Raw materials in the chemical industry

regional trends in a globalized industry

Asia Petrochemical Industry Conference 2015, Seoul

150 years

Kurt Bock
BASF
May 8, 2015

Agenda
1 | Globalized world:
Development of the chemical industry
2 | Regional raw material trends

3 | BASFs approach
150 years

05.07.2010

INTERN

Global challenges are shaping

the chemical industry

150 years

>9 billion

30%

people will live

on this planet
by 2050

more food
will be
needed by
2050

50%

70%

more primary
energy will be
needed in 2050

of the world
population
will live in
cities by 2050
3

Chemistry is a key enabler to provide

solutions for todays and future needs

Water & nutrition

Health care

Energy & resources

Mobility & transportation

Construction & housing

Consumer goods

150 years

Highlighting the contribution of chemistry to mobility

chemistry in todays cars

fibers and
textiles
foams

leather and
textile chemicals

steel,
metals

metal
treatment
chemicals

glass
standard and
engineering
plastics

leather

coatings

polyurethanes

chemicals
for adhesives
and coatings

elastomers
rubbers
silica

battery materials
brake fluid
150 years

lubricants
and oils

carbon
black

plastizicers /
plastic additives
engine
coolants

fuel
additives

catalysts

adhesives,
sealants

ceramics
5

Global chemicals growth is above GDP growth,

driven by emerging economies
Real chemicals* production versus GDP growth, 2000-2014
Percent (CAGR)

7.4

Emerging Economies

Advanced Economies

World

Chemicals*

GDP

5.3

0.6
1.5

3.5

2.7

150 years

* Excluding pharma
Source: IHS Economics, Feri, BASF

Emerging economies will account for 60 percent

of chemical production in 2020
Real chemicals* production, 2000-2020

CAGR 2014-2020:

USD billions (2010 prices and exchange rates)

2.1 %
3.0%

60%
6.8%

27%

40%

73%
2000

* Excluding pharma
** Asia Pacific excl. Japan, South Korea, ANZ
Source: IHS Economics, Feri, BASF

2010

2014

1.4%
2.9%

150 years

4.2 %

5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0

Middle East, Africa

Eastern Europe
South America, incl. Mexico
Emerging Asia**
Japan, South Korea, ANZ
USA, Canada

1.2%

Western Europe

2020

Trade in chemicals has strongly gained

in importance over the last 15 years
Real global production and trade in chemicals*, 2000-2013
Index, 2000 = 100

220
200

Trade

180

160

Production

140
120

100
150 years

0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

* Excluding pharma
Source: IHS Economics, Feri, BASF

Trade in chemicals is strongest between

North America, Europe and Asia
Inter-regional trade
flows in chemicals*, 2013
% of global chemical production

Share in global production:

>2.0%
1.0-2.0%
0.5-1.0%
<0.5%

Eastern
Europe
Western
Europe

North
America

Middle
East

Asia

Africa

150 years

South
America

* Excluding pharma
Source: UNCTAD, BASF

Oceania

Increasing importance of intellectual property

in emerging markets
Number of priority chemical patent applications

2000

2011

160000
160,000

140000
140,000
120000
120,000
100000
100,000
80000
80,000
60000
60,000

40000
40,000
150 years

20000
20,000
00
China
Source: Derwent World Patents Index

Japan

Germany

France

Great Britain South Korea

USA
10

Increasing investment into R&D: China already on EU level,

but still well below South Korea
Gross Domestic Expenditure on R&D, 2003-2013
% of GDP
5

2003

2013

4.2
4

3.5
2.9

2.4

2.0
2

1.7

2.5

2.6

2.8

3.1

1.9

1.1
1
150 years

China

EU 28

* Data for 2012 instead of 2013

Source: OECD Main Science and Technology Indicators

South Korea

Germany

USA*

Japan

11

How will the contribution of chemistry

based solutions look like in the future?

Complexity

From molecules to multi-material systems

Multi-material
systems
Advanced
materials
Performance
products
Chemicals,
base polymers

150 years

Value generation
12

Having a look at the automotive industry again

Lightweight composites will help to reduce weight
Legislation on reduction of CO2 emissions
Germany (parallel in EU, J, KR, USA, CN)
CO2/km

143g
120g
95g

2010

2015

2021

75g*

*under
discussion

2025

2030

Composite Market Potential

150 years

Body
today

Hang-on
parts

Structural
parts

Whole
modules

Complete new
vehicle concepts

13

Conclusions
trends in globalized chemical industry

Global common denominator

chemistry key enabler to provide solution for todays and future needs
Increasing importance of R&D in all regions
Global chemical production growing above GDP, driven by emerging
markets
Strong entanglement between regions via increasing trade
150 years

