
wwwiciscom 35
China petrochemicals volumes critically important
67
892
2171
378
749
89 120
1088
2560
-
500
1000
1500
2000
2500
3000
00
0 to
nn
es
2015 LLDPE imports
Source ICIS Supply and Demand Database
7 7 77 8 8
8
35 35 35 36 36 36 36
0
5
10
15
20
25
30
35
40
2016 2017 2018 2019 2020 2021 2022
-
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
lsquo00
0 to
nn
es
China versus India PP consumption
World Consumption India Consumption
China Consumption India as a percentage of global total
China as a percentage of global total
wwwiciscom 36
The impact of stimulus on chemicals and polymers
0
200
400
600
800
1000
1200
1400
China Europe Japan SouthKorea
US Taiwan
lsquo00
0 to
nn
esy
ea
r
Average size of PTA capacities
2000 2016
Source ICIS Supply and Demand Database
7872
77
91
114
138
154
164158
0
20
40
60
80
100
120
140
160
180
-
10000
20000
30000
40000
50000
60000
2009 2010 2011 2012 2013 2014 2015 2016 2017
China PTA
Capacity in 000 tonnesyear Consumption in 000 tonnesyear
Capacity as of consumption
wwwiciscom 37
5000
10000
15000
20000
25000
30000
35000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
To
nn
es
China ethylene versus propylene consumption
Ethylene Propylene
China becomes the first country or region in the world where propylene consumption exceeds ethylene
China consumed 13m tonnes of phenol in 2010 versus capacity of 880000 tonnesyear In 2017 ICIS Consulting expects capacity 27m tonnesyear versus 24m tonnes of demand
Acrylic acid capacity in China in 2010 was 11m tonnesyear versus consumption of 1m tonnes In 2017 we are forecasting 35m tonnesyear of capacity versus 17m tonnes of demand
Source ICIS Supply and Demand Database
wwwiciscom 38
Source ICIS Supply and Demand Database
It was about building factories for the sake of building factories to preserve jobs
Little regard was given to conventional analysis of long- term supply and demand
It wasnrsquot about cost per tonne economics
6368 70
7780
8486 87
90
0
10
20
30
40
50
60
70
80
90
100
-
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PP consumption and capacity
Capacity in 000 tonnesyear Consumption in 000 tonnes
Capacity as a percentage of consumption
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 23Copyright copy 2016 ICIS
Petrochemicals in the ldquoRest of the Worldrdquo
Polyolefins most important Aromatics chain grows at the same pace
267
15307 61
46
195
07 78 52 332
Rest of World Incremental Petrochemical Demand (Million Tonne)
Polyolefins
Key
Elastom
Poly
Estamp Uret
Other
Plastics
2015 2020 2025
PolyolefinsKey
Elastom
Poly
Estamp Uret
Other
Plastics
Source ICIS Supply and Demand Database
wwwiciscom 24Copyright copy 2016 ICIS
Beyond Energy geographical influence is shifting to the ldquoRest of the Worldrdquo
Much of the high growth in the rest of the World is on the ldquoOne Belt One Roadrdquohellip
Asia Excl
China50
Africa amp MEast
39
F USSR
4
S America7
Asia Excl
China52
Africa amp MEast
32
F USSR
7
S America9
Asia Excl
China63
Africa amp
MEast19
F USSR
8
S America10
Energy Oil Petrochemicals
Share of 2015-2025 Incremental Demand in the ldquoRest of Worldrdquo
India Indonesia
Vietnam Russia amp
Iran account for
40 of global
growth potentialSource ICIS Supply and Demand Database
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
The Economic Supercycle and
Why It Is Over
John RichardsonICIS Senior Consultant Asia
wwwiciscom 26
What was the economic Supercycle
The end of the Supercycle What it means for petrochemicals
China past and future Its role in the end of the Supercycle
and what happens next
The way forward New opportunities
Agenda
What was the Supercycle
wwwiciscom 28
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 29
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 30
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
What this means for petrochemicals
wwwiciscom 32
The supply-driven model no longer works
A paradigm shift is under way in the global economy as well as in the global petrochemical markets
Having expected this we successfully forecast the slowdown in the Chinese economy and the collapse of oil prices
Stimulus hangover a lot of it badly spent has left big supply overhangs and so the loss of pricing power
Chinarsquos Role In This New Paradigm
The History
wwwiciscom 34
The biggest credit bubble in economic history
President Xi Jinping opening the 3rd Plenum November 2013
ldquoThe good meat is all gone all that is left are hard bones to chewrdquo
Premier Li Keiqiang in his Work Report to the National Peoplersquos Congress March 2016
ldquoThis is the crucial period in which China currently finds itself and during which we must build up powerful new drivers in order to accelerate the development of the new economyrdquo
2014
wwwiciscom 35
China petrochemicals volumes critically important
67
892
2171
378
749
89 120
1088
2560
-
500
1000
1500
2000
2500
3000
00
0 to
nn
es
2015 LLDPE imports
Source ICIS Supply and Demand Database
7 7 77 8 8
8
35 35 35 36 36 36 36
0
5
10
15
20
25
30
35
40
2016 2017 2018 2019 2020 2021 2022
-
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
lsquo00
0 to
nn
es
China versus India PP consumption
World Consumption India Consumption
China Consumption India as a percentage of global total
China as a percentage of global total
wwwiciscom 36
The impact of stimulus on chemicals and polymers
0
200
400
600
800
1000
1200
1400
China Europe Japan SouthKorea
US Taiwan
lsquo00
0 to
nn
esy
ea
r
Average size of PTA capacities
2000 2016
Source ICIS Supply and Demand Database
7872
77
91
114
138
154
164158
0
20
40
60
80
100
120
140
160
180
-
10000
20000
30000
40000
50000
60000
2009 2010 2011 2012 2013 2014 2015 2016 2017
China PTA
Capacity in 000 tonnesyear Consumption in 000 tonnesyear
Capacity as of consumption
wwwiciscom 37
5000
10000
15000
20000
25000
30000
35000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
To
nn
es
China ethylene versus propylene consumption
Ethylene Propylene
China becomes the first country or region in the world where propylene consumption exceeds ethylene
China consumed 13m tonnes of phenol in 2010 versus capacity of 880000 tonnesyear In 2017 ICIS Consulting expects capacity 27m tonnesyear versus 24m tonnes of demand
Acrylic acid capacity in China in 2010 was 11m tonnesyear versus consumption of 1m tonnes In 2017 we are forecasting 35m tonnesyear of capacity versus 17m tonnes of demand
Source ICIS Supply and Demand Database
wwwiciscom 38
Source ICIS Supply and Demand Database
It was about building factories for the sake of building factories to preserve jobs
Little regard was given to conventional analysis of long- term supply and demand
It wasnrsquot about cost per tonne economics
6368 70
7780
8486 87
90
0
10
20
30
40
50
60
70
80
90
100
-
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PP consumption and capacity
Capacity in 000 tonnesyear Consumption in 000 tonnes
Capacity as a percentage of consumption
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 24Copyright copy 2016 ICIS
Beyond Energy geographical influence is shifting to the ldquoRest of the Worldrdquo
Much of the high growth in the rest of the World is on the ldquoOne Belt One Roadrdquohellip
Asia Excl
China50
Africa amp MEast
39
F USSR
4
S America7
Asia Excl
China52
Africa amp MEast
32
F USSR
7
S America9
Asia Excl
China63
Africa amp
MEast19
F USSR
8
S America10
Energy Oil Petrochemicals
Share of 2015-2025 Incremental Demand in the ldquoRest of Worldrdquo
India Indonesia
Vietnam Russia amp
Iran account for
40 of global
growth potentialSource ICIS Supply and Demand Database
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
The Economic Supercycle and
Why It Is Over
John RichardsonICIS Senior Consultant Asia
wwwiciscom 26
What was the economic Supercycle
The end of the Supercycle What it means for petrochemicals
China past and future Its role in the end of the Supercycle
and what happens next
The way forward New opportunities
Agenda
What was the Supercycle
wwwiciscom 28
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 29
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 30
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
What this means for petrochemicals
wwwiciscom 32
The supply-driven model no longer works
A paradigm shift is under way in the global economy as well as in the global petrochemical markets
