Overcapacity in the Xylenes Chain

Steve Jenkins
PCI Xylenes & Polyesters Asia Sdn Bhd

INDIAN POLYESTER 2014

AUGUST 2014, MUMBAI

Polyester Chain Vital Statistics

Since 2000, 669 million tonnes of polyester have been produced
Polyester consumption growth averaged 6.3% globally, 9.3% in India
and 14.7% in China from 2000-2014
In 2000, China accounted for 18.3% of global polyester production and
6.4% of consumption. India had 5.7% of global production.
In 2020, China is forecast to account for 53.9% of global polyester
production and 32.3% of consumption. India is forecast to produce 11%
of global polyester by this time.

Estimated investment in the PX-PTA-Polyester chain since 2000 is

$77.4 bn, over $5bn per year on average.

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World Polyester Production Growth by Region

7,000
6,000

000 Tonnes

5,000
4,000
3,000

2,000
1,000
0
-1,000
-2,000
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Staple

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Filament

PET

Film

Others

PTA Production Growth by Region

6,000
5,000

000 Tonnes

4,000
3,000
2,000

1,000
0
-1,000
-2,000
-3,000
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

North America

South America

Europe

Middle East/Africa

China

Indian Subcontinent

North East Asia

South East Asia

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Paraxylene Production Growth by Region

4,000

000 Tonnes

3,000
2,000
1,000
0
-1,000
-2,000
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
North America

South America

Europe

Middle East/Africa

China

Indian Subcontinent

North East Asia

South East Asia

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Polyester Capacity Growth by Region

10,000

000 Tonnes

8,000
6,000
4,000
2,000
0
-2,000
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
North America

South America

Europe

Middle East/Africa

China

Indian Subcontinent

North East Asia

South East Asia

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PTA Capacity Growth by Region

12,000
10,000

000 Tonnes

8,000

6,000
4,000
2,000
0
-2,000
-4,000
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

North America

South America

Europe

Middle East/Africa

China

Indian Subcontinent

North East Asia

South East Asia

INDIAN POLYESTER 2014

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Paraxylene Capacity Growth by Region

7,000
6,000

000 Tonnes

5,000

4,000
3,000
2,000
1,000
0
-1,000
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

North America

South America

Europe

Middle East/Africa

China

Indian Subcontinent

North East Asia

South East Asia

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Polyester/PTA/PX Capacity Growth 2010-2020

000 Tonnes Polyester

10,000

North America

South America

Europe

Middle East/Africa

China

Indian Subcontinent

North East Asia

South East Asia

8,000
6,000
4,000
2,000
0

12,000
10,000
8,000
6,000
4,000
2,000
0
-2,000
-4,000

000 Tonnes PX

000 Tonnes PTA

-2,000

7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
-1,000

2010

2012

2014

2016

2018

2020

2010

2012

2014

2016

2018

2020

2010

2012

2014

2016

2018

2020

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Global Polyester Industry Utilisation

95%

Nameplate Utilisation

90%

85%

80%

75%

70%

PX

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PTA

Polyester Polymer

Value Chain for Polyester & Intermediates

2,000

2,000
USD/Tonne

2,500

1,500

1,000

150 den Polyester Filament Fibre

1,500
1,000
500

500

2000
Crude Oil

2003
Naphtha

2006
PX

2009
PTA

2000

2012

Crude Oil

PSF 1.5 den

2003
Naphtha

PET Packaging Resin

2,500
2,000
USD/Tonne

USD/Tonne

1.5 den Polyester Staple Fibre

2,500

1,500
1,000
500
(500)

2000
Crude Oil

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2003
Naphtha

2006
PX

2009
PTA

2012
PET

2006
PX

2009
PTA

2012

POY 150 den

Polyester Fibre & Packaging Spreads

1.5 den Polyester Staple Fibre

500
USD/Tonne

400
300

200

400
300
200
100

100

2000

2003

2006

2009

2000

2012

PET Packaging Resin

400
300
200
100
(100)

2000

2003

2006

(200)