14

Agenda
1 | Globalized world:
Development of the chemical industry
2 | Regional raw material trends

3 | BASFs approach
150 years

05.07.2010

INTERN

15

Raw material change is a historic reality,

but the future will see a regional diversification
Epoch

Pre industrial

Coal

Oil

Regional
Diversity in
Feedstock

Oil
Coal

150 years

Gas

Renewables
1800

1850

1900

1950

2000

2050
16

Raw material landscape is changing,

Europe in a sandwich position
North America
New capacities based on shale gas
Export of NGLs*/ LPG** and base-products

China
Strong domestic demand will drive capacity additions
Abundant coal reserves support coal-to-chemicals
investments

Europe
Ongoing restructuring of olefins/ polyolefins industry
Focus on innovative chemistry

Middle East
Diminishing feedstock advantage due to shale gas
(USA) and coal (China)
Export hub for raw materials and base-products

150 years

South America
Focus on renewable resources
Will remain net importer of chemicals from the U.S.
* Natural Gas Liquids
** Liquefied Petroleum Gas

17

USA: The shale gas boom increased

competitiveness in ethylene production
Change in the Global Cost Curve for Ethylene 2005 versus 2012
Production Costs ($/pound)
$1.20
Other Northeast Asia

$1.00
China
Western Europe

$0.80

$0.60

China

Western
Europe
Other
Northeast
Asia

$0.40

United
States

2005

Middle East

150 years

$0.20

Middle
East

2012
United
States

$0.00
0

73

Source: American Chemical Society

136

172

247

307

Global Supply (Cumulative in billions of pounds)

18

China: First wave of coal-based capacities

focusing on ammonia and methanol
Current projects in China (# of projects)
Xinjiang
(19)
Ningxia
(7)

Inner Mongolia
(42)

Shandong
(5)
Jiangsu
(5)
Anhui
(2)

Shaanxi
(11)

150 years

Gansu
(2)

Henan
(11)

Planned (until 2017)

Under construction
Running

Million tons
per year

80

Shanxi
(7)

Qinghai
(4)

Coal-based capacities in China

74

60
40

39

24

32

20
0

6
Ammonia Methanol

PVC

C2, C3
Olefins

MEG

Coal demand for running chemical projects in China exceeds total German coal demand
Shenhua Ningmei project (province Ningxia) at final stage of extension
10% of total German CO2 emissions
19

 but product portfolio is broadening

Old
Coal Chemicals

Calcium
Carbide

Acetylene

PVC

Coking

Coal Tar

Benzene

Ammonia

Coal

150 years

New
Coal Chemicals

Methanol

Crude
Methanol
Syngas

MTO/MTP

Ethylene
Propylene

Acetyl

Ethanol

Oxalate Ester

MEG
20

Renewables on the rise

Strongly driven by national politics,
contributing to regional diversification of the raw material mix
Demand by region

Shares of energy sources

(in billion tons)

(in billion toe)

18

18

16

16

14

14

12

12

10

10
Other
Non-OECD

China

2
150 years

0
1990
1990

2
India
2000

2010

2010

Non-OECD
OECD
International Energy Agency: World Energy Outlook 2009

2020

2030

2030

2035

0
1990
1990

2000

Fossil Fuels
Renewables

2010
2010

2020

2030
2030

Nuclear energy
Biomass
21

Renewable feedstock in the chemical industry

Within the EU, renewables account for 9% of total feedstock
Shares in total organic raw materials (feedstock use only), 2011
Percent
Renewables
Coal 1%

Natural gas 21%

9%

68% Mineral oil

150 years

Source: CEFIC

22

Keep an eye on regulatory developments

Development of emission trading systems world-wide

Canada
- Manitoba

Russia
Ukraine

Washington

Canada
- Ontario

EU
Japan
Turkey

Mexico
Thailand
Vietnam

Brazil
Chile
150 years
In force
Scheduled
Considered
23

Conclusions

Increased diversity in the raw material base in future despite a

temporarily lower oil price
Most chemical value chains are affected
Process strategies need to adapt to regional raw material mix
150 years

Process and product innovation key

24

Agenda
1 | Globalized world:
Development of the chemical industry
2 | Regional raw material trends

