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Between geopolitical tension and economic slowdown: impact on the petrochemicals market
Lara Berton
Editor, EMEA Petrochemicals
T: +44 (0)20 7176 0125
June 2019
Introduction to S&P Global Platts
2
Platts brings transparency, price discovery and efficiency to
global commodity markets
• A leading global provider of energy, petrochemicals, metals and agriculture information and a premier source of
benchmark prices for the physical and futures markets
• Publishes thousands of daily price assessments and indices
• Platts’ Dated Brent price assessment is the benchmark for
>60% of the world’s crude oil
Agenda
3
• Global expansions: from upstream to downstream
• Trade war affecting inter-regional flows
• Impact on Europe
• Weak conditions for global petrochemicals markets
Global ethylene feedstock landscape: naphtha continues to dominate internationally while ethane use steadily increases
4
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Naphtha Ethane Propane Butane Coal Methanol
Global Ethylene Feedstock Use
2019 2029
-200
0
200
400
600
800
1000
Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19
Regional Primary Feedstock Cracker Margins
US Ethane Margin NW Europe Naphtha Margin NE Asia Naphtha Margin
Source: S&P Global Platts, S&P Global Platts Analytics
New North American polyethylene capacity
5
COMPANY LOCATION CAPACITY (mt/year) PRODUCT STARTUP STATUS
CONSTRUCTION
Formosa Plastics Point Comfort, Texas 400,000/400,000 LDPE/HDPE & LLDPE 2H 2019 Construction
Sasol Lake Charles, Louisiana 420,000 LDPE 8/19/2019 Construction
LyondellBasell La Porte, Texas 549,000 HDPE Mid-2019 Construction
Exxon Mobil Chemical Beaumont, Texas 650,000 LLDPE Mid-2019 Construction
Nova Chemical Sarnia, Ontario 450,000 LLDPE/HDPE Late 2021 Construction
Shell Chemical Monaca, Pennsylvania 550,000/550,000/500,000 HDPE/LLDPE/LLDPE 2021/2022 Construction
NOVA Chemical/Borealis Bayport, Texas 625,000 HDPE 2021 Construction
PLANNING
PTTGC/Daelim Belmont County, Ohio 700,000/900,000 HDPE/HDPE/LLDPE 2021 Awaiting FID
Exxon Mobil/SABIC Corpus Christi, Texas 650,000/600,000 LLDPE/LLDPE & HDPE 2020s Awaiting FID
Dow Chemical US Gulf Coast 600,000 TBD 2020s Planning
Formosa Taiwan (FG LA) St James Parish, Louisiana 400,000/400,000 HDPE/LLDPE 2022 Planning
Formosa Taiwan (FG LA) St James Parish, Louisiana 400,000/400,000 HDPE/LLDPE 2027 Planning
Source: S&P Global Platts, Companies
Recent PE trade shows the US increasing export volumes as capacity is brought on line and ramped up, joining the Middle East as a major global PE exporter
-15
-10
-5
0
5
10
15
Africa Asia Europe Middle East North America South America
Million mt PE Historical Regional Net Trade
2016 2017 2018
Source: S&P Global Platts, International Trader Publications (ITP), Government sources
Source: S&P Global Platts Analytics
Overall, Middle East and the US will be key polyethylene exporters
-40
-30
-20
-10
0
10
20
30
40
2013 2015 2017 2019 2021 2023 2025 2027 2029
Million mtRegional PE Net Trade
North America Central and South America Western Europe Eastern Europe Middle East Asia Africa
Source: S&P Global Platts, S&P Global Platts Analytics
With growing global capacities, Platts Analytics expects softer PE prices
Source: S&P Global Platts Analytics
800
900
1,000
1,100
1,200
1,300
1,400
1,500
1,600
1,700
2014 2017 2020 2023 2026 2029
$/mtGlobal HDPE Price Forecast
Asia Europe US
Period of bearish prices
China PE imports from US falls when trade tensions rise
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
February 2018 April 2018 June 2018 August 2018 October 2018 December 2018 February 2019 April 2019
HDPE LLDPE LDPE
Trade tension up Aug 23
China tariffs on US LL, HD
2019
LD
LL
HD
LD
LL
HD
H2 2018
Source: China Customs
Real impact is
seen in Q4
Trade tension
down Dec
mt
Trade tension up
May 10
Will China LD
imports from US
fall?
What about Europe?
10
0
20,000
40,000
60,000
80,000
100,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr
Total US exports into Europe (2018 to January-April 2019)
Methanol HDPE LLDPE
2019 sees more imports
mt
Source: Eurostat
Platts Global Petrochemical Prices show downward trend
11
0
10
20
30
40
50
60
70
80
90
700
750
800
850
900
950
1000
1050
1100
1150
February 2015 July 2015 December 2015 May 2016 October 2016 March 2017 August 2017 January 2018 June 2018 November 2018 April 2019
Platts Global Petrochemical Index Dated Brent
Source: S&P Global Platts
$/mt
Global and China annual petrochemical cumulative demand change in Trade War scenario
Source: S&P Global Platts Analytics
-3.0%
-2.5%
-2.0%
-1.5%
-1.0%
-0.5%
0.0%
2019 2020 2021
Global PP Global PE Global PET & Polyester
-4.0%
-3.5%
-3.0%
-2.5%
-2.0%
-1.5%
-1.0%
-0.5%
0.0%
2019 2020 2021
China PP China PE China PET & Polyester
Cumulative global petrochemical demand, Trade
War scenario
Cumulative China petrochemical demand, Trade
War scenario
Platts Analytics estimates ethylene and propylene will see a “cost push” due to IMO 2020 related naphtha feedstock cost pressures
13
Source: S&P Global Platts Analytics
325
525
725
925
1125
1325
1525
2014 2016 2018 2020 2022
$/mt
Global Ethylene Price Forecasts
US Asia Europe
600
700
800
900
1000
1100
1200
1300
2015 2017 2019 2021 2023
$/mtGlobal Propylene Price Forecasts
US Asia Europe
Download our report “A sea of challenges – The impact of IMO 2020 on petrochemicals”
14
https://www.spglobal.com/platts/en/market-insights/special-reports/petrochemicals/imo-2020-impact-petrochemicals?utm_source=internal&utm_medium=email&utm_term=plattspetchems&utm_content=specialreport&utm_campaign=seaofchallenges
• Naphtha: Key petchem feedstock outlook hinges on balance between
marine fuels and gasoline
• Olefins: Propylene production likely to be affected by IMO 2020
• Aromatics: Producers hope for wider product margins, but full impact
remains hazy
• Shipping: Chemical tankers eyeing LSFO ahead of IMO 2020, fundamentals
to improve
• Methanol: Market expects demand from shipping industry to grow after
2020
Conclusions
15
• Trade tariffs enacted in 2018 had a measurable impact on petrochemical
supply chains, mainly impacting the trade flow of US PE resins
• Forecasts show prolonged trade tensions will reduce global
petrochemical demand
• Potential upward trend with stricter shipping regulations
Q&ALara Berton
Editor, EMEA Petrochemicals
Contributors:
Hetain Minstry
Lead Analyst, Global Olefins
Yi-Jeng Huang
Senior Market Development Specialist
Eshwar Yennigalla
Senior Analyst, Asia Aromatics
