1. Asian Olefins 2013: Changing Landscapes
CHUA Sok Peng,
Managing Editor, Asian Petrochemicals | February, 2013

2. Agenda
Ethylene 2013: Rebound on naphtha, European
demand
Derivatives: PE demand weak, MEG faces challenge
as MTO-based MEG starts up
Propylene 2013: Prices rising but derivatives hurt
Derivatives: PP still in the red, ACN struggling
Butadiene 2013: A seemingly good year
Derivatives: New synthetic rubber drives C4 demand
2

3. Ethylene prices rebound from on tight supply
3

4. Ethylene CFR SEA spread still negative
4

5. Ethythylene CFR NEA margin positive
5

6. European demand pushes
Asian Ethylene to 4 ½- year- high
Asian cargoes headed towards Europe since mid-
December
European demand unsustainable as downstream PE
hurt by rising feedstock. PE producers cutting run rates
will lead to excess ethylene being put back in the
market Taiwan Formosa sells 6,000-10,000 mt of
spot ethylene via tender
MEG the only bright spark for ethylene but downstream
polyester in a lull
US ethylene weak, imports for 2012 at 3.27 million mt,
down 783,430 mt or 19% from 2011
6

7. Europe, Asia arbitrage
7

8. PE prices climbing on cost push factors
8

9. Negative margins for LLDPE, LDPE, HDPE
9

10. MEG the only bright spark for ethylene
10

11. Agenda
Ethylene 2013: Rebound on naphtha, European
demand
Derivatives: PE demand weak, MEG faces challenge
as MTO-based MEG starts up
Propylene 2013: Prices rising but derivatives hurt
Derivatives: PP still in the red, ACN struggling
Butadiene 2013: A seemingly good year
Derivatives: New synthetic rubber drives C4 demand
11

12. Propylene: Positive margin on turnarounds
12

13. Propylene up on US arbitrage, SEA shortage
13

14. PP margins negative
14

15. Acrylonitrile rising on cost-push factors
15

16. Acrylonitrile: Dwindling demand
South Korea's ACN January exports fell 32.8% month on
month and 35.2% year on year to 13,453 mt. Exports to key
destination China slid 23.7% month on month to 13,361 mt.
Downstream acrylonitrile-butadiene-styrene producers were
concerned about firm styrene monomer prices. ABS makes
up 30% of ACN derivatives.
Acrylic fiber makes up 50% of ACN derivatives. China is top
spot buyer in Asia but demand will fall as new plants start
up.
China's textile and garment exports weakening as
Europe/US demand falls. Exports rose a mere 3% year on
year in 2012 to $260 billion, the second lowest level of
growth in 20.
16

17. Chinese PP: Oversupply, low domestic price
In China: Overcapacity continues to dampen demand. Total
capacity 12.7 million mt/year, imports stabilize
Six new PP plants started up in 2012, total capacity 1.55 million
mt/year
Structural problem: PP homo/raffia grade makes up 50% of
Chinese market. Mainly produced by small-to-medium sized
companies which lead to intense competition, oversupply. Run
rates at less than 70% and losses intensify as propylene prices
rise
China domestic price more than Yuan 500/mt ($80/mt) cheaper
than imports since November 2012, resulting in lower demand for
imported PP. Market watchers expect similar price gap in 2013.
East China: PP price fell 16.5% between September 2012 and
January 2013, from Yuan 12,100/mt to Yuan 10,100/mt
17

18. Eurpean PP: Hanging on automobiles
In Europe: PP market dragged down by a slump in automotive
demand, which has fallen to its lowest level in 17 years. European
new passenger car sales dropped 8.2% in 2012 to 12.05 million
units, the lowest since 1995, latest data from European
Automobile Manufacturers' Association (ACEA) showed.
The 8.2% contraction was the steepest fall on record since 1993
when car demand slumped 16.9%, with major markets Germany,
France, Italy and Spain all reporting decreases. December saw
sales plunge 16.3% year on year to 799,407 units, continuing the
downward trend that started 15 months ago.
Converters expect their deliveries to customers in the auto
segment to weaken significantly this year as car manufacturers
scale down operations in Europe amid shrinking demand and
overcapacity.
18

