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Polymers special update – Facts and
figures
TransGraph Consulting Pvt. Ltd.
Oct 2011
PP and PET production process and price determinants
Crude oil
Naphtha
PP
PROPYLENE XYLENE ETHYLENE
MEG PARA-XYLENE
PTA PET
Immediate Feedstock
End Product
Product Raw material Correlation
PET
PTA 0.9199
MEG 0.5174
Crude Oil 0.6765
Naphtha 0.7516
Para-Xylene 0.8274
PP
Propylene 0.9152
Crude Oil 0.8587
Naphtha 0.9055
Correlation: Jan 2007 – Oct 2011
Immediate feedstock's having high correlation as compared to parent materials Crude oil
and naphtha.
Parent material having very high correlation with downstream products emphasizes
impact of upstream energy prices on latter prices.
60
95
130
165
200
Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11
PP price trend since Jan' 2010
PP Naphtha Propylene
Peak demand season ahead for polyesters shall keep PTA and MEG prices on higher momentum
giving positive support to PET prices over medium term.
Ample supplies on back up of plant restarts in key Asian and Middle east markets coupled with dried
demand could pressurize prices propylene and PP downwards over medium term.
Volatile energy prices specifically crude oil and lingering economic concerns across US and
European front could adversely impact demand from these regions.
Prices indexed to 100, Jan 2007 taken as 100
50
100
150
200
50
85
120
155
190
Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11
PET price trend since Jan' 2010
PET Paraxylene
PTA MEG
MEG on RHS, others on LHS
Price Trends vis-à-vis feedstock's
Supply-demand balance and trends
PP INDIA (Mtpa) 2008-09 2009-10 2010-11p
Demand 1.80 2.03 2.27
Capacity 2.12 3.02 3.70
Import 0.21 0.10 0.08
Export 0.24 0.75 1.00
Capacity Utilization (%) 86.62 88.68 86.31
PET INDIA (Mtpa) 2008-09 2009-10 2010-11p
Demand 0.499 0.562 0.647
Capacity 0.959 1.023 1.069
Import 0.95 0.121 0.128
Export 0.485 0.528 0.584
Capacity Utilization (%) 92.66 94.73 103.19
PP GLOBAL (Mtpa) 2009 2010e 2011p
Capacity 54.11 58.51 62.11
Demand 47.84 50.07 54.15
Capacity Utilization (%) 93.64 90.33 90.79
PET GLOBAL (Mtpa) 2009 2010e 2011p
Capacity 18.50 19.50 19.78
Demand 14.61 15.54 16.62
Capacity Utilization (%) 78.97 79.67 84.02
Strong demand growth for PP at global and Indian front – higher capacity utilization levels – bright pricing
prospects
PET capacity utilization to witness rise in the coming year both at global and Indian front – No net
change in export potential
PP Supply Demand Analysis for H2’ 2011
Region Demand Supply
Global
Lingering concerns over economic
growth in US and European countries to
impact demand from these regions in
H2’11
Despite prevailing economic concerns,
relatively better demand from FMCG and
Automobile industry in developing regions
shall keep over all demand prospects on
a bright note in respective regions
China and India shall continue to be the
major drivers in demand at Asian front.
Ample availability specifically on
Middle East front coupled with brand new
start ups shall negate any supply
concerns.
Volatile upstream product cost
coupled with falling PP prices could
incline regional producers to reduce their
operating rates.
End of maintenance season across
key Asian markets of China and Taiwan
expected to keep supplies on surging
mode.
Indian
With festive season at its last leg,
demand for packaging films could be
seen showing signs of weakness.
Approaching kharif crop harvesting
season to keep PP demand intact at
agricultural front.
Depreciation of Indian currency to
subdue the import volumes.
No new expansion planned in H2’2011
Robust demand and depreciating
currency could lead to regional
producers ramping up the operating
rates to propel profitability.
Exports volumes could see upward
momentum.
PET Supply Demand Analysis for H2’2011
Region Demand Supply
Global
Lingering concerns over economic growth in
US and European countries to impact demand
from these regions in H2’11
Approaching winter season in West shall
adversely impact demand from CSD segments
Polyester demand to be kept intact owing to
robust growth in textile industry specifically on
Chinese front.
Additional capacities of around 1
million tons (18.5 to 19.5 million
tons) to be added during the year
Shutdown of plants in western
countries (US and Europe) to keep
excess capacity in check.
Indian
With winter peak polyester demand season
set to begin, PET prices could be kept on
buoyant note.
With festive season on verge of end, PET
films demand could be adversely impacted.
Demand for PET products from key end user
industries as aerated drinks, packaged mineral
water, beverages etc, to keep growth
momentum intact
Amid depreciation of Indian
currency, ample regional availability
shall keep brighter export prospects
intact .
No capacity expansion/addition in
any grades of the PET is planned
during the period.