Having expected this we successfully forecast the slowdown in the Chinese economy and the collapse of oil prices
Stimulus hangover a lot of it badly spent has left big supply overhangs and so the loss of pricing power
Chinarsquos Role In This New Paradigm
The History
wwwiciscom 34
The biggest credit bubble in economic history
President Xi Jinping opening the 3rd Plenum November 2013
ldquoThe good meat is all gone all that is left are hard bones to chewrdquo
Premier Li Keiqiang in his Work Report to the National Peoplersquos Congress March 2016
ldquoThis is the crucial period in which China currently finds itself and during which we must build up powerful new drivers in order to accelerate the development of the new economyrdquo
2014
wwwiciscom 35
China petrochemicals volumes critically important
67
892
2171
378
749
89 120
1088
2560
-
500
1000
1500
2000
2500
3000
00
0 to
nn
es
2015 LLDPE imports
Source ICIS Supply and Demand Database
7 7 77 8 8
8
35 35 35 36 36 36 36
0
5
10
15
20
25
30
35
40
2016 2017 2018 2019 2020 2021 2022
-
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
lsquo00
0 to
nn
es
China versus India PP consumption
World Consumption India Consumption
China Consumption India as a percentage of global total
China as a percentage of global total
wwwiciscom 36
The impact of stimulus on chemicals and polymers
0
200
400
600
800
1000
1200
1400
China Europe Japan SouthKorea
US Taiwan
lsquo00
0 to
nn
esy
ea
r
Average size of PTA capacities
2000 2016
Source ICIS Supply and Demand Database
7872
77
91
114
138
154
164158
0
20
40
60
80
100
120
140
160
180
-
10000
20000
30000
40000
50000
60000
2009 2010 2011 2012 2013 2014 2015 2016 2017
China PTA
Capacity in 000 tonnesyear Consumption in 000 tonnesyear
Capacity as of consumption
wwwiciscom 37
5000
10000
15000
20000
25000
30000
35000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
To
nn
es
China ethylene versus propylene consumption
Ethylene Propylene
China becomes the first country or region in the world where propylene consumption exceeds ethylene
China consumed 13m tonnes of phenol in 2010 versus capacity of 880000 tonnesyear In 2017 ICIS Consulting expects capacity 27m tonnesyear versus 24m tonnes of demand
Acrylic acid capacity in China in 2010 was 11m tonnesyear versus consumption of 1m tonnes In 2017 we are forecasting 35m tonnesyear of capacity versus 17m tonnes of demand
Source ICIS Supply and Demand Database
wwwiciscom 38
Source ICIS Supply and Demand Database
It was about building factories for the sake of building factories to preserve jobs
Little regard was given to conventional analysis of long- term supply and demand
It wasnrsquot about cost per tonne economics
6368 70
7780
8486 87
90
0
10
20
30
40
50
60
70
80
90
100
-
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PP consumption and capacity
Capacity in 000 tonnesyear Consumption in 000 tonnes
Capacity as a percentage of consumption
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
OUR PEOPLE
OPERATE AS EXTENSION OF CLIENTrsquoS TEAM
SENIOR INDUSTRY EXPERTS NOT lsquoGENERICrsquo CONSULTANTS
20 YEARS INDUSTRY EXPERTISE ON AVERAGE
Tailored consultancy services to support your business goals
BUDGETING AND FORECASTINGWe can support you throughout the budgeting process from historical analysis to long-term forecasting helping your organisation remain competitive ef cient and pro table
STRATEGIC PLANNINGWhether you are benchmarking performance adopting new delivery models or planning a speci c project ICIS Consulting can provide the strategic direction to strengthen your business case
MARKET ADVISORYOur consultantrsquos industry knowledge coupled with our wealth of market data makes ICIS Consulting uniquely placed to offer crucial insight into the markets that matter most to your organization
COST AND VALUE MODELLINGValuations cost modelling ef ciency evaluation and capital and resource planning When you are making major changes to your current business ICIS Consulting offers the guidance and practical support needed for a smooth transition with minimal risk
20 Y
PREVENTING FUTURE PROBLEMS AS WELL AS SOLVING EXISTING ONES
LETrsquoS TALKContact ICIS Consulting today for a con dential discussion on how we can help you address your business challenges and support your decision-making
wwwiciscomconsulting
enquiryiciscom
ICIS APIC Booklet Adsindd 2 11516 306 pm
The Economic Supercycle and
Why It Is Over
John RichardsonICIS Senior Consultant Asia
wwwiciscom 26
What was the economic Supercycle
The end of the Supercycle What it means for petrochemicals
China past and future Its role in the end of the Supercycle
and what happens next
The way forward New opportunities
Agenda
What was the Supercycle
wwwiciscom 28
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 29
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 30
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
What this means for petrochemicals
wwwiciscom 32
The supply-driven model no longer works
A paradigm shift is under way in the global economy as well as in the global petrochemical markets
Having expected this we successfully forecast the slowdown in the Chinese economy and the collapse of oil prices
Stimulus hangover a lot of it badly spent has left big supply overhangs and so the loss of pricing power
Chinarsquos Role In This New Paradigm
The History
wwwiciscom 34
The biggest credit bubble in economic history
President Xi Jinping opening the 3rd Plenum November 2013
ldquoThe good meat is all gone all that is left are hard bones to chewrdquo
Premier Li Keiqiang in his Work Report to the National Peoplersquos Congress March 2016
ldquoThis is the crucial period in which China currently finds itself and during which we must build up powerful new drivers in order to accelerate the development of the new economyrdquo
2014
wwwiciscom 35
China petrochemicals volumes critically important
67
892
2171
378
749
89 120
1088
2560
-
500
1000
1500
2000
2500
3000
00
0 to
nn
es
2015 LLDPE imports
Source ICIS Supply and Demand Database
7 7 77 8 8
8
35 35 35 36 36 36 36
0
5
10
15
20
25
30
35
40
2016 2017 2018 2019 2020 2021 2022
-
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
lsquo00
0 to
nn
es
China versus India PP consumption
World Consumption India Consumption
China Consumption India as a percentage of global total
China as a percentage of global total
wwwiciscom 36
The impact of stimulus on chemicals and polymers
0
200
400
600
800
1000
1200
1400
China Europe Japan SouthKorea
US Taiwan
lsquo00
0 to
nn
esy
ea
r
Average size of PTA capacities
2000 2016
Source ICIS Supply and Demand Database
7872
77
91
114
138
154
164158
0
20
40
60
80
100
120
140
160
180
-
10000
20000
30000
40000
50000
60000
2009 2010 2011 2012 2013 2014 2015 2016 2017
China PTA
Capacity in 000 tonnesyear Consumption in 000 tonnesyear
Capacity as of consumption
wwwiciscom 37
5000
10000
15000
20000
25000
30000
35000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
To
nn
es
China ethylene versus propylene consumption
Ethylene Propylene
China becomes the first country or region in the world where propylene consumption exceeds ethylene
China consumed 13m tonnes of phenol in 2010 versus capacity of 880000 tonnesyear In 2017 ICIS Consulting expects capacity 27m tonnesyear versus 24m tonnes of demand
Acrylic acid capacity in China in 2010 was 11m tonnesyear versus consumption of 1m tonnes In 2017 we are forecasting 35m tonnesyear of capacity versus 17m tonnes of demand
Source ICIS Supply and Demand Database
wwwiciscom 38
Source ICIS Supply and Demand Database
It was about building factories for the sake of building factories to preserve jobs
Little regard was given to conventional analysis of long- term supply and demand
It wasnrsquot about cost per tonne economics
6368 70
7780
8486 87
90
0
10
20
30
40
50
60
70
80
90
100
-
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PP consumption and capacity
Capacity in 000 tonnesyear Consumption in 000 tonnes
Capacity as a percentage of consumption
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
The Economic Supercycle and
Why It Is Over
John RichardsonICIS Senior Consultant Asia
wwwiciscom 26
What was the economic Supercycle
The end of the Supercycle What it means for petrochemicals
