China Poly Olo e Fins June 2013

7/27/2019 China Poly Olo e Fins June 2013

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China Polyolefins Market Outlook

John Richardson

Director ICIS training Asia and ICB Asia correspondent

1


2/27

About ICIS


3/27

www.icis.com

ICIS Is Part of Worlds Largest Information Provider

Apri l 2013 3

www.icis.com

www.rbi.co.uk

www.reedelsevier.com


4/27

www.icis.com

Consulting

Prices, News, Analysis, Consulting

Prices

NewsAnalysis

Test

4


5/27

About our speaker


6/27

www.icis.com

John Richardson

Director ICIS training Asia and ICB Asia correspondent

Apri l 2013 6


7/27

Presentation structure

A brief look at history

Why weak demandhas surprised peoplein 2013

The prospects for therest of this year

The long-term impactof economic reforms


8/27

Polyethylene history

PE demand growth hasbeen below the growth inoverall GDP for most ofthe years between 2006and 2012

In 2006-2007, a dip inconsumption of virginresins showed how pricesensitive the market is

0%

5%

10%

15%

20%

25%

30%

2006 2007 2008 2009 2010 2011 2012

China PE Versus GDPGrowth

PE growth GDP growth

ICIS Consulting, World Bank & NBS


9/27

Polyethylene history

2009 boom wasbecause of economicstimulus

Tighter monetaryconditions from April

2011 bad news for theSMEs

Growth also hurt bylingering inventoryproblems

0%

5%

10%

15%

20%

25%

30%

2006 2007 2008 2009 2010 2011 2012

China PE Versus GDPGrowth

PE growth GDP growth

ICIS Consulting, World Bank & NBS


10/27

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2006 2007 2008 2009 2010 2011 2012

PE/GDP ratio

PE/GDP ratio

ICIS Consulting


11/27

And then from November, a ray of light!


12/27

China had avoided a hardlanding

The new leaders wouldadopt pro-growthpolicies

PMIs and other dataindicated a strongeconomic rebound

Accepted wisdom was suddenly that


13/27

This confidence carried over into January-early February on...

More strength in the PMIs,although signs of exportweakness were alreadyshowing

Strong export, retail sales data

for December Avoidance of the fiscal cliff

Extra liquidity in China andsustained confidence in politics


14/27

2012 GDP growth more like5.5%, according toStandard Chartered

Accuracy of Decemberexport number also indoubt (and all the data this

year) Passenger car sales

included inventories inshowrooms

No substantive andindependent investigation

of any data Dr John Lee

But data was being questioned


15/27

And where recovery did occur,was it the wrong kind of recovery?

Politically motivated surge inbank lending in May-October

Also, $1.1 trillion allocated toinfrastructure investments

This has made economic

rebalancing a lot harder Domestic inflationary impact

of the extra credit, spendingoccurred as global commodityprices rose


16/27

And so China has started to tighten

Total credit in the systemwas the highest ever lastyear because of officiallending and shadowbanking

It grew by 58% in Q1 And so credit is being

withdrawn e.g. officialloans down 16% inJanuary-May; newmeasures to tackle shadow

banking

What does this mean forthe SMEs?


17/27

More evidence of weak real growth

Li Keqiang: GDP numbers are man-made


18/27

Margins squeezed byhigher fuel and resinprices

Now they could face lesscredit

The commodityconverters also affectedby rising labour costs

Labour shortages grewworse post-CNY

B u t t h e d i f f e r e n ce t h i s

t i m e a r o u n d i s t h a t

d e f l a t i o n , r a t h e r t h a n

i n f l a t i o n , c o u l d b e t h e

p r o b l e m

The SMEs back to the future?

Shan Dalin, pictured with his family, is a craneoperator from Southwest China's Guizhou provincewho has worked in eastern Zhejiang province for10 years. In 2012, Shan's monthly income rose to2,800 yuan ($449) from lower than 2,000 yuan in2008. [Photo/Xinhua]


19/27

Zero or flat PE growth in 2013*

Converters now think that

the government is seriousabout reform

In the short term a littlebit more corruption wouldbe good!

