© 2013 Platts, McGraw Hill Financial. All rights reserved.

Global benzene market: Changes and trade flows Ng Baoying Senior Editor Asia Petrochemicals

Global Panoramic Picture Strength in the US draws volumes from Asia, and Europe

Regional Zoom-In

Production Margins And The State Of Derivatives Demand

US Shale Storm vs Asian Aromatics Monsoon

Platts Outlook For Regional Balances

1. Global Panoramic Picture Strength in the US draws volumes from Asia, and Europe

Return of the global disconnect

4

Source: Platts

900

1000

1100

1200

1300

1400

1500

1600

1700

3-J

an-1

2

3-F

eb

-12

3-M

ar-1

2

3-A

pr-

12

3-M

ay-1

2

3-J

un

-12

3-J

ul-

12

3-A

ug-

12

3-S

ep

-12

3-O

ct-1

2

3-N

ov-

12

3-D

ec-1

2

3-J

an-1

3

3-F

eb

-13

3-M

ar-1

3

3-A

pr-

13

3-M

ay-1

3

3-J

un

-13

3-J

ul-

13

3-A

ug-

13

3-S

ep

-13

3-O

ct-1

3

3-N

ov-

13

3-D

ec-1

3

3-J

an-1

4

3-F

eb

-14

3-M

ar-1

4

3-A

pr-

14

3-M

ay-1

4

3-J

un

-14

3-J

ul-

14

3-A

ug-

14

Benzene FOB Korea Marker

Benzene FOB USG Mo02 $/mt

Benzene CIF ARA

950

1050

1150

1250

1350

1450

1550

1650

1750

3-J

an-1

2

3-F

eb

-12

3-M

ar-1

2

3-A

pr-

12

3-M

ay-1

2

3-J

un

-12

3-J

ul-

12

3-A

ug-

12

3-S

ep

-12

3-O

ct-1

2

3-N

ov-

12

3-D

ec-1

2

3-J

an-1

3

3-F

eb

-13

3-M

ar-1

3

3-A

pr-

13

3-M

ay-1

3

3-J

un

-13

3-J

ul-

13

3-A

ug-

13

3-S

ep

-13

3-O

ct-1

3

3-N

ov-

13

3-D

ec-1

3

3-J

an-1

4

3-F

eb

-14

3-M

ar-1

4

3-A

pr-

14

3-M

ay-1

4

3-J

un

-14

3-J

ul-

14

3-A

ug-

14

Benzene FOB Korea Marker

Benzene FOB USG Mo02 $/mt

FOB US Gulf vs FOB Korea Benzene

5

Source: Platts

Spread between Asia and US benzene widens and stays wide

-100

-50

0

50

100

150

200

250

300

350

400

FOB USG less FOB Korea

US Benzene Price Spread To Asia Wide

6

Arbitrage window open for about five months

Arbitrage window shuts for three weeks then reopens amid firm US prices

Source: Platts

-150

-100

-50

0

50

100

150

200

250

300

350

Arbitrage Margin

US-Asia Arbitrage Margin (Less Freight)

7

Margins stay firm for most of 2014 apart from a dip in June

Source: Platts

1000

1100

1200

1300

1400

1500

1600

3-J

an-1

2

3-F

eb

-12

3-M

ar-1

2

3-A

pr-

12

3-M

ay-1

2

3-J

un

-12

3-J

ul-

12

3-A

ug-

12

3-S

ep

-12

3-O

ct-1

2

3-N

ov-

12

3-D

ec-1

2

3-J

an-1

3

3-F

eb

-13

3-M

ar-1

3

3-A

pr-

13

3-M

ay-1

3

3-J

un

-13

3-J

ul-

13

3-A

ug-

13

3-S

ep

-13

3-O

ct-1

3

3-N

ov-

13

3-D

ec-1

3

3-J

an-1

4

3-F

eb

-14

3-M

ar-1

4

3-A

pr-

14

3-M

ay-1

4

3-J

un

-14

3-J

ul-

14

3-A

ug-

14

CIF ARA Benzene price 2012-2014, $/mt

Benzene CIF ARA

European Prices Hit Record Highs

8

Source: Platts

US Pulls European Molecules Too

9

Source: Platts

-300

-250

-200

-150

-100

-50

0

50

100

150

200

Jan

-20

12

Feb

-20

12

Mar

-20

12

Ap

r-2

01

2

May

-20

12

Jun

-20

12

Jul-

20

12

Au

g-2

01

2

Sep

-20

12

Oct

-20

12

No

v-2

012

Dec

-20

12

Jan

-20

13

Feb

-20

13

Mar

-20

13

Ap

r-2

01

3

May

-20

13

Jun

-20

13

Jul-

20

13

Au

g-2

01

3

Sep

-20

13

Oct

-20

13

No

v-2

013

Dec

-20

13

Jan

-20

14

Feb

-20

14

Mar

-20

14

Ap

r-2

01

4

May

-20

14

Jun

-20

14

Cross-Atlantic Arbitrage 2012-2014, $/mt

Arb Europe-US to M1Arb Europe-US to M2Arb US-Europe to M1Arb US-Europe to M2

One Way Ticket

10

Source: Eurostat

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

Jan

. 20

12

Feb

. 20

12

Mar

. 20

12

Ap

r. 2

01

2

May

. 20

12

Jun

. 20

12

Jul.

