Chlor-Alkali & Derivatives Marketscpmaindia.com/pdf/apice2013_charles_fryer.pdf · Chlor-Alkali...

Chlor-Alkali & Derivatives Markets

Charles Fryer

PVC Committee Meeting at APIC 2013

Taipei, 10 May 2013

Source: Tecnon OrbiChem

APIC 2013

US GULF CAUSTIC SODA & CHLORINE PRICES

0

100

200

300

400

500

600

700

800

900

1,000

1,100

1,200

1,300

1,400

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

$/Metric Ton

ChlorineDomestic

ChlorineDomestic

Caustic SodaEx Works

Caustic SodaEx Works

$/Metric Ton

Source: Tecnon OrbiChem

APIC 2013

US GULF CAUSTIC SODA & CHLORINE PRICES

0

100

200

300

400

500

600

700

800

900

1,000

1,100

1,200

1,300

1,400

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

ChlorineDomestic

ChlorineDomestic

Caustic SodaEx Works

Caustic SodaEx Works

ECU value

ECU value

$/Metric Ton

Source: Tecnon OrbiChem

APIC 2013

COST of ECU on the US GULF

0

50

100

150

200

250

300

350

400

450

500

550

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

ECU Production Cost

Energy Costof ECU

(27mmBtu plus $30)

0

10

20

30

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

$/mmBtu

Source: Tecnon OrbiChem

APIC 2013

NATURAL GAS, CRUDE OIL & COAL PRICES

US Nat Gas $/mmBtu

Oil $/mmBtuequivalent

Coal $/mmBtuequivalent

WE Nat Gas $/mmBtuequivalent

APIC 2013

EFFECT OF ENERGY COST ON CASH COST OF PRODUCTION OF THE ECU (Metric)

$/ECU

Source: Tecnon OrbiChem

Diaphragm

Mercury

Membrane

Cell Type

0

100

200

300

400

500

600

700

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Energy Cost $/mmBtu

Includes evaporation of lye to 50%

Natural Gasat Source

Coal in China

Fuel oilbasis

Middle East

USA

Europe

Asia

2004 2005 2006 2007 2008 2009 2010 2011 20120

400

800

1,200

1,600

2,000

2,400

2,800

3,200

Source: Tecnon OrbiChem

APIC 2013

US PVC EXPORTS

1,000 Metric Tons

$/Metric Ton

Source: Tecnon OrbiChem

APIC 2013

US GULF EXPORT CAUSTIC SODA& CHLORINE PRICES

-400-300-200-100

0100200300400500600700800900

1,0001,1001,200

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Caustic Soda FOB Gulf CoastChlorine value into Exported EDC1.38 x [EDC - (0.285 x Ethylene) -20]

Caustic Soda

APIC 2013

CYCLES IN CHLOR-ALKALI BUSINESS

Chlorine Price

Low High

1

3

4

5

= 5-6 month trend

Price Trend

1 Chlorine up, Caustic down

2 Chlorine peak, Caustic up

3 Chlorine down, Caustic up

4 Chlorine down, Caustic peak

5 Chlorine trough, Caustic down

Caustic Soda Price

2

Higher

Lower

PlantUtilisation

Low

High

Source: Tecnon OrbiChem

$/Metric Ton

Source: Tecnon OrbiChem

APIC 2013

ASIAN CAUSTIC SODA & CHLORINE PRICES

5

-200

-100

0

100

200

300

400

500

600

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

4

1 Chlorine up, Caustic down

2 Chlorine peak, Caustic up

3 Chlorine down, Caustic up

4 Chlorine down, Caustic peak

5 Chlorine trough, Caustic down

Caustic Soda Liquid Spot Export FOB Northeast Asia

Chlorine value into Imported EDC 1.38 x [EDC - (0.285 x Ethylene) -20]

5 1 23

4 1 2 3 4 5 1

0

400

800

1,200

1,600

2,000

2,400

2,800

3,200

2006 2007 2008 2009 2010 2011 2012 2013

Source: Tecnon OrbiChem

ChlorineLiquid

ChlorineLiquid

Caustic SodaLiquid Market

membrane

Caustic SodaLiquid Market

membrane

APIC 2013

CHINESE CAUSTIC SODA & CHLORINE PRICES

Rmb/Metric Ton (inc. VAT)

0

100

200

300

400

500

600

700

800

2006 2007 2008 2009 2010 2011 2012 2013

$/Metric Ton/ECU

Source: Tecnon OrbiChem

ECU Value Cl + 1.10 NaOH

Caustic SodaLiquid Market

membrane

Chlorine Liquid

All inc VAT

APIC 2013

CHINESE VALUE OF ECU

Source: Tecnon OrbiChem

VCMFurnace

VCMFurnace

EDCDirect

EDCDirect

EDC Oxy

EDC Oxy

Air

HClEthylene

ChlorineVCM

VCM

WaterCalcium Carbide

ChlorineHydrogen

HClAcetyleneChlorine

Burner

ChlorineBurner

VCM Reactor

VCM Reactor

ReactorReactorPVC

PVC

APIC 2013

PRODUCTION ROUTES TO PVC

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Rmb/Ton (inc VAT)

Calcium Carbide

HCl (100%)

Liquid Chlorine

Source: Tecnon OrbiChem

APIC 2013

EAST CHINA RAW MATERIAL PRICES

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Rmb (inc VAT)

Calcium CarbideRmb/Ton

CoalRmb/2.5 Tons

Source: Tecnon OrbiChem

APIC 2013

EAST CHINA COAL vs CALCIUM CARBIDE PRICES

0

200

400

600

800

1,000

1,200

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

$/Metric Ton

Source: Tecnon OrbiChem

EthyleneBased

AcetyleneBased

APIC 2013

PVC CASH COST COMPARISON IN CHINA

East China Rmb price less VAT converted to US$

APIC 2013

EAST CHINA PVC PRODUCTION COSTS(March 2013)