China past and future Its role in the end of the Supercycle
and what happens next
The way forward New opportunities
Agenda
What was the Supercycle
wwwiciscom 28
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 29
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 30
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
What this means for petrochemicals
wwwiciscom 32
The supply-driven model no longer works
A paradigm shift is under way in the global economy as well as in the global petrochemical markets
Having expected this we successfully forecast the slowdown in the Chinese economy and the collapse of oil prices
Stimulus hangover a lot of it badly spent has left big supply overhangs and so the loss of pricing power
Chinarsquos Role In This New Paradigm
The History
wwwiciscom 34
The biggest credit bubble in economic history
President Xi Jinping opening the 3rd Plenum November 2013
ldquoThe good meat is all gone all that is left are hard bones to chewrdquo
Premier Li Keiqiang in his Work Report to the National Peoplersquos Congress March 2016
ldquoThis is the crucial period in which China currently finds itself and during which we must build up powerful new drivers in order to accelerate the development of the new economyrdquo
2014
wwwiciscom 35
China petrochemicals volumes critically important
67
892
2171
378
749
89 120
1088
2560
-
500
1000
1500
2000
2500
3000
00
0 to
nn
es
2015 LLDPE imports
Source ICIS Supply and Demand Database
7 7 77 8 8
8
35 35 35 36 36 36 36
0
5
10
15
20
25
30
35
40
2016 2017 2018 2019 2020 2021 2022
-
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
lsquo00
0 to
nn
es
China versus India PP consumption
World Consumption India Consumption
China Consumption India as a percentage of global total
China as a percentage of global total
wwwiciscom 36
The impact of stimulus on chemicals and polymers
0
200
400
600
800
1000
1200
1400
China Europe Japan SouthKorea
US Taiwan
lsquo00
0 to
nn
esy
ea
r
Average size of PTA capacities
2000 2016
Source ICIS Supply and Demand Database
7872
77
91
114
138
154
164158
0
20
40
60
80
100
120
140
160
180
-
10000
20000
30000
40000
50000
60000
2009 2010 2011 2012 2013 2014 2015 2016 2017
China PTA
Capacity in 000 tonnesyear Consumption in 000 tonnesyear
Capacity as of consumption
wwwiciscom 37
5000
10000
15000
20000
25000
30000
35000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
To
nn
es
China ethylene versus propylene consumption
Ethylene Propylene
China becomes the first country or region in the world where propylene consumption exceeds ethylene
China consumed 13m tonnes of phenol in 2010 versus capacity of 880000 tonnesyear In 2017 ICIS Consulting expects capacity 27m tonnesyear versus 24m tonnes of demand
Acrylic acid capacity in China in 2010 was 11m tonnesyear versus consumption of 1m tonnes In 2017 we are forecasting 35m tonnesyear of capacity versus 17m tonnes of demand
Source ICIS Supply and Demand Database
wwwiciscom 38
Source ICIS Supply and Demand Database
It was about building factories for the sake of building factories to preserve jobs
Little regard was given to conventional analysis of long- term supply and demand
It wasnrsquot about cost per tonne economics
6368 70
7780
8486 87
90
0
10
20
30
40
50
60
70
80
90
100
-
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PP consumption and capacity
Capacity in 000 tonnesyear Consumption in 000 tonnes
Capacity as a percentage of consumption
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 26
What was the economic Supercycle
The end of the Supercycle What it means for petrochemicals
China past and future Its role in the end of the Supercycle
and what happens next
The way forward New opportunities
Agenda
What was the Supercycle
wwwiciscom 28
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 29
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 30
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
What this means for petrochemicals
wwwiciscom 32
The supply-driven model no longer works
A paradigm shift is under way in the global economy as well as in the global petrochemical markets
Having expected this we successfully forecast the slowdown in the Chinese economy and the collapse of oil prices
Stimulus hangover a lot of it badly spent has left big supply overhangs and so the loss of pricing power
Chinarsquos Role In This New Paradigm
The History
wwwiciscom 34
The biggest credit bubble in economic history
President Xi Jinping opening the 3rd Plenum November 2013
ldquoThe good meat is all gone all that is left are hard bones to chewrdquo
Premier Li Keiqiang in his Work Report to the National Peoplersquos Congress March 2016
ldquoThis is the crucial period in which China currently finds itself and during which we must build up powerful new drivers in order to accelerate the development of the new economyrdquo
2014
wwwiciscom 35
China petrochemicals volumes critically important
67
892
2171
378
749
89 120
1088
2560
-
500
1000
1500
2000
2500
3000
00
0 to
nn
es
2015 LLDPE imports
Source ICIS Supply and Demand Database
7 7 77 8 8
8
35 35 35 36 36 36 36
0
5
10
15
20
25
30
35
40
2016 2017 2018 2019 2020 2021 2022
-
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
lsquo00
0 to
nn
es
China versus India PP consumption
World Consumption India Consumption
China Consumption India as a percentage of global total
China as a percentage of global total
wwwiciscom 36
The impact of stimulus on chemicals and polymers
0
200
400
600
800
1000
1200
1400
China Europe Japan SouthKorea
US Taiwan
lsquo00
0 to
nn
esy
ea
r
Average size of PTA capacities
2000 2016
Source ICIS Supply and Demand Database
7872
77
91
114
138
154
164158
0
20
40
60
80
100
120
140
160
180
-
10000
20000
30000
40000
50000
60000
2009 2010 2011 2012 2013 2014 2015 2016 2017
China PTA
Capacity in 000 tonnesyear Consumption in 000 tonnesyear
Capacity as of consumption
wwwiciscom 37
5000
10000
15000
20000
25000
30000
35000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
To
nn
es
China ethylene versus propylene consumption
Ethylene Propylene
China becomes the first country or region in the world where propylene consumption exceeds ethylene
China consumed 13m tonnes of phenol in 2010 versus capacity of 880000 tonnesyear In 2017 ICIS Consulting expects capacity 27m tonnesyear versus 24m tonnes of demand
Acrylic acid capacity in China in 2010 was 11m tonnesyear versus consumption of 1m tonnes In 2017 we are forecasting 35m tonnesyear of capacity versus 17m tonnes of demand
Source ICIS Supply and Demand Database
wwwiciscom 38
Source ICIS Supply and Demand Database
It was about building factories for the sake of building factories to preserve jobs
Little regard was given to conventional analysis of long- term supply and demand
It wasnrsquot about cost per tonne economics
6368 70
7780
8486 87
90
0
10
20
30
40
50
60
70
80
90
100
-
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PP consumption and capacity
Capacity in 000 tonnesyear Consumption in 000 tonnes
Capacity as a percentage of consumption
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
What was the Supercycle
wwwiciscom 28
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 29
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 30
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
What this means for petrochemicals
wwwiciscom 32
The supply-driven model no longer works
A paradigm shift is under way in the global economy as well as in the global petrochemical markets
Having expected this we successfully forecast the slowdown in the Chinese economy and the collapse of oil prices
Stimulus hangover a lot of it badly spent has left big supply overhangs and so the loss of pricing power
Chinarsquos Role In This New Paradigm
The History
wwwiciscom 34
The biggest credit bubble in economic history
President Xi Jinping opening the 3rd Plenum November 2013
ldquoThe good meat is all gone all that is left are hard bones to chewrdquo
Premier Li Keiqiang in his Work Report to the National Peoplersquos Congress March 2016
ldquoThis is the crucial period in which China currently finds itself and during which we must build up powerful new drivers in order to accelerate the development of the new economyrdquo
2014
wwwiciscom 35
China petrochemicals volumes critically important
