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SOUTHEAST ASIA

PETROCHEMICALS
A Rapid Evolution in Progress

CHOMMANAD
THAMMANAYAKATIP
MANAGING CONSULTANT
NEXANT
Southeast Asia
Petrochemicals

A Rapid Evolution in Progress

August 2018
The petrochemical industry in Southeast Asia is entering a new phase of further
development
Petrochemical Industry in Southeast Asia
Demand-side Characteristics
▪ Market is generally demand driven, due to absence of ample low-cost
feedstock supply
▪ Urbanisation wave and growth of consuming class offer significant
demand growth potential, also considering relatively low consumption per
capita levels

Supply-side Characteristics
▪ Each country’s petrochemical industry is generally dominated by 1-2 key
players
▪ Project implementation may involve longer timelines compared to other
locations with more developed industries
▪ Feedstock supply may depend on refinery development or imports
New Phase of Further Development
▪ Largest single construction project in Malaysia
▪ Vietnam’s first steam cracker complex and Brunei’s first aromatics facility
APIC 2018 August 2018 3
Southeast Asia has continued to enjoy significant economic and social progress in
recent years
Strong GDP Growth Developments in Manufacturing

Real GDP Growth 6% 8%

Manufacturing Value
Added Growth
6%
4%
4%
2%
2%
0% 0%
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017
Source: IMF
ASEAN World Source: World Bank
ASEAN World

Continued Urbanisation Increased Consumer Wealth


3% 6%
Growth in ASEAN

Real Income per


Capita Growth
2% 4%

1% 2%

0% 0%
2013 2014 2015 2016 2017 2012 2013 2014 2015 2016
Source: World Bank
Urban Population Total Population Source: World Bank
ASEAN World

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This continues to support petrochemical and polymer demand growth in Southeast
Asia
SE Asia Polymer Demand & GDP Growth Asia Polymer Demand Growth
8% 10%

Demand CAGR in 2017-2027


Bubble size indicates
8% India demand volume in 2017
6%
6%
Growth

4%
4% China
Polymer demand includes HDPE, SE Asia
2% LLDPE, LDPE, PP, PET, PVC, PS, EPS, Japan,
2%
ABS, SBR, BR and PC Korea &
0% 0% Taiwan
2011 2012 2013 2014 2015 2016 2017 0 50 100 150
SE Asia Polymer Demand SE Asia GDP Consumption per Capita in 2017 (kg)

????? SE Asia Economy ????? SE Asia Polymer Market


 As a whole, currently third-largest economy in Asia  As a whole, currently similar market size as India
 Expanding labour force and shift from agriculture  Key end-use sectors include manufacturing,
to manufacturing construction, transportation and agriculture
APIC 2018 August 2018 5
Emerging markets offer strong potential for growth, while polyolefins and polyesters
represent the key growth drivers in polymers
SE Asia Polymer Demand Growth SE Asia Polymer Demand Growth
10% 6% PP
PVC
Higher growth potential
Vietnam
Demand CAGR in 2017-2027

Demand CAGR in 2017-2027


8% PC
4% SBR & BR
6% Philippines ABS PET PE
Indonesia
4% Malaysia PS & EPS
2% Key growth drivers

2% Singapore
Thailand
0% 0%
0 50 100 150 0 100 200 300 400 500
Consumption per Capita in 2017 (kg) Average Annual Demand Growth in 2017-2027 (kt)

Note: Polymer demand represents total demand for HDPE, LLDPE, LDPE, PP, PET, PVC, PS, EPS, ABS, SBR, BR and PC. Bubble size indicates demand volume in 2017.

High polymer demand growth rates are supported by GDP growth, urbanisation, increased consumer
wealth, growth in finished good exports, as well as substitution of traditional materials

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Polymer demand growth in Southeast Asia is expected to allow for significant
domestic market opportunities
SE Asia Polymer Market – Present Capacity & Future Demand
12

10

8
Million Tons

0
Vietnam Indonesia Malaysia Philippines Thailand Singapore
Capacity in 2017 Demand in 2027
Note: Polymer capacity and demand includes HDPE, LLDPE, LDPE, PP, PET melt phase, PVC, PS, EPS, ABS, SBR, BR and PC.

In some Southeast Asian countries, the additional domestic capacity requirement to meet
projected demand growth is quite significant

APIC 2018 August 2018 7


Projected polymer demand growth volumes equate to considerable volumes of olefin
requirements
SE Asia Polymer Demand Outlook, 2017-2027
Volume Growth Equivalent Olefin Consumption
CAGR
(million tons) (million tons of olefin)
HDPE 4.7% 1.8

LLDPE 5.5% 1.5


~ 4 (ethylene)
LDPE 3.2% 0.4

PVC 5.0% 1.4

PP 4.8% 3.1 ~ 3 (propylene)

0 2 4 6 8 10
Note: Equivalent olefin consumption volumes are shown
Million tons for illustrative purposes only. Actual polymer demand
2017 2027 growth may also be met by additional polymer imports.