PET

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AUGUST 2014 , MUMBAI

2003

2006
POY 150 den

PSF 1.5 den

USD/Tonne

USD/Tonne

150 den Polyester Filament Fibre

600

500

2009

2012

2009

2012

Naphtha, Paraxylene & PTA Spreads

Paraxylene Naphtha Spread
700
600
USD/Tonne

USD/Tonne

Naphtha-Crude Spread
160
140
120
100
80
60
40
20
-

500
400
300
200

100
2000

2003

2006

2009

2012

2000

Naphtha

PTA-Paraxylene Spread

USD/Tonne

500
400
300
200
100
2003

2006
PTA

INDIAN POLYESTER 2014

AUGUST 2014 , MUMBAI

2006
PX

600

2000

2003

2009

2012

2009

2012

India Polyester Market Outlook

12,000

115%
110%

10,000

100%

8,000
KT

95%
6,000

90%
85%

4,000

80%
75%

2,000

70%
0

65%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Staple

Filament

PET Resin

Film

Polymer Capacity

Polymer Utilisation Rate

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Polymer Utilisation

105%

Outlook for Polyester

Margin cycle may have bottomed out for polyester, with prospect
of increasingly competitive PX prices and ongoing margin
squeeze for PTA giving some positive outlook.
Inventory release from Chinas cotton stockpile may negatively
impact PSF.
Investment in new assets continues, although at reduced rate.
Scale investment continues to drive the business cycle.
Many polyester assets sit idle in China, Korea, and Taiwan but
industry wide capacity rationalisation is not progressing. Idled
plants are likely to be scrapped as M&A options are limited.
Options for cost reduction through investment focused on scale
of build, with less room to drive conversion efficiencies. Small
old plants scrapped in favour of building large, new assets.
INDIAN POLYESTER 2014
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India PTA Market Outlook

12,000

100%
PTA investments (RIL, JBF) wellbalanced with current demand
outlook. Self-sufficiency in PTA
2015-2019

8,000

95%
90%

KT

6,000
85%
4,000
80%

2,000
0

75%

-2,000

70%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Production

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Consumption

Capacity

Net Trade

Utilisation Rate

Utilisation Rate

10,000

Outlook for Polyester & Intermediates

Asia margins may stabilise if Chinas cartel are successful in holding
lower production levels, but gross oversupply persists in N Asia
Rate of investment is slowing, but capacity will continue to be added into
2015, driving down overall industry utilization
Plant closures have been carried out and more are planned, but are too
small and too few to have any meaningful impact on utilisation and
margin in the next 12-18 months
Asset renewal is one of the few options for survival, but this can lead to
further unwanted capacity, keeping margins persistently low and
extending to current downcycle for several more years to come.,

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PTA Breakeven Cash Cost Curve

1250

Demand estimate 57.5 million tonnes annualised rate

USD Per Tonne

1200
1150

$120/te gap between

leader and laggard

1100
1050
1000

Based on PX@$1400/tonne

Cumulative Capacity

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71406

70071

68121

66836

64746

63246

61651

59681

57731

56081

53281

50431

47281

44681

42891

35855

32505

29055

26870

24280

21505

19195

9345

6605

3935

700

950

India PX Market Outlook

8,000

105%

PX investments (RIL, OMPL) push India

slightly long on PX 2015-2020. PX costs
likely to remain highly competitive for
downstream.

7,000

100%

6,000

KT

5,000

90%

4,000
85%

3,000

80%

2,000

1,000

75%

70%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Production

INDIAN POLYESTER 2014

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Total Consumption

Capacity

Net Trade

Utilisation Rate

Utilisation Rate

95%

Outlook for Paraxylene

Margins set to fall as competition between integrated refiners and
condensate-based operations intensifies.
Role of gasoline and middle distillate fuel spreads may play larger
role in determining PX production levels the next 2-3 years than
previously seen
Investments in PX will peak by 2017/2018 based on current project
assessments
Restructuring has already taken place, with non-integrated assets
closed or under severe financial pressure
Technology allows more PX to be made from limited supplies of
feedstock naphtha, integrates refinery-based assets further and
allowing for more energy efficient operations, driving down
production costs/improving PX margins
INDIAN POLYESTER 2014
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PX Breakeven Cash Cost Curve

$300/te gap between

leaders and laggards

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Any Questions ?

Thank You For Your Kind Attention

INDIAN POLYESTER 2014
AUGUST 2014 , MUMBAI