petrochemical outlook for latin america june 2014 - polymers & aromatics
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Surf’s up: Riding the petrochemical revival wave in North America by Bernardo Fallas, Managing Editor, Americas Petrochemicals – Platts June 5, 2014TRANSCRIPT
© 2013 Platts, McGraw Hill Financial. All rights reserved.
Surf’s up: Riding the petrochemical revival wave in North America Bernardo Fallas, Managing Editor, Americas Petrochemicals – Platts
June 5, 2014
On the agenda…
2
• The ethylene boom – US projects at a glance
• Cheap feedstock and its effect on olefins pricing
• Cashing in through exports of polymer resin
• The propylene dilemma – is propane the savior?
• Other products being squeezed – butadiene, benzene
• Short-term implications for Mexico
The resurgence of US petchems
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• The North American petrochemical industry is bullish about the future thanks to the shale gas boom
• Olefins, in particular, are undergoing a renaissance – and dreaming big – less than 7 years after being left for dead
Ethylene – In the US alone, more than 11.5 million mt/year in announced greenfield expansions
– Up to 2.45 million mt/year in brownfield
Propylene – Up to 4.1 million mt/year (greenfield)
Butadiene – TPC Group to expand on-purpose production
• Methanol production in North America is staging an impressive comeback after years of exile
Shale gas & petchems– the link
4
Source: BENTEK/Platts
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Olefins are key building blocks
Steam cracker NGLs
Naphtha
Gas Oil
HDPE
LDPE
LLDPE
PP
PVC
PET
PS
MEG
ABS
SBR
Ethylene
Propylene
Butadiene
Benzene
Methane
Hydrogen
Heavy Oil
FCC, PDH, CTO/MTO, metathesis
BDH
CTO/MTO, others
Source: BENTEK/Platts
NGL growth driven by crude/gas ratio
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• The delta between feedstocks is dictating ethane profitability
• Crude-to-gas ratio has more than doubled since 2008
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Ethane vs. Naphtha price
Naphtha Index Purity Ethane Mt Belvieu
$/m
t
Cen
ts/g
al
Ethane yielding record margins
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-$1,000
-$500
$0
$500
$1,000
$1,500
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US cracker margins
Ethane Cracker Margin Ethane/Propane Mix Cracker Margin Naphtha Cracker Margin Propane Cracker Margin
Since early 2011, margins for US ethane and E/P Mix have climbed from $500/mt to $1,000/mt; naphtha margins fluctuate
$/m
t
Source: Platts
Shift to lighter feeds in full effect
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• Ethane consumption in US crackers has climbed from 41% of total feedstock in 2005 to 58% of total feedstock in 2013
• Ethane is expected to account for 76% of US cracker feedstock by 2024 – Cut in propane use is necessitating PDH development – Aromatics output at the cracker has diminished, contributing to a tighter benzene market
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North American ethylene at a glance
Cheap feedstock, projected PE demand drive expansions
Spot is becoming indifferent to ethane
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$-
$150
$300
$450
$600
$750
$900
$1,050
$1,200
$1,350
$1,500
$1,650
$1,800
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Ethylene contract vs. spot price vs. ethane
Ethylene FD USGMAvg $/mt
Ethylene USG NetCP $/mt
Ethane non-LSTMt Belvieu pipeMAvg $/mt
$/m
t
Source: Platts
US olefins producers are “all in”
13
Source: Company announcements, Platts
Company Location ,000 mt/yr ETA
Formosa Plastics CUSA Texas 1,200-1,500 2017
ExxonMobil Chemical Texas 1,500 2017
Chevron Phillips Chemical Texas 1,500 2017
Dow Chemical Texas 1,500 2017
Sasol Louisiana 1,500 2017
Occidental/Mexichem Texas 550 2017
Appalachian Resin W. Virginia 250 2017
Aither Chemical/RMG W. Virginia 200-300 2017
Odebrecht (Braskem) W. Virginia 1,000-1,500 2018
Axiall Louisiana 1,000 2019
Shin-Etsu (Shintech) Louisiana 1,000 2019