67
892
2171
378
749
89 120
1088
2560
-
500
1000
1500
2000
2500
3000
00
0 to
nn
es
2015 LLDPE imports
Source ICIS Supply and Demand Database
7 7 77 8 8
8
35 35 35 36 36 36 36
0
5
10
15
20
25
30
35
40
2016 2017 2018 2019 2020 2021 2022
-
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
lsquo00
0 to
nn
es
China versus India PP consumption
World Consumption India Consumption
China Consumption India as a percentage of global total
China as a percentage of global total
wwwiciscom 36
The impact of stimulus on chemicals and polymers
0
200
400
600
800
1000
1200
1400
China Europe Japan SouthKorea
US Taiwan
lsquo00
0 to
nn
esy
ea
r
Average size of PTA capacities
2000 2016
Source ICIS Supply and Demand Database
7872
77
91
114
138
154
164158
0
20
40
60
80
100
120
140
160
180
-
10000
20000
30000
40000
50000
60000
2009 2010 2011 2012 2013 2014 2015 2016 2017
China PTA
Capacity in 000 tonnesyear Consumption in 000 tonnesyear
Capacity as of consumption
wwwiciscom 37
5000
10000
15000
20000
25000
30000
35000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
To
nn
es
China ethylene versus propylene consumption
Ethylene Propylene
China becomes the first country or region in the world where propylene consumption exceeds ethylene
China consumed 13m tonnes of phenol in 2010 versus capacity of 880000 tonnesyear In 2017 ICIS Consulting expects capacity 27m tonnesyear versus 24m tonnes of demand
Acrylic acid capacity in China in 2010 was 11m tonnesyear versus consumption of 1m tonnes In 2017 we are forecasting 35m tonnesyear of capacity versus 17m tonnes of demand
Source ICIS Supply and Demand Database
wwwiciscom 38
Source ICIS Supply and Demand Database
It was about building factories for the sake of building factories to preserve jobs
Little regard was given to conventional analysis of long- term supply and demand
It wasnrsquot about cost per tonne economics
6368 70
7780
8486 87
90
0
10
20
30
40
50
60
70
80
90
100
-
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PP consumption and capacity
Capacity in 000 tonnesyear Consumption in 000 tonnes
Capacity as a percentage of consumption
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 28
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 29
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 30
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
What this means for petrochemicals
wwwiciscom 32
The supply-driven model no longer works
A paradigm shift is under way in the global economy as well as in the global petrochemical markets
Having expected this we successfully forecast the slowdown in the Chinese economy and the collapse of oil prices
Stimulus hangover a lot of it badly spent has left big supply overhangs and so the loss of pricing power
Chinarsquos Role In This New Paradigm
The History
wwwiciscom 34
The biggest credit bubble in economic history
President Xi Jinping opening the 3rd Plenum November 2013
ldquoThe good meat is all gone all that is left are hard bones to chewrdquo
Premier Li Keiqiang in his Work Report to the National Peoplersquos Congress March 2016
ldquoThis is the crucial period in which China currently finds itself and during which we must build up powerful new drivers in order to accelerate the development of the new economyrdquo
2014
wwwiciscom 35
China petrochemicals volumes critically important
67
892
2171
378
749
89 120
1088
2560
-
500
1000
1500
2000
2500
3000
00
0 to
nn
es
2015 LLDPE imports
Source ICIS Supply and Demand Database
7 7 77 8 8
8
35 35 35 36 36 36 36
0
5
10
15
20
25
30
35
40
2016 2017 2018 2019 2020 2021 2022
-
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
lsquo00
0 to
nn
es
China versus India PP consumption
World Consumption India Consumption
China Consumption India as a percentage of global total
China as a percentage of global total
wwwiciscom 36
The impact of stimulus on chemicals and polymers
0
200
400
600
800
1000
1200
1400
China Europe Japan SouthKorea
US Taiwan
lsquo00
0 to
nn
esy
ea
r
Average size of PTA capacities
2000 2016
Source ICIS Supply and Demand Database
7872
77
91
114
138
154
164158
0
20
40
60
80
100
120
140
160
180
-
10000
20000
30000
40000
50000
60000
2009 2010 2011 2012 2013 2014 2015 2016 2017
China PTA
Capacity in 000 tonnesyear Consumption in 000 tonnesyear
Capacity as of consumption
wwwiciscom 37
5000
10000
15000
20000
25000
30000
35000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
To
nn
es
China ethylene versus propylene consumption
Ethylene Propylene
China becomes the first country or region in the world where propylene consumption exceeds ethylene
China consumed 13m tonnes of phenol in 2010 versus capacity of 880000 tonnesyear In 2017 ICIS Consulting expects capacity 27m tonnesyear versus 24m tonnes of demand
Acrylic acid capacity in China in 2010 was 11m tonnesyear versus consumption of 1m tonnes In 2017 we are forecasting 35m tonnesyear of capacity versus 17m tonnes of demand
Source ICIS Supply and Demand Database
wwwiciscom 38
Source ICIS Supply and Demand Database
It was about building factories for the sake of building factories to preserve jobs
Little regard was given to conventional analysis of long- term supply and demand
It wasnrsquot about cost per tonne economics
6368 70
7780
8486 87
90
0
10
20
30
40
50
60
70
80
90
100
-
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PP consumption and capacity
Capacity in 000 tonnesyear Consumption in 000 tonnes
Capacity as a percentage of consumption
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 29
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
wwwiciscom 30
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
What this means for petrochemicals
wwwiciscom 32
The supply-driven model no longer works
A paradigm shift is under way in the global economy as well as in the global petrochemical markets
Having expected this we successfully forecast the slowdown in the Chinese economy and the collapse of oil prices
Stimulus hangover a lot of it badly spent has left big supply overhangs and so the loss of pricing power
Chinarsquos Role In This New Paradigm
The History
wwwiciscom 34
The biggest credit bubble in economic history
President Xi Jinping opening the 3rd Plenum November 2013
ldquoThe good meat is all gone all that is left are hard bones to chewrdquo
Premier Li Keiqiang in his Work Report to the National Peoplersquos Congress March 2016
ldquoThis is the crucial period in which China currently finds itself and during which we must build up powerful new drivers in order to accelerate the development of the new economyrdquo
2014
wwwiciscom 35
China petrochemicals volumes critically important
67
892
2171
378
749
89 120
1088
2560
-
500
1000
1500
2000
2500
3000
00
0 to
nn
es
2015 LLDPE imports
Source ICIS Supply and Demand Database
7 7 77 8 8
8
35 35 35 36 36 36 36
0
5
10
15
20
25
30
35
40
2016 2017 2018 2019 2020 2021 2022
-
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
lsquo00
0 to
nn
es
China versus India PP consumption
World Consumption India Consumption
China Consumption India as a percentage of global total
China as a percentage of global total
wwwiciscom 36
The impact of stimulus on chemicals and polymers
0
200
400
600
800
1000
1200
1400
China Europe Japan SouthKorea
US Taiwan
lsquo00
0 to
nn
esy
ea
r
Average size of PTA capacities
2000 2016
Source ICIS Supply and Demand Database
7872
77
91
114
138
154
164158
0
20
40
60
80
100
120
140
160
180
-
10000
20000
30000
40000
50000
60000
2009 2010 2011 2012 2013 2014 2015 2016 2017
China PTA
Capacity in 000 tonnesyear Consumption in 000 tonnesyear
Capacity as of consumption
wwwiciscom 37
5000
10000
15000
20000
25000
30000
35000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
To
nn
es
China ethylene versus propylene consumption
Ethylene Propylene
China becomes the first country or region in the world where propylene consumption exceeds ethylene
China consumed 13m tonnes of phenol in 2010 versus capacity of 880000 tonnesyear In 2017 ICIS Consulting expects capacity 27m tonnesyear versus 24m tonnes of demand
Acrylic acid capacity in China in 2010 was 11m tonnesyear versus consumption of 1m tonnes In 2017 we are forecasting 35m tonnesyear of capacity versus 17m tonnes of demand
Source ICIS Supply and Demand Database
wwwiciscom 38
Source ICIS Supply and Demand Database