Very low processorinventories, however,which might lead to a rally,according to some people

*Producers and traders

ICIS pricing. Upuntil 7 June


20/27

Wild card of the ExxonMobil plants in Singapore 2 x650,000 tonnes/year of metallocene LLDPE now said tobe operating, but at what rates? Also, new 450,000tonnes/year PP plant in the same complex

And there are new capacities

Source: ICIS pricing



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Polypropylene Capacity Expansion 2H2012-2013

Unit: 10kt/yr Region Province Producers 1H 2012capacity

Capacity under Start-upFeedstock

construction

Northeast Heilongjiang Daqing Refining & Chemicals 30 30

9.2012

Oil refining

Northeast Liaoning Fushun Petrochemical 9 30 9.2012 cracking

CentralChina Henan Sinopec J ingmen Co 8 14 1.2013 Oil refining

East China J iangsu Xuzhou Haitian Petrochemical Co 0 20 1.2013 Import

East China Zhejiang Ningbo Skyford 0 40 2.2013 MTO

South china Fujian Sinochem Quanzhou Petrochemical 0 20 2013 cracking

South china Guangdong Guangzhou Petrochemical 19 20 2013 cracking/imports

Northwest China Nixia Ningxia Petrochemical 10 0 2.2012 MTO

North China Neimenggu Datang International 50 0 2.2012 MTO

North China Neimenggu Hohhot Petrochemical 0 15 9.2012 Oil refining

CentralChina Hubei Wuhan Petrochemical 0 40 7.2013 cracking

Southwest China Chengdu Sichuan Petrochemical 0 45 6.2013 cracking

South china Guangxi Guangxi Beihai Petrochemical 20 0 4.2012 Oil refining

South china Guangdong Maoming Petrochemical 47 20 2.2013 Oil refining

Total 294


22/27

Middle East turnaround season also over

Company Location Grade Capacity(tonnes/year)

Shutdown schedule in

2013Arabian Petrochemical Co

(Petrokemya) Al Jubail, Saudi Arabia LLDPE 400,000 Mar (details to beconfirmed)HDPE 400,000PetroRabigh Rabigh, Saudi Arabia LLDPE 600,000 Three weeks in JanSaudi Polymers Al Jubail, Saudi Arabia HDPE 2 x 550,000 10 Nov 2012 to Jan 2013

PP 400,000Oman Oil Refineries and

Petroleum Industries Co

(Orpic) Sohar, Oman PP 340,000 45 days in FebPetrochemical Co(IbnZahr) Al Jubail, Saudi Arabia PP 500,000 a month in Feb or Mar

Borouge Ruwais, Abu DhabiLLDPE 2 x 300,000

About a month for eachline from end Nov 2012to Feb 2013 consecutively

HDPE 540,000PP 2x 400,000

SaudiEthyleneandPolyethylene Co (SEPC) Al Jubail, LDPE 400,000 Apr (to be confirmed)Saudi Arabia HDPE 400,000Saudi PolyolefinsCo Al Jubail, Saudi Arabia PP 720,000 Apr (to be confirmed)


23/27

Sentiment likely toremain subdued as theeconomic adjustmentprocess accelerates(more details in October)

The peak production

season in Asiatraditionally sees greateroutput from the SouthKoreans. How will theyrespond? Or will we seerate cuts?

Get used to it!

The rest of the year looks difficult

-100

100

300

500

700

900

1,100

1,300

1,500

Margin,

$/tonne

Regional HDPE Variable MarginsSoutheast Asia integrated HDPE variable margin (naphtha)

Northeast Asia integrated HDPE variable margin (naphtha)

Northwest Europe integrated HDPE variable margin (naphtha)

US integrated HDPE variable margin (ethane)

ICIS pricing HDPE variable cost margins, up until end-May 2013


24/27

But The Opportunities Are Still Huge

Western China still very

under-developed. Fly-in-fly-out workers andmoving rural communitiesto cities?

Li Keqiang has promised toreform the H u k o u system,

but no details yet

But, again, how can thisgrowth be achievedsustainably?

And so a big opportunity

for the chemicals industry


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The 12th Five-Year-Plan

Seven priorities1. New Energy

2. Energy conservation &environmental protection

3. Biotechnology

4. New materials5. New IT

6. High-end equipmentmanufacturing

7. Clean Energy vehicles

Some of the chemicals sectorsaffected

1. Performance materials

2. Water treatment chemicals,process improvements

3. Bio-feedstocks, catalysts4. Performance materials

5. Performance resins &polymers


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Questions?


27/27

Thank you!

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China Poly Olo e Fins June 2013