19. China demand stabilizes as production rises
China PP Homo imports stabilizing (million mt)
2012
2011
2010
2009
2008
0.00 1.00 2.00 3.00 4.00 5.00
19

20. US PP homo exports falling
US PP Homo Exports (million mt)
2012
2011
2010
2009
2008
0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60
20

21. Agenda
Ethylene 2013: Rebound on naphtha, European
demand
Derivatives: PE demand weak, MEG faces challenge
as MTO-based MEG starts up
Propylene 2013: Prices rising but derivatives hurt
Derivatives: PP still in the red, ACN struggling
Butadiene 2013: A seemingly good year
Derivatives: New synthetic rubber drives C4 demand
21

22. Roller coaster ride for Butadiene
22

23. What drives Butadiene? Strong demand
Feb 22: Asian butadiene at $2,100/mt FOB Korea
Prices up 44% from 2012 low of $1,455/mt FOB Korea on
Dec 7
China imports up 47% in 2012 to 344,828 mt
Prices rally on start up of new butadiene rubber plants in
China:
2012: Lanxess JV 30l000 mt/year nitrile butadiene rubber
Keyuan Petrochemicals: 70,000 mt/year SBS
Q1: Sinopec Maoming: 100,000 mt/year BR
Zhejiang Transfar: 100,000 mt/year BR
Q2: YPC-GPRO (Nanjing): 100,000 mt/year BR
PetroChina Sichuan: 150,000 mt/year BR
23

24. What drives Butadiene? Tight supply
South Korean producers using LGP for feed as naphtha surges
Feb 1: Lotte Chemical using 10% LPG as feedstock for Daesan steam
cracker to cope with rising naphtha costs. Cracker capacity: 1 million
mt/year of ethylene, 500,000 mt/year of propylene, supplies crude C4
feedstock to a 150,000 mt/year butadiene extraction unit at the same
location. The change in feedstock will lower production of butadiene. Loss
of C4 = 600-800 mt/month
March 1: YNCC to use 10% butane for No. 1 and No. 2 naphtha-fed
steam crackers. No. 1: 860,000 mt/year of ethylene, 450,000 mt/year of
propylene; No. 2: 580,000 mt/year of ethylene, 280,000 mt/year of
propylene; No.: 3 470,000 mt/year of ethylene, 240,000 mt/year of
propylene. No butane will be used in the No. 3 cracker. The three supply
crude C4 feedstock to a 240,000 mt/year butadiene extraction unit. Loss
of C4 = 600 mt/month
March 1: Samsung Total to use 10% butane as feedstock for Daesan
cracker, which can produce 1 million mt/year of ethylene, 600,000 mt/year
of propylene and 114,000 mt/year of butadiene
Thailand’s Bangkok Synthetics to cease butadiene supply (140,000
mt/year) as BSTE will start a new 50,000 mt/yar solution-SBR plant jointly
with Japan’s JSR in 2013
,
24

25. Butane vs Naphtha
25

26. Butadiene tracks natural rubber
26

27. ABS margin hurt by rising SM
27

28. What’s ahead for Butadiene
• The Bulls:
Change to lighter feedstocks an unstoppable trend so
butadiene will surge on tight supply, strong demand.
China will continue to be biggest importer in the region as
more synthetic rubber plants start up.
• The Bears:
Current prices unrealistic especially since natural rubber is
on down trend. Prices will crash as China’s synthetic rubber
plants will be delayed.
US butadiene demand falling. 2012 total imports at 640,834
mt, down 142,000 mt or 18.2% from 2011.
28

29. China olefin imports 2010-2012
2500000
2000000
1500000
2010
2011
2012
1000000
500000
0
Ethylene Propylene Butadiene
29

30. US olefins imports
4500
4000
3500
3000
2500 2010
2011
2000 2012
1500
1000
500
0
Ethylene Propylene Butadiene
30

31. THANK YOU
CHUA Sok Peng
Managing Editor, Asian Petrochemicals
February 2013