20

12

Au

g. 2

01

2

Sep

. 20

12

Oct

. 20

12

No

v. 2

01

2

Dec

. 20

12

Jan

. 20

13

Feb

. 20

13

Mar

. 20

13

Ap

r. 2

01

3

May

. 20

13

Jun

. 20

13

Jul.

20

13

Au

g. 2

01

3

Sep

. 20

13

Oct

. 20

13

No

v. 2

01

3

Dec

. 20

13

Jan

. 20

14

Feb

. 20

14

Mar

. 20

14

Ap

r. 2

01

4

EU-US Trade Flow 2012-2014, mt

EU->US

US->EU

2. Regional Zoom-In 2.1 US: Production Margins And The State Of Derivatives Demand

US Benzene & Styrene Trends

12

1000

1100

1200

1300

1400

1500

1600

1700

1800

Jan

-20

12

Feb

-20

12

Mar

-20

12

Ap

r-2

01

2

May

-20

12

Jun

-20

12

Jul-

20

12

Au

g-2

01

2

Sep

-20

12

Oct

-20

12

No

v-2

012

Dec

-20

12

Jan

-20

13

Feb

-20

13

Mar

-20

13

Ap

r-2

01

3

May

-20

13

Jun

-20

13

Jul-

20

13

Au

g-2

01

3

Sep

-20

13

Oct

-20

13

No

v-2

013

Dec

-20

13

Jan

-20

14

Feb

-20

14

Mar

-20

14

Ap

r-2

01

4

May

-20

14

Benzene

Styrene

Source: Platts

US Phenol & Benzene Price Trends

13

1100

1200

1300

1400

1500

1600

1700

US Phenol

US Benzene

Source: Platts

Weaker US Derivative Demand

14

-

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

mlb

s

US benzene and derivative demand

BENZENE DEMAND (mlbs)

US STYRENE DEMAND (mlbs)

US CUMENE DEMAND (mlbs)