It was about building factories for the sake of building factories to preserve jobs
Little regard was given to conventional analysis of long- term supply and demand
It wasnrsquot about cost per tonne economics
6368 70
7780
8486 87
90
0
10
20
30
40
50
60
70
80
90
100
-
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PP consumption and capacity
Capacity in 000 tonnesyear Consumption in 000 tonnes
Capacity as a percentage of consumption
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 30
Demand The New Direction for Profit
The rise and fall of the Economic Supercycle
What this means for petrochemicals
wwwiciscom 32
The supply-driven model no longer works
A paradigm shift is under way in the global economy as well as in the global petrochemical markets
Having expected this we successfully forecast the slowdown in the Chinese economy and the collapse of oil prices
Stimulus hangover a lot of it badly spent has left big supply overhangs and so the loss of pricing power
Chinarsquos Role In This New Paradigm
The History
wwwiciscom 34
The biggest credit bubble in economic history
President Xi Jinping opening the 3rd Plenum November 2013
ldquoThe good meat is all gone all that is left are hard bones to chewrdquo
Premier Li Keiqiang in his Work Report to the National Peoplersquos Congress March 2016
ldquoThis is the crucial period in which China currently finds itself and during which we must build up powerful new drivers in order to accelerate the development of the new economyrdquo
2014
wwwiciscom 35
China petrochemicals volumes critically important
67
892
2171
378
749
89 120
1088
2560
-
500
1000
1500
2000
2500
3000
00
0 to
nn
es
2015 LLDPE imports
Source ICIS Supply and Demand Database
7 7 77 8 8
8
35 35 35 36 36 36 36
0
5
10
15
20
25
30
35
40
2016 2017 2018 2019 2020 2021 2022
-
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
lsquo00
0 to
nn
es
China versus India PP consumption
World Consumption India Consumption
China Consumption India as a percentage of global total
China as a percentage of global total
wwwiciscom 36
The impact of stimulus on chemicals and polymers
0
200
400
600
800
1000
1200
1400
China Europe Japan SouthKorea
US Taiwan
lsquo00
0 to
nn
esy
ea
r
Average size of PTA capacities
2000 2016
Source ICIS Supply and Demand Database
7872
77
91
114
138
154
164158
0
20
40
60
80
100
120
140
160
180
-
10000
20000
30000
40000
50000
60000
2009 2010 2011 2012 2013 2014 2015 2016 2017
China PTA
Capacity in 000 tonnesyear Consumption in 000 tonnesyear
Capacity as of consumption
wwwiciscom 37
5000
10000
15000
20000
25000
30000
35000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
To
nn
es
China ethylene versus propylene consumption
Ethylene Propylene
China becomes the first country or region in the world where propylene consumption exceeds ethylene
China consumed 13m tonnes of phenol in 2010 versus capacity of 880000 tonnesyear In 2017 ICIS Consulting expects capacity 27m tonnesyear versus 24m tonnes of demand
Acrylic acid capacity in China in 2010 was 11m tonnesyear versus consumption of 1m tonnes In 2017 we are forecasting 35m tonnesyear of capacity versus 17m tonnes of demand
Source ICIS Supply and Demand Database
wwwiciscom 38
Source ICIS Supply and Demand Database
It was about building factories for the sake of building factories to preserve jobs
Little regard was given to conventional analysis of long- term supply and demand
It wasnrsquot about cost per tonne economics
6368 70
7780
8486 87
90
0
10
20
30
40
50
60
70
80
90
100
-
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PP consumption and capacity
Capacity in 000 tonnesyear Consumption in 000 tonnes
Capacity as a percentage of consumption
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
What this means for petrochemicals
wwwiciscom 32
The supply-driven model no longer works
A paradigm shift is under way in the global economy as well as in the global petrochemical markets
Having expected this we successfully forecast the slowdown in the Chinese economy and the collapse of oil prices
Stimulus hangover a lot of it badly spent has left big supply overhangs and so the loss of pricing power
Chinarsquos Role In This New Paradigm
The History
wwwiciscom 34
The biggest credit bubble in economic history
President Xi Jinping opening the 3rd Plenum November 2013
ldquoThe good meat is all gone all that is left are hard bones to chewrdquo
Premier Li Keiqiang in his Work Report to the National Peoplersquos Congress March 2016
ldquoThis is the crucial period in which China currently finds itself and during which we must build up powerful new drivers in order to accelerate the development of the new economyrdquo
2014
wwwiciscom 35
China petrochemicals volumes critically important
67
892
2171
378
749
89 120
1088
2560
-
500
1000
1500
2000
2500
3000
00
0 to
nn
es
2015 LLDPE imports
Source ICIS Supply and Demand Database
7 7 77 8 8
8
35 35 35 36 36 36 36
0
5
10
15
20
25
30
35
40
2016 2017 2018 2019 2020 2021 2022
-
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
lsquo00
0 to
nn
es
China versus India PP consumption
World Consumption India Consumption
China Consumption India as a percentage of global total
China as a percentage of global total
wwwiciscom 36
The impact of stimulus on chemicals and polymers
0
200
400
600
800
1000
1200
1400
China Europe Japan SouthKorea
US Taiwan
lsquo00
0 to
nn
esy
ea
r
Average size of PTA capacities
2000 2016
Source ICIS Supply and Demand Database
7872
77
91
114
138
154
164158
0
20
40
60
80
100
120
140
160
180
-
10000
20000
30000
40000
50000
60000
2009 2010 2011 2012 2013 2014 2015 2016 2017
China PTA
Capacity in 000 tonnesyear Consumption in 000 tonnesyear
Capacity as of consumption
wwwiciscom 37
5000
10000
15000
20000
25000
30000
35000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
To
nn
es
China ethylene versus propylene consumption
Ethylene Propylene
China becomes the first country or region in the world where propylene consumption exceeds ethylene
China consumed 13m tonnes of phenol in 2010 versus capacity of 880000 tonnesyear In 2017 ICIS Consulting expects capacity 27m tonnesyear versus 24m tonnes of demand
Acrylic acid capacity in China in 2010 was 11m tonnesyear versus consumption of 1m tonnes In 2017 we are forecasting 35m tonnesyear of capacity versus 17m tonnes of demand
Source ICIS Supply and Demand Database
wwwiciscom 38
Source ICIS Supply and Demand Database
It was about building factories for the sake of building factories to preserve jobs
Little regard was given to conventional analysis of long- term supply and demand
It wasnrsquot about cost per tonne economics
6368 70
7780
8486 87
90
0
10
20
30
40
50
60
70
80
90
100
-
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PP consumption and capacity
Capacity in 000 tonnesyear Consumption in 000 tonnes
Capacity as a percentage of consumption
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 32
The supply-driven model no longer works
A paradigm shift is under way in the global economy as well as in the global petrochemical markets
Having expected this we successfully forecast the slowdown in the Chinese economy and the collapse of oil prices
Stimulus hangover a lot of it badly spent has left big supply overhangs and so the loss of pricing power
Chinarsquos Role In This New Paradigm
The History
wwwiciscom 34
The biggest credit bubble in economic history
President Xi Jinping opening the 3rd Plenum November 2013
ldquoThe good meat is all gone all that is left are hard bones to chewrdquo
Premier Li Keiqiang in his Work Report to the National Peoplersquos Congress March 2016
ldquoThis is the crucial period in which China currently finds itself and during which we must build up powerful new drivers in order to accelerate the development of the new economyrdquo
2014
wwwiciscom 35
China petrochemicals volumes critically important
67
892
2171
378
749
89 120
1088
2560
-
500
1000
1500
2000
2500
3000
00
0 to
nn
es
2015 LLDPE imports
Source ICIS Supply and Demand Database
7 7 77 8 8
8
35 35 35 36 36 36 36
0
5
10
15
20
25
30
35
40
2016 2017 2018 2019 2020 2021 2022
-
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
lsquo00
0 to
nn
es
China versus India PP consumption
World Consumption India Consumption
China Consumption India as a percentage of global total