$/Ton (excl VAT)

Source: Tecnon OrbiChem

0

200

400

600

800

1,000

1,200

Ethylene + Chlorine Calcium Carbide + HCl

Other costs

Chlorine (0.62) +

Hydrogen

CaC2 cost(1.45)

Price in E China ex works

Othercosts

Ethylene

(0.47)

Chlorine

(0.59)

Export Sales

Northeast Asia cfr International Supplies

APIC 2013

USA & CHINA CASH PVC PRODUCTION COSTS(March 2013)

$/Ton ( for China excl VAT)

Source: Tecnon OrbiChem

0

200

400

600

800

1,000

1,200

USA Ethylene at cashcost ex Ethane;Chlorine at spot

price

USA Ethylene contractprice + Chlorine

spot price

CHINA Ethylene +Chlorine

CHINA Calcium Carbide

+ HCl

Other costs

Chlorine (0.62) +

Hydrogen

CaC2 cost(1.45)

Price in E China ex works

Othercosts

Ethylene

(0.47)

Chlorine

(0.59)

Export Sales fob

Northeast Asia cfr International Supplies

Source: Tecnon OrbiChem

APIC 2013

PVC PRODUCTION COSTS vs CRUDE OIL PRICE

$/Ton

0

500

1,000

1,500

0 25 50 75 100 125 150

Production cost of PVC-A (from calcium carbide) in E China (excl VAT), Mar 2013

International PVC cash cost from ethylene ex naphtha cracker plus chlorine at ECU cost ÷÷÷÷ 2.1

China can export PVC-A

Brent Crude Oil Price $/bbl

International PriceNE Asia - March 2013

$/Ton

Source: Tecnon OrbiChem

APIC 2013

CHINA PVC-A PRODUCTION GROSS MARGIN

-200

0

200

400

600

800

1,000

1,200

2005 2006 2007 2008 2009 2010 2011 2012 2013

Acetylene Based(Price ex. VAT)

Acetylene Based (Cash Cost)

Difference between Acetylene Based

Price (ex VAT) and Acetylene Based

Cash Cost

$/Ton

Source: Tecnon OrbiChem

APIC 2013

CHINA PVC-E PRODUCTION GROSS MARGIN

-200

0

200

400

600

800

1,000

1,200

2005 2006 2007 2008 2009 2010 2011 2012 2013

Ethylene Based PVC Cash Cost

Ethylene BasedPVC Price(excl. VAT)

Difference between Ethylene Based

Price (ex VAT) and Ethylene Based

Cash Cost

0

20

40

60

80

100

120

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

0

20

40

60

80

100

120

140

160

180

200

1,000 Metric Tons

APIC 2013

CHINA PVC EXPORTS vs CRUDE OIL PRICE

$/bbl

PVC Exports

BrentCrude Oil

Source: Tecnon OrbiChem

Brent Crude Oil Price $/bbl

APIC 2013

CRUDE OIL PRICE, ECU COST, CFBT, CHLORINE PRICE & CAUSTIC SODA PRICE RELATIONSHIP

Source: Tecnon OrbiChem

0

100

200

300

400

500

600

700

800

900

0 50 100 150

ECU $ Cost and Cash Flow

0

100

200

300

400

500

600

700

800

900

0 100 200 300 400 500 600 700 800

Caustic Soda Price $/ton

25%

20%

15%

10%

5%

0%

CFBT%

Chlorine Price per ton

$400

$300

$200

$100 $0

US DomesticMar 2013

0

100

200

300

400

500

600

700

800

900

0 50 100 150

APIC 2013

‘SHOULD WE SELL LOW-PRICED EDC TO MAKE ADDITIONAL CAUSTIC SODA AVAILABLE FOR SALE?’

Source: Tecnon OrbiChem

Brent Crude Oil Price $/bbl

ECU $ Cost and Cash Flow

0

100

200

300

400

500

600

700

800

900

0 100 200 300 400 500 600 700 800

Caustic Soda Price $/ton

25%

20%

15%

10%

5%

0%

CFBT%

Chlorine Price per ton

$400

$300

$200

$100 $0

US ExportMar 2013

-$10

0

?!

ECU

APIC 2013

CONCLUSIONS

• The slump in building construction in the USA and Europe and the 2012 slowdown in the Chinese economy led to weakened prices for vinyl chain products, worldwide, weak chlorine values and therefore high caustic soda prices BUT …o Building construction is recovering in the USAo Asian caustic prices are now in decline, so …o Chlorine values are likely to recover, then strengthening PVC prices

• Low-cost gas from shale has greatly strengthened the US competitive position for chemicals, particularly for vinyl productso US ethylene production costs from ethane are far lower than from naphtha-

based crackers widely used in Asia and Europeo US electrical power costs and hence the cost of the ECU are lower than for

most other chlor-alkali producerso Hence US producers of EDC, VCM and PVC have a huge competitive

advantageo US advantages will last for many years

Source: Tecnon OrbiChem

APIC 2013

CONCLUSIONS continued

• The traditional chlor-alkali cycle seems to have entered a caustic-weakening and chlorine-strengthening phase, at least in Asia. If there is economic improvement in 2013 we can expect that worldwide:

o Operating rates and chlorine values will rise

o Caustic soda prices will decline

• Chinese PVC, largely acetylene-based, had lost competitiveness in 2011-2012 based on high coal costs, but a decline in coal prices over the past 12 months is leading to better margins and rising export flows.

Source: Tecnon OrbiChem

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