3 | BASFs approach
150 years

05.07.2010

INTERN

25

BASFs approach
Investing close to the markets

Antwerp
Ludwigshafen
Florham Park
Geismar

Nanjing
Hong Kong

Freeport
Kuantan
Singapore
150 years

Regional centers
Selected sites

So Paulo

Verbund sites

Selected research
and development sites
26

Major investment project start-ups in 2015

Major capex projects for start-up in 2015

Nanjing

Ludwigshafen

Neopentylglycol
+40,000 mt
Specialty amines*
Ethylene oxide*

TDI complex
+300,000 mt
Specialty amines*
Crop protection products*

Theodore
Trilon M*

Shanghai

Geismar
Formic acid
+50,000 mt
Polyurethane systems

Cinderford

Chongqing

Precious metals
recycling*

MDI
+400,000 mt

Automotive coatings*
Polyamides
+100,000 mt

Yesan

Camaari
Acrylic acid
+160,000 mt
SAP
+60,000 mt

150 years

Upstream businesses

Chennai

Specialty plastics*

Automotive
catalysts*

Guaratingueta

Pasir Gudang

Crop protection
formulations*

Polymer dispersions*

Maoming
Isononanol*

Downstream businesses
* Capacity not published

27

Portfolio of technologies needed to adapt

to regional feedstock mix

Natural Gas

Oil

Chemical
Intermediates

150 years

Renewables

Coal

28

Natural gas
Exploiting the shale gas potential in North America Methane to Methanol
to Propylene (MMTP) project
Cost leading gas-to-propylene
technology covers supply gap

Propylene supply North America

Methane

U.S. Gulf Coast (Freeport, TX)

(from shale gas)

(NGLs, Naphtha)

150 years

Port Arthur cracker and new onpurpose propylene complex to

cover entire captive propylene
demand

Propylene

Propylene

Acrylic acid

World-scale plant

Flexible feed

Methanol

(Port Arthur cracker)

Oxo-alcohols

Polyols

Lower cost than alternative PDH

technology

Downstream
products

29

Renewable feedstock
Biorefineries giving access to known and new chemicals
1st generation
Rape seed
Corn
Sugar cane

Plant oil processor

Vegetable oils

Food,

Corn mill

Glucose

Fuels,

Sugar mill

Saccharose

Chemicals

2nd generation (ex non-edible biomass)

Glucose

Wood
150 years

Switchgrass

Lignocellulosic Biorefinery

Xylose

Fuels,

Chemicals
Straw

Lignin
30

Operational excellence
Running existing plants highly efficiently example: the energy Verbund
Power plant

Steam consumption
in Ludwigshafen

Steam
export
Steam consumption
Sulfuric acid
plant

Administration
Urea
plant

150 years

Adipic acid
plant

Acrylic acid
plant
31

Continue to invest in chemistry-based innovations

Growth and technology fields
Key customer industries

Growth fields

Technology fields

Batteries for Mobility

Enzymes
Transportation

Agriculture

E-Power Management

Materials, Systems
& Nanotechnology

Functional Crop Care

Heat Management for Construction
Construction

Energy & Resources

Lightweight Composites

Raw Material Change

Organic Electronics
Consumer Goods

Electronics

Plant Biotechnology
Water Solutions

150 years

White
Biotechnology

Wind Energy
Health & Nutrition

...
32

BASFs approach in a nutshell

Investment close to the markets
Adaption to regional raw material mix via portfolio of technologies, e.g.
MMTP
2nd generation biorefineries
Increased flexibility to process different feedstock materials

Strengthening value chains (e.g. backward integration)

Operational excellence as basis to stay competitive
150 years

Globalizing R&D platform to exploit regional innovation potential

Continued investment in chemistry-based innovations
33

150 years

150 years

China has become the biggest chemicals producer

within the last 15 years
Real chemicals* production
USD billions (2010 prices and exchange rates)

2014

2000

659

614

EU 28

549

506

United States
Japan

225

China

205
183

Germany

205

1,181
194

150 years

South Korea

* Excluding pharma
Source: IHS Economics, Feri, BASF

86

148

35

Global chemicals growth is above GDP growth,

driven by China
Real chemicals* production versus GDP growth, 2000-2014
Percent (CAGR)

13.3

China

9.1

United States

0.6

EU 28

0.5
1.2

Germany

0.4
1.0

Japan

GDP

4.0
4.0

South Korea

150 years

Chemicals*

1.8

-0.7

World
* Excluding pharma
Source: IHS Economics, Feri, BASF

0.8

3.5
2.7
36

Overview on raw material costs

Heating value as a proxy, disadvantage for renewables
5-year-average 2009-2013 (/GJ)

Coal

Natural gas

Naphtha

Sugar

25
20
15
10

5
150 years

0
USA

Europe

Western
China

Brazil

*Source: BASF
37

Renewable feedstock
2nd generation biorefineries not in competition to food
Example: BASF Venture Capital
Renmatix Biorefinery RENMATIX Plantrose
Technology scope

Woody Biomass
Hydrolysis

US-based biotech start up

C6 - Glucose C5 - Xylose

Lignin

150 years

Hydrolysis of woody biomass

with super critical water
Separation of sugar streams and lignin

C5 / C6 sugar & aromatic structures

based value chains
38