China as a percentage of global total
wwwiciscom 36
The impact of stimulus on chemicals and polymers
0
200
400
600
800
1000
1200
1400
China Europe Japan SouthKorea
US Taiwan
lsquo00
0 to
nn
esy
ea
r
Average size of PTA capacities
2000 2016
Source ICIS Supply and Demand Database
7872
77
91
114
138
154
164158
0
20
40
60
80
100
120
140
160
180
-
10000
20000
30000
40000
50000
60000
2009 2010 2011 2012 2013 2014 2015 2016 2017
China PTA
Capacity in 000 tonnesyear Consumption in 000 tonnesyear
Capacity as of consumption
wwwiciscom 37
5000
10000
15000
20000
25000
30000
35000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
To
nn
es
China ethylene versus propylene consumption
Ethylene Propylene
China becomes the first country or region in the world where propylene consumption exceeds ethylene
China consumed 13m tonnes of phenol in 2010 versus capacity of 880000 tonnesyear In 2017 ICIS Consulting expects capacity 27m tonnesyear versus 24m tonnes of demand
Acrylic acid capacity in China in 2010 was 11m tonnesyear versus consumption of 1m tonnes In 2017 we are forecasting 35m tonnesyear of capacity versus 17m tonnes of demand
Source ICIS Supply and Demand Database
wwwiciscom 38
Source ICIS Supply and Demand Database
It was about building factories for the sake of building factories to preserve jobs
Little regard was given to conventional analysis of long- term supply and demand
It wasnrsquot about cost per tonne economics
6368 70
7780
8486 87
90
0
10
20
30
40
50
60
70
80
90
100
-
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PP consumption and capacity
Capacity in 000 tonnesyear Consumption in 000 tonnes
Capacity as a percentage of consumption
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
Chinarsquos Role In This New Paradigm
The History
wwwiciscom 34
The biggest credit bubble in economic history
President Xi Jinping opening the 3rd Plenum November 2013
ldquoThe good meat is all gone all that is left are hard bones to chewrdquo
Premier Li Keiqiang in his Work Report to the National Peoplersquos Congress March 2016
ldquoThis is the crucial period in which China currently finds itself and during which we must build up powerful new drivers in order to accelerate the development of the new economyrdquo
2014
wwwiciscom 35
China petrochemicals volumes critically important
67
892
2171
378
749
89 120
1088
2560
-
500
1000
1500
2000
2500
3000
00
0 to
nn
es
2015 LLDPE imports
Source ICIS Supply and Demand Database
7 7 77 8 8
8
35 35 35 36 36 36 36
0
5
10
15
20
25
30
35
40
2016 2017 2018 2019 2020 2021 2022
-
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
lsquo00
0 to
nn
es
China versus India PP consumption
World Consumption India Consumption
China Consumption India as a percentage of global total
China as a percentage of global total
wwwiciscom 36
The impact of stimulus on chemicals and polymers
0
200
400
600
800
1000
1200
1400
China Europe Japan SouthKorea
US Taiwan
lsquo00
0 to
nn
esy
ea
r
Average size of PTA capacities
2000 2016
Source ICIS Supply and Demand Database
7872
77
91
114
138
154
164158
0
20
40
60
80
100
120
140
160
180
-
10000
20000
30000
40000
50000
60000
2009 2010 2011 2012 2013 2014 2015 2016 2017
China PTA
Capacity in 000 tonnesyear Consumption in 000 tonnesyear
Capacity as of consumption
wwwiciscom 37
5000
10000
15000
20000
25000
30000
35000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
To
nn
es
China ethylene versus propylene consumption
Ethylene Propylene
China becomes the first country or region in the world where propylene consumption exceeds ethylene
China consumed 13m tonnes of phenol in 2010 versus capacity of 880000 tonnesyear In 2017 ICIS Consulting expects capacity 27m tonnesyear versus 24m tonnes of demand
Acrylic acid capacity in China in 2010 was 11m tonnesyear versus consumption of 1m tonnes In 2017 we are forecasting 35m tonnesyear of capacity versus 17m tonnes of demand
Source ICIS Supply and Demand Database
wwwiciscom 38
Source ICIS Supply and Demand Database
It was about building factories for the sake of building factories to preserve jobs
Little regard was given to conventional analysis of long- term supply and demand
It wasnrsquot about cost per tonne economics
6368 70
7780
8486 87
90
0
10
20
30
40
50
60
70
80
90
100
-
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PP consumption and capacity
Capacity in 000 tonnesyear Consumption in 000 tonnes
Capacity as a percentage of consumption
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 34
The biggest credit bubble in economic history
President Xi Jinping opening the 3rd Plenum November 2013
ldquoThe good meat is all gone all that is left are hard bones to chewrdquo
Premier Li Keiqiang in his Work Report to the National Peoplersquos Congress March 2016
ldquoThis is the crucial period in which China currently finds itself and during which we must build up powerful new drivers in order to accelerate the development of the new economyrdquo
2014
wwwiciscom 35
China petrochemicals volumes critically important
67
892
2171
378
749
89 120
1088
2560
-
500
1000
1500
2000
2500
3000
00
0 to
nn
es
2015 LLDPE imports
Source ICIS Supply and Demand Database
7 7 77 8 8
8
35 35 35 36 36 36 36
0
5
10
15
20
25
30
35
40
2016 2017 2018 2019 2020 2021 2022
-
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
lsquo00
0 to
nn
es
China versus India PP consumption
World Consumption India Consumption
China Consumption India as a percentage of global total
China as a percentage of global total
wwwiciscom 36
The impact of stimulus on chemicals and polymers
0
200
400
600
800
1000
1200
1400
China Europe Japan SouthKorea
US Taiwan
lsquo00
0 to
nn
esy
ea
r
Average size of PTA capacities
2000 2016
Source ICIS Supply and Demand Database
7872
77
91
114
138
154
164158
0
20
40
60
80
100
120
140
160
180
-
10000
20000
30000
40000
50000
60000
2009 2010 2011 2012 2013 2014 2015 2016 2017
China PTA
Capacity in 000 tonnesyear Consumption in 000 tonnesyear
Capacity as of consumption
wwwiciscom 37
5000
10000
15000
20000
25000
30000
35000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
To
nn
es
China ethylene versus propylene consumption
Ethylene Propylene
China becomes the first country or region in the world where propylene consumption exceeds ethylene
China consumed 13m tonnes of phenol in 2010 versus capacity of 880000 tonnesyear In 2017 ICIS Consulting expects capacity 27m tonnesyear versus 24m tonnes of demand
Acrylic acid capacity in China in 2010 was 11m tonnesyear versus consumption of 1m tonnes In 2017 we are forecasting 35m tonnesyear of capacity versus 17m tonnes of demand
Source ICIS Supply and Demand Database
wwwiciscom 38
Source ICIS Supply and Demand Database
It was about building factories for the sake of building factories to preserve jobs
Little regard was given to conventional analysis of long- term supply and demand
It wasnrsquot about cost per tonne economics
6368 70
7780
8486 87
90
0
10
20
30
40
50
60
70
80
90
100
-
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PP consumption and capacity
Capacity in 000 tonnesyear Consumption in 000 tonnes
Capacity as a percentage of consumption
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 35
China petrochemicals volumes critically important
67
892
2171
378
749
89 120
1088
2560
-
500
1000
1500
2000
2500
3000
00
0 to
nn
es
2015 LLDPE imports
Source ICIS Supply and Demand Database
7 7 77 8 8
8
35 35 35 36 36 36 36
0
5
10
15
20
25
30
35
40
2016 2017 2018 2019 2020 2021 2022
-
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
lsquo00
0 to
nn
es
China versus India PP consumption
World Consumption India Consumption
China Consumption India as a percentage of global total
China as a percentage of global total
wwwiciscom 36
The impact of stimulus on chemicals and polymers
0
200
400
600
800
1000
1200
1400
China Europe Japan SouthKorea
US Taiwan
lsquo00
0 to
nn
esy
ea
r
Average size of PTA capacities
2000 2016
Source ICIS Supply and Demand Database
7872
77
91
114
138
154
164158
0
20
40
60
80
100
120
140
160
180
-
10000
20000
30000
40000
50000
60000
2009 2010 2011 2012 2013 2014 2015 2016 2017
China PTA
Capacity in 000 tonnesyear Consumption in 000 tonnesyear
Capacity as of consumption
wwwiciscom 37
5000
10000
15000
20000
25000
30000
35000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