Margins Movements – feedstock’s
47.86
15.93
39.01
5
15
25
35
45
55
65
75
85
28-Oct-10 17-Dec-10 5-Feb-11 27-Mar-11 16-May-11 5-Jul-11 24-Aug-11 13-Oct-11
Polymer Feedstock Margins
Naptha-Crude diff (%) Ethylene margin (%) Propylene margin (%)
Hist (Since Apr '09) avg. margins
Naphtha = 28 %Ethylene = 44 %
Sharp fall in feedstock margins and simultaneous rally in Naphthamargins signals undervalued prices for feedstock . Such a scenariofurther signals of ample feedstock supply prevailing in the marketwhich shall keep prices subdued in the near term.
However, such sharp fall in margins shall keep medium termprospects on positive tone
Margins Movements - Products
28.06
30.81
15.61
-10
0
10
20
30
40
50
60
28-Oct-10 17-Dec-10 5-Feb-11 27-Mar-11 16-May-11 5-Jul-11 24-Aug-11 13-Oct-11
Polymer Product Margins
HDPE margin (%) PP margin (%) PET margin (%)
Hist (Since Apr '09) avg. margins
HDPE = 23%PP = 26 %PET = 17 %
Rising margins at PE front signalling an optimistic outlook over medium term entails that producers could be left with cushion off reducing their prices levels.
However on PP and PET front, fall in margins owing to ample avaliability of former and weakening demand of the feedstock of latter could lead to producers cutting back the operating rates curbing supplies over medium term.
Factors affecting prices in Q3’11 - Review
Volatile crude oil and naphtha prices coupled with robust demand at Indian and Asian front
imparted positive momentum in PP and PET prices during the period.
Demand pick ahead of festive season start up at Indian front, national holiday at Chinese
front and post Ramadan demand from Middle East and some of the south east Asian
countries kept prices on firm tone during the period.
Large number of crackers planned and unplanned shutdown at Asian front squeezing
demand supply gap for feedstock’s, pushing up prices of the same too added positive
momentum in prices during the period.
Rapid rise in Chinese textile exports coupled with sharp fluctuations of Cotton prices led to
rapid incline in Xylene prices which further imparted positive momentum in PTA and MEG
prices.
At another front, sharp depreciation in Indian currency during the quarter pushing up prices
of raw materials further landed additional support to downstream products prices in the
region.
Start-up of some of the textiles mills in China, Italy and in some other European countries
pushing up demand for PET synthetic fibers kept PET prices on firm tone.
Demand pull from textiles sector coupled with delay in start-up of production units of
capacity 1.4 Mtpa pushing up prices of feedstock PTA prompted PET producers to revise up
their offer rates during the period.
Critical factors in the coming 2-3 months
Expected positive momentum in crude oil over supply concerns from north sea and naphtha
prices over escalating demand from South Korea could negate any steep downslides in
downstream product prices in the near term.
Upcoming winter season expected to push up LPG demand for heating purpose making it
less economical for crackers in the West to rely on alternative LPG feedstock shall lend
additional pressure to naphtha demand in the medium term.
While expected start-up of their respective crackers by Formosa, Mitsubishi Chemical and
Sumitomo Chemical with a combined capacity of over 2 Mtpa shall on one hand push up
naphtha demand and prices while at another hand could improve feedstock supply.
Ample supplies of feedstock across key Asian markets on back up of plant restarts coupled
with increased imports from Middle east following post holiday restarts shall negate any
supply concerns in the near term.
Restart of CNOOC 840 KTPA Xylene unit coupled with capacity addition of around 200 Ktpa
by Samsung Petrochemicals shall negate any supply concerns of PET feedstock’s at Asian
front.
Approaching winter pointing towards increase in use of PTA and MEG from polyester
segment thereby pushing up the prices of the same could narrow down PET producers
margins prompting them to revise up their offer rates in the medium term
Upcoming festive season of Christmas expected to push up buying momentum in next one-
month shall lend support to producers demand for increase in prices during the period.
Critical factors in the coming 2-3 months – contd.
While end of festive demand at Indian front post Diwali shall impart some weakness in the
near term, start-up of Kharif crop harvesting season across the country and upcoming
marriage season ahead shall keep medium term prospects on bright note.
Post harvesting season demand for woven sacks for packaging and big dooms for storage
shall lend support to demand for PP in particular.
Expectation of further depreciation in Indian Rupee in next 3-4 weeks shall keep imported
raw material prices higher which could negate nay near term sharp fall in downstream
products prices at Indian front.
At economic front, concerns over the economic revival across the globe shall keep over all
demand sentiments weak which could prompt producers to negate possibility of any sharp
rise in products prices in the medium term.
Concisely: PP prices are expected see further downside revision of around INR 1.5/2 per kg while PET prices shall revise down by INR 2.5 per kg in next 3-4 weeks before resuming its positive trend.
Plant Update – (Aug – Nov)
Company Location Product Shutdown
Date Capacity Days
Net effect
(‘000 tons)
Chandra Asri Indonesia Propylene H1 Oct 306 45 54.64
CPC Taiwan Propylene 15th Aug 250 45 44.64
Shell Chemicals Singapore Propylene 10th Aug 450 45 80.36
Yishen Petrochemical China PTA 13th Aug 3300 Unknown
Petrochemical Industries
Company (PIC) Kuwait PX H1 Oct 830 25 82.34
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