Source: Platts

2.2. Asia: Strong Production Economics

Asia Benzene To Naphtha Spread Healthy

16

Source: Platts

-200

0

200

400

600

800

1000

1200

1400

1600Benzene-naphtha spread

Benzene FOB Korea Marker

Naphtha C+F Japan Cargo

-500

0

500

1000

1500

2000

PX-Benzene spread

Paraxylene FOB Korea Marker

Benzene FOB Korea Marker

Asia Benzene Rise Past PX Temporarily

17

PX prices weaken on soft downstream. Run rate reduction eats into benzene supply

Source: Platts

Asia Toluene Attractive For Benzene Production

18

Source: Platts

-200

-100

0

100

200

300

400

500

600

700

0

200

400

600

800

1000

1200

1400

1600

Benzene-Toluene spread

Benzene FOB Korea Marker

Toluene FOB Korea Marker

0

200

400

600

800

1000

1200

1400

1600

1800

2000

Styrene-benzene spread

Benzene FOB Korea Marker

Styrene FOB Korea Marker

Asia Styrene-Benzene Spread Starts To Narrow

19

Spreads start to come under pressure after experiencing period of strength

Source: Platts

Asia Phenol Margins Negative

20

Source: Platts

-200

300

800

1300

1800

2300

2800

3300

3800

-200

300

800

1300

1800

2300

Benzene FOB Korea Marker

Phenol CFR China Weekly

Phenol-benzene margins

Breakeven

2.3. Europe: Incremental Production Comes Back

Europe Recuperates Strength in Q1

22

Source: Platts

-50

0

50

100

150

200

CIF ARA M1/M2 Structure 2012-2014, $/mt

Styrene Production Margins Sink In Q1

23

1000

1100

1200

1300

1400

1500

1600

1700

1800

1900

2000

ARA Styrene/Benzene Spread 2012-2014, $/mt

Source: Platts

Structural Tightness Persists

24

Source: Platts

0

200

400

600

800

1000

1200

1400

1600

1800

CIF ARA Benzene/Naphtha Spread 2012-2014, $/mt

Incremental Production Restarts

25

Source: Platts

900

1000

1100

1200

1300

1400

1500

1600

Jan

-20

12

Feb

-20

12

Mar

-20

12

Ap

r-2

01

2

May

-20

12

Jun

-20

12

Jul-

20

12

Au

g-2

01

2

Sep

-20

12

Oct

-20

12

No

v-2

01

2

De

c-2

01

2

Jan

-20

13

Feb

-20

13

Mar

-20

13

Ap

r-2

01

3

May

-20

13

Jun

-20

13

Jul-

20

13

Au

g-2

01

3

Sep

-20

13

Oct

-20

13

No

v-2

01

3

De

c-2

01

3

Jan

-20

14

Feb

-20

14

Mar

-20

14

Ap

r-2

01

4

May

-20

14

Jun

-20

14

ARA Benzene/TDI Grade Toluene Spread 2012-2014, $/mt

3. US Shale Storm vs Asian Aromatics Monsoon 3.1. Upcoming Challenges for US Benzene

US Shifts To Light Feeds

27

• Pygas to decrease 40% • Crude C4 to decrease 20% • Propylene to decrease 20%

• 69% growth in ethane based output • 32% decrease in naphtha based output

Source: Platts Petrochemical Analytics

Yields From Steam Crackers Vary With The Feedstock

28

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Ethane Propane Butane LightNaphtha

Yields by feedstock

Hydrogen/Fuel

Gas Oil

Aromatics

Crude C4s

Propylene

Ethylene

US Benzene Production At Cracker

0

50

100

150

200

250

300

350

400

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Be

nze

ne

Pro

du

ctio

n (

'00

0 M

T/Y

ear

)

Benzene Production

Ethane

Propane

Butane

Full-range Naphtha

Naphtha

Gas Oil

29

US Benzene Demand Will Outpace Supply,

Increasing Volatility & Dependence On Imports

30 Source: Platts Petrochemical

3.2. Asia PX/BZ Expansions

South Korea’s Benzene Exports Surge To The US But China’s Tumble

32

1

10

100

1,000

10,000

100,000

0

20,000

40,000

60,000

80,000

100,000

120,000

Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14

South Korea exports to US

South Korea exports to China

South Korea exports to US (Line)

South Korea exports to China (Line)

Source: South Korea customs

Asia PX Expansions – Benzene Oversight

33

Country Company Location Quarter 2014 2015 2016

BZ TL MX PX BZ TL MX PX BZ TL MX PX

China Sinopec Hainan Q1 600

PetroChina Yangzhou - 400 1000

Sinopec Zhenhai - 1600

China Total 2200 400 1000

S.Korea SK Innovation (July) Incheon Q3 450 1300

SK Energy/JX Nippon Oil (June)

Ulsan Q2 300 1000

Samsung Total (June) Daesan Q2 420 1000

GS Caltex/Taiyo Oil/Showa Shell

Yeosu - 400 1000

S. Korea Total 1170 3000 400 1000

India ONGC (Aug/Sep) Mangalore Q3 270 900

Reliance Dahej, Gujarat

Q1 200 1500

Indian Oil Group Vadodara, Gujarat

Q1 370

India Total 270 900 200 1870

SEA Jurong Aromatics (Aug) Singapore Q2 400 800

PetroViet Vietnam Q2 240 700

PTT Global Chemicals Thailand

SEA Total 400 800 240 700

Total BZ start up in 2014: 1.84 mln mt

Source: Platts Petrochemical Analytics

3.3. Europe benzene movements

Western Europe Benzene Balance

35

Source: IMF, CEFIC, Platts Petrochemical Analytics

000 mt

EU Benzene Exports/Imports 2002-2013

36

Source: Eurostat

mt

EU Benzene Exports/Imports 2013

37

267kt

Source: Eurostat

European Crackers Are Less Competitive

38

Source: Bentek, Platts Petrochemical Analytics

Western European Deficit To Increase

39

• WE Europe is expected move from a balanced position to a growing deficit

Source: IMF, CEFIC, Platts Petrochemical Analytics

40 40

Key Middle East Aromatics Projects

Source: Platts

• Could be the growing supplier to other regions

July 2014

Q4 2014

Conclusions

• Downwards push for global benzene

– Weakness in downstream demand

– Additional capacities to come onstream in Asia, Middle East

• Upwards push for global benzene

– Tight US to remain the main global driver

– Europe production to decline amid lower competitiveness

– Potentially reduced run rates at new capacities in Asia

41

© 2013 Platts, McGraw Hill Financial. All rights reserved.

Editor contact information: Ng Baoying

Email: bao.ying.ng@platts.com Yahoo Messenger: benzene_platts

Phone: +65 6530 6588

Thank you.