To
nn
es
China ethylene versus propylene consumption
Ethylene Propylene
China becomes the first country or region in the world where propylene consumption exceeds ethylene
China consumed 13m tonnes of phenol in 2010 versus capacity of 880000 tonnesyear In 2017 ICIS Consulting expects capacity 27m tonnesyear versus 24m tonnes of demand
Acrylic acid capacity in China in 2010 was 11m tonnesyear versus consumption of 1m tonnes In 2017 we are forecasting 35m tonnesyear of capacity versus 17m tonnes of demand
Source ICIS Supply and Demand Database
wwwiciscom 38
Source ICIS Supply and Demand Database
It was about building factories for the sake of building factories to preserve jobs
Little regard was given to conventional analysis of long- term supply and demand
It wasnrsquot about cost per tonne economics
6368 70
7780
8486 87
90
0
10
20
30
40
50
60
70
80
90
100
-
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PP consumption and capacity
Capacity in 000 tonnesyear Consumption in 000 tonnes
Capacity as a percentage of consumption
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 36
The impact of stimulus on chemicals and polymers
0
200
400
600
800
1000
1200
1400
China Europe Japan SouthKorea
US Taiwan
lsquo00
0 to
nn
esy
ea
r
Average size of PTA capacities
2000 2016
Source ICIS Supply and Demand Database
7872
77
91
114
138
154
164158
0
20
40
60
80
100
120
140
160
180
-
10000
20000
30000
40000
50000
60000
2009 2010 2011 2012 2013 2014 2015 2016 2017
China PTA
Capacity in 000 tonnesyear Consumption in 000 tonnesyear
Capacity as of consumption
wwwiciscom 37
5000
10000
15000
20000
25000
30000
35000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
To
nn
es
China ethylene versus propylene consumption
Ethylene Propylene
China becomes the first country or region in the world where propylene consumption exceeds ethylene
China consumed 13m tonnes of phenol in 2010 versus capacity of 880000 tonnesyear In 2017 ICIS Consulting expects capacity 27m tonnesyear versus 24m tonnes of demand
Acrylic acid capacity in China in 2010 was 11m tonnesyear versus consumption of 1m tonnes In 2017 we are forecasting 35m tonnesyear of capacity versus 17m tonnes of demand
Source ICIS Supply and Demand Database
wwwiciscom 38
Source ICIS Supply and Demand Database
It was about building factories for the sake of building factories to preserve jobs
Little regard was given to conventional analysis of long- term supply and demand
It wasnrsquot about cost per tonne economics
6368 70
7780
8486 87
90
0
10
20
30
40
50
60
70
80
90
100
-
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PP consumption and capacity
Capacity in 000 tonnesyear Consumption in 000 tonnes
Capacity as a percentage of consumption
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 37
5000
10000
15000
20000
25000
30000
35000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
To
nn
es
China ethylene versus propylene consumption
Ethylene Propylene
China becomes the first country or region in the world where propylene consumption exceeds ethylene
China consumed 13m tonnes of phenol in 2010 versus capacity of 880000 tonnesyear In 2017 ICIS Consulting expects capacity 27m tonnesyear versus 24m tonnes of demand
Acrylic acid capacity in China in 2010 was 11m tonnesyear versus consumption of 1m tonnes In 2017 we are forecasting 35m tonnesyear of capacity versus 17m tonnes of demand
Source ICIS Supply and Demand Database
wwwiciscom 38
Source ICIS Supply and Demand Database
It was about building factories for the sake of building factories to preserve jobs
Little regard was given to conventional analysis of long- term supply and demand
It wasnrsquot about cost per tonne economics
6368 70
7780
8486 87
90
0
10
20
30
40
50
60
70
80
90
100
-
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PP consumption and capacity
Capacity in 000 tonnesyear Consumption in 000 tonnes
Capacity as a percentage of consumption
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 38
Source ICIS Supply and Demand Database
It was about building factories for the sake of building factories to preserve jobs
Little regard was given to conventional analysis of long- term supply and demand
It wasnrsquot about cost per tonne economics
6368 70
7780
8486 87
90
0
10
20
30
40
50
60
70
80
90
100
-
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PP consumption and capacity
Capacity in 000 tonnesyear Consumption in 000 tonnes
Capacity as a percentage of consumption
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 39
Source ICIS Supply and Demand Database
Slowdown in naphtha crackers
And of course no ldquoon purposerdquo production routes for ethylene
Polyethylene a different story
54
6062
64 65 66 67 68 68
0
10
20
30
40
50
60
70
80
5000
10000
15000
20000
25000
30000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chinarsquos PE consumption and capacity
Consumption in 000 tonnes Capacity in 000 tonnnes Capacit as a percentage of consumption
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 40
China boosts exports to protect jobs
3587869
39201323623348
3567105
1707608
560805
33120
(184249)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinas PTA imports minus exports in January-July
1318056
613868
375018 467328
83178
(188010)
56199
(257576)
2009 2010 2011 2012 2013 2014 2015 2016
To
nn
es
Chinarsquos PVC imports minus exports January-July
It is not realistic in the short term nor the long term to expect China to follow standard Western concepts of cost-per-tonne economics
Source China Customs department
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
Chinarsquos Role What Happens Next
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 42
Source BP World Review of Energy 2016
Coal You need multiple scenarios
CTO plants preserve jobs in the coal mining regions
They maintain demand for coal which is declining due to planned cutbacks in outdated steel production and a slowing economy
They contribute to Chinarsquos energy balance
Big logistics improvements making freight between regions quicker and cheaper
Upgrading six tonnes of coal at around $20tonne to a tonne of say raffia-grade PP - $970tonne on 9 September
Big improvement in water efficiency
China2
Global proven gas reserves (65994 trillion cubic feet)
China11
Global proven coal reserves ( 891531 million tonnes)
China1
Global proven oil reserves (2394 thousand million
barrels)
Chinarsquos energy reserves- end of 2015 data
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 43
Demographics and the Lewis Curve
The one child policy has resulted in a 421 family structure One child may need to care for 2 parents and 4 grand parents
China is ageing rapidly before it has reached developed economy status The median age will hit 471 by 2030 compared to 399 in the US
The working age population (aged 15-64 years) will shrink by 108 in 2014-2030 This is equivalent to 107 million fewer people
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 44
ldquoOne Belt One Roadrdquo initiative
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 45
Escaping the ldquomiddle income traprdquo and more basic manufacturing
A smartphone manufacturer in Guangdong makes all its components from scratch including the electronic chemicals higher-value polymers and the memory chips
But it cannot afford to assemble the smartphones in Guangdong because of higher labour costs
So the unassembled phones are shipped to Yunnan for final assembly where labour costs are much lower
The phones are wrapped in locally made polymers via CTO plants and shipped overseas ndashvia the One Belt One Road initiative and around China
Or lower-value manufacturing will be outsourced to another countryhellip
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 46
hellipHow this could work in the polyester value chain
China imports oil from a One Belt One Road partner
It helps develop this partnerrsquos refinery sector with downstream PX plants
China imports the PX
It then exports polyester fibre to this country
Uncompetitive clothing factories relocated from China to the trading partner thus helping to tackle unemployment
(20000)
(15000)
(10000)
(5000)
-
5000
10000
15000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR
AFRICA IRAN MIDDLE EAST EX-
IRAN
CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
5000
10000
15000
20000
25000
30000
35000
Global Paraxylene in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
Source ICIS Supply and Demand Database
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 47
A breakdown in global free trade ndash what it means for PE
Markets become more regional
More capacity than expected continues to run on govt support
Growth is of course lower
And China prioritises imports from its strategic partners
Source ICIS Supply and Demand Database
(10000)
(8000)
(6000)
(4000)
(2000)
-
2000
4000
6000
8000
10000
12000
NORTH AMERICA
SOUTH amp CENTRAL AMERICA
EUROPE FORMER USSR AFRICA MIDDLE EAST CHINA NORTH EAST ASIA EX-CHINA
ASIA AND PACIFIC
-
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Global HDPE in 2026
Capacity in 000 tonnesyear (left-hand axis) Production in 000 tonnes (left-hand axis)
Consumption in 000 tonnes (left-hand axis) Deficitsurplus in 000 tonnes (right-hand axis)
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
To find out more or take a trial visit wwwiciscompriceforecast
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
ICIS price forecast reportsSupply demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months Packed with vital information reports include everything you need to assess where the market is heading and the impact or opportunity that presents for your business
How price forecast reports can help you
Use ICIS price forecast reports to understand where the market is heading and identify the risks and the opportunities for your business What are the major demand developments for your product
Understand the market
Use market information to make better-informed business decisions relating to supply and demand Learn about changes in market capacities What factors will affect supply for you
Safeguard commercial decisions
Whether you are planning how much you will be spending in the short-to-medium or even long term use the price forecast reports to help assess future prices for your product What will the price of your product be in six monthsrsquo time
Budgeting and planning
New featurePrice Forecast Window
ICIS price forecasts are now available on the Dashboard channel using the Price Forecast Window which will enable users to
n Chart the price forecast against the last (rolling) 12 months of related price history
n Plot the last 12 months to view forecast progression and ICIS forecast accuracy
n Convert data into different currencies and units and download this data into Excel in order to easily enter into your own calculations
Price forecast reports currently available
Asia
PolypropylenePolyethylene
BenzeneStyrenePolystyrene
Europe USA
To nd out more or take a trial visit wwwiciscompriceforecast
ICIS APIC Booklet Adsindd 3 11516 306 pm
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
The Way Forward
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 49
The global opportunity Create your own demand
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 50
Water shortages The challenges and opportunities
Globally 20-30 of drinking water is lost because of leakages in urban distribution systems ndash Huge opportunity for plastic pipes
Almost 60 of the worldrsquos fresh water goes to crop irrigation with many countries charging nothing for its use ndashDrip irrigation systems ndash ie ldquoplastic veinsrdquo ndash that direct water to the roots of each plant
Aqueduct Alliance members include Dow Chemical DuPont and Shell
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 51
ldquoBuild it and they will comerdquo just doesnrsquot work anymore
The percentage of high and medium strength steel used in US autos rose from 133 in 2009 to 162 in 2014 iron rose from 52 to 68 aluminium rose from 82 to 10 and glass recovered to 24
Meanwhile of the polymers only PP has seen volume gains polyurethane has held 2009 levels ndash and all the rest have lost volume
Demand The New Direction for Profit
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 52
In autos you must therefore for example
Work with the auto makers who will want ever-cheaper materials to design with them models that beat non-organics on cost and performance
Opportunities in 3D printing as a means of keeping old cars on the road
Autonomous driving might result in less autos sales volumes So again you have to work closely with the auto companies
Source imageBROKERREXShutterstock
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 53
Separating the Winners from the Losers
Winners in this transition will believe that
Business models will return to being demand-driven based on application development
Companies need to realign their offerings with key demographic drivers eg the ageing Baby Boomers and greater domestic consumption in emerging economies
Profitable growth will come from providing sustainable solutions that meet real needs (not just ldquowantsrdquo) in these new markets
Losers in this transition will be those who think that
Stimulus programmes will return markets to the supply-driven model of the Supercycle
Chinarsquos demand will be the saviour of the global industry
The rise in oil prices meant end-user demand was robust
Companies now lsquocaught in the middlersquo neither low-cost or selling a solution will somehow regain pricing power
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
Enquire about the ICIS-IeCScenario Study
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
Scenario Study
FIVE key questions it will help you answer
DEMAND ndash THE NEW DIRECTION FOR PROFIT
This new study is the culmination of ve years of ground-breaking forecasting work and provides a critical assessment of the present economic landscape and a roadmap for navigating towards future pro t and growth
Enquire about the ICIS-IeC Scenario Studywwwiciscomscenariostudy
1What are themyths that have brought us to this point 2 3 4 5
The collapse of oil prices ndash what does this mean
How will Chinarsquos slowdown impact global markets
Where are the future opportunities
What demographic paradigm shifts impact supply amp demand fundamentals
enquireiciscom
ICIS APIC Booklet Adsindd 5 11516 306 pm
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 54
Conclusions
The new demand scenario will require a shift in the energy mix towards a lower carbon intensity and growing efficiencies The industry needs to be prepared and consider an accelerated case on top of the base scenario Coal demand is fast approaching its peak and evidence of over-investment based on this fuel is appearing in China power sector Are coal-based petrochemicals a solution
ldquoPeak Oilrdquo may not appear in the next 10 years but a rapid adoption of Electric Vehicles could have a disruptive effect on the base case scenario Europe will be particularly exposed to gasoline surpluses beyond its own regional developments Refinersrsquo role in Petrochemicals will ldquonecessarilyrdquo increase
Petrochemical Demand growth is an opportunity supported by Macro Trends New geographies and new trade influences are emerging under Chinarsquos lsquoOne Belt One Roadrsquo Initiative The initiative is likely to extend to countries that are key to European petrochemical growth Chinarsquos expansions in energy refining and petrochemicals highlights the risk to an export-based strategy
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
wwwiciscom 55
Conclusions
A low oil price scenario will impact the profitability initially envisaged for export oriented investments based on North American shale developments The role of European refineries as integrated naphtha feedstock provider for regional petrochemical producer improves in the Comfortable Middle scenario but is challenged by the risk of further rationalization Feedstock diversification in the form of imported light NGLs is rapidly expanding but is heavily reliant on US shale developments
The petrochemicals industry thus needs a new global business approach aligned with the real needs of changing social political and economic drivers These challenges are opportunities for the petrochemicals industry given its ability to efficiently deliver the products needed to improve our lives in the future
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