Over the next decade, ethylene requirements from PE and PVC demand growth in Southeast Asia are
expected to be equivalent to ethylene production from 3-4 worldscale steam crackers

APIC 2018 August 2018 8


The olefins and aromatics industries are still in a relatively early development stage in
several countries
Overview of Olefins and Aromatics Capacity in SE Asia, 2017

????? Singapore – Most Developed ????? Indonesia


Aromatics
Aromatics
36%
 10.1 mtpa total capacity 40%
 3.3 mtpa total capacity
 Mainly based on naphtha  Based on naphtha and
Olefins
refinery FCC
Olefins
64% * Including TPPI
60%

????? Malaysia ????? Vietnam


Aromatics Aromatics
23%  3.8 mtpa total capacity 0%  150 ktpa total capacity
 Based on naphtha and  Based on refinery FCC
NGLs
Olefins Olefins
77% 100%

????? Thailand – Most Developed ????? Philippines


Aromatics
Aromatics  11.8 mtpa total capacity 2%  Less than 1 mtpa total
34%
 Based on naphtha and capacity
NGLs  Based on naphtha and
Olefins Olefins
66% 98% refinery FCC
Note: Olefins include ethylene and propylene. Aromatics include benzene and PX.
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Major new olefins investments are taking place in Malaysia, Vietnam and Thailand
Olefins Net Capacity Additions in SE Asia Olefins Capacity in SE Asia, 2017
6 Vietnam
Major Additions Major Additions Philippines
????? ????? 4%
1%
Indonesia
5
 ExxonMobil in  PCG in Malaysia 10% Thailand
Singapore  PTTGC in Thailand 38%
Malaysia
4  JG Summit in  NSRP and LSP in 15%
Philippines Vietnam
Million Tons

3  CAPC expansion in Singapore


Indonesia 32%
2  Shell restart in
Singapore Olefins Net Capacity Additions in
SE Asia, 2017-2023
1
Indonesia
Philippines
1%
4%
0 Thailand Malaysia
15% 46%
(1)
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Ethylene Propylene Vietnam
34%
Note: Net capacity additions in forecast only reflect firm projects.

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These new olefins projects in the region are based on a range of different feedstocks
SE Asia Ethylene Feedstock Slate

????? Current Trends Development Trends in Major Firm Projects


?????
 Limited volumes of ethane cracked in Malaysia  PCG – naphtha and LPG from new refinery
and Thailand  PTTGC – naphtha and LPG from existing refinery
 Other NGLs (e.g. propane and LPG) also used  LSP – domestic ethane and imported propane and
across SE Asia naphtha
 However, naphtha consumed as major feedstock

SE Asia Propylene Capacity by Process


100%
Percent of Total Capacity

Development Trends in Major Firm Projects


?????
75%
 Firm capacity additions based on steam cracker
50% and refinery-based project
 No firm projects involving on-purpose propylene
25%
production
0%
2012 2017 2022
Refinery Steam Cracker PDH Metathesis

APIC 2018 August 2018 11


Major new aromatics investments are tied to refinery developments in Vietnam and
Brunei
Aromatics Net Capacity Additions in SE Asia Aromatics Capacity in SE Asia, 2017
5 Philippines
Major Events
????? Major Additions
????? Indonesia 0.3%
7%
 TPPI shutdown &  NSRP in Vietnam Malaysia
4 restart in Indonesia Thailand
 PCG (benzene from 10%
43%
 Shell shutdown & cracker) in Malaysia
3 restart in Singapore  Zhejiang Hengyi in
Singapore
 JAC shutdown & Brunei
Million Tons

40%
2
restart in Singapore

Aromatics Net Capacity Additions in Asia,


1 2017-2020
Others
SE Asia 2%
0 15%

(1)
2015 2016 2017 2018 2019 2020
Benzene PX China
83%
Note: Aromatics include benzene and PX.

APIC 2018 August 2018 12


Net trade volumes of derivative products in Southeast Asia will be impacted by new
capacity additions
SE Asia Net Exports in Intermediates and Polymers
2.5
Intermediates Polymers
2.0

1.5
Million Tons

1.0

0.5

0.0

(0.5)
EDC VCM MEG Styrene Phenol & PO PE PP PVC PS SBR & PET
Acetone PBR Bottle
2017 2020

The region’s net trade flows of major intermediates and polymers are not expected to change over
the next few years, with the exception of PP

APIC 2018 August 2018 13


Intra-regional trade will continue to be important, facilitated by market proximity and
the ASEAN Free Trade Area
SE Asia Net Exports in Intermediates SE Asia Net Exports in Polymers
3 8

2
4
Million Tons

Million Tons
1
0
0
(4)
(1)

(2) (8)
2014 2017 2020 2014 2017 2020
Singapore Thailand Malaysia Singapore Thailand Malaysia
Indonesia Vietnam Philippines Indonesia Vietnam Philippines
Note: Intermediates include EDC, VCM, MEG, styrene, phenol/acetone and PO. Polymers include PE, PP, PVC, PS, SBR/PBR and PET bottle.

In particular, Vietnam and Indonesia are expected to continue requiring significant imports of
intermediates and polymers. Indeed, new projects are progressing in these countries.

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Summary and concluding comments
High Demand Growth Potential
▪ Polymer demand growth in Southeast Asia is expected to allow for significant domestic market
opportunities
▪ Projected polymer demand growth volumes equate to considerable volumes of olefin requirements
▪ However, demand growth trends remain highly sensitive to overall economic performance
Naphtha & Refinery Integration
▪ New petrochemical investments are still heavily based on naphtha feedstock but increasingly
integrated with refinery developments to capture synergies, enhance competitiveness and ensure
feedstock supply security
▪ However, the relative competitiveness of naphtha-based petrochemical production will also remain
impacted by crude oil pricing

Prospects for Further Development


▪ Despite the start-up of firm projects, multiple countries in Southeast Asia are expected to sustain net
deficits in intermediates and polymers
▪ Further projects (e.g. in Indonesia) are continuing to progress and are expected join the current phase
of industry development in Southeast Asia

APIC 2018 August 2018 15


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