Shell Chemical Pennsylvania 1,000-1,500 2019
news
news
news
Brownfields: Good barometers
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Source: Company announcements, Platts
Company Location +,000 mt/yr ETA
BASF-Total Texas 60 2012
Dow Chemical (restart) Louisiana 400 2012
Westlake Chemical Louisiana 110 2013
Williams Louisiana 230 2013
BASF-Total Texas 100 2014
Westlake Chemical Kentucky 80 2014
Ineos Texas 120 2014
Westlake Chemical Louisiana 110 2015
LyondellBasell Texas (3) 830 2014-16
Dow Chemical TX/LA (2) 400 2014-16
North American PE expansions
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Company Location ,000 mt/yr Grade(s) ETA
Braskem/Grupo Idesa Coatza., MEX 1,000 HD, LD 2015
Nova Chemicals Joffre, CAN 450 LLD 2015
LyondellBasell Texas 450 LD, LLD 2016
Ineos/Sasol Texas 470 HD 2017
Sasol Louisiana 420 LD 2017
Dow Chemical Texas TBD LD, EPDM 2017
ChevronPhillips Texas 1,000 HD, LLD 2017
ExxonMobil Chemical Texas 1,300 HD, LLD 2017
Formosa Plastics CUSA Texas 300 LD 2018
Sasol Louisiana 450 HD, LLD 2018
Nova Chemicals Sarnia, CAN 500 TBD 2018+
Shell Chemical Pennsylvania 1,000 TBD 2018+
Odebrecht (Braskem) W. Virginia TBD TBD 2019
Advantage through resin exports
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US product in Latin America
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Country 2012 (MT) 2000-2012 (MT)
Mexico 980,949 10,751,045
Canada 593,670 7,228,356
China 173,140 2,962,309
Colombia 138,962 1,067,259
Brazil 165,176 980,295
Belgium 85,228 930,664
Hong Kong 62,036 847,535
Peru 99,407 785,584
Guatemala 67,362 763,976
Ecuador 55,040 723,765Source: U.S. Dept. of Commerce/US International Trade Commission
Top US PE Export Destinations
Export shows disconnect with C2
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950
1050
1150
1250
1350
1450
1550
1650
Ethylene FD USG
LDPE FAS Houston
LLDPE Butene FAS Houston
HDPE B/Mldg USGC Weekly
$/m
t
US domestic contract PE prices
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Source: Platts
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95Ja
n-1
2Fe
b-1
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ar-1
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2Se
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HDPE B/Mldg
HDPE Film
LDPE
LLDPE
Ce
nts
/lb
US PVC expansions limited so far
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Source: Company announcements, Platts
Company Location +,000 mt/yr ETA
Westlake Chemical Kentucky 80 2014
Shintech Louisiana 300 2016
• Caustic, ethylene expansions have translated in additional PVC capacity projects, although scope is currently limited
• However, cracker project announcements by Shintech, Axiall and Oxychem/Mexichem could signal expansions
• Dow Chemical’s proposed divestment of its $5 billion chlor-alkali, chlor vinyls business adds new wrinkle to North American market
North American propylene at a glance
Shift to light feeds has diminished production, injecting volatility in pricing
US propylene production sliding
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0
1000
2000
3000
4000
5000
6000
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Propylene produced in US crackers, by feedstock
Ethane Propane Butane Naphtha Full-range Naphtha Gas Oil
During the next decade, propylene produced by US crackers will fall 30% to 3.5 million metric tons
Source: Platts
Tho
usa
nd
mt/
yr
Tightening supply yields volatility
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Contract PGP cts/lbMonthly
Spot PGP cts/lb Weekly
Spot Ref- GradePropylene FD USG cts/lbWeekly
Ce
nts
/lb
Source: Platts
Propane: The propylene lifeline?
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Source: Company announcements, Platts
Company Location ,000 mt/yr ETA
Dow Chemical (PDH) Freeport, TX 750 2015
Enterprise Products (PDH) Mt. Belvieu, TX 750 2015
C3 Petrochemicals (PDH) Alvin, TX 1,200 2015
Formosa Plastics CUSA (PDH) Point Comfort, TX 600-750 2016
Williams (PDH) Alberta, Canada 500 2016
REXTac (PDH) Odessa, TX 300 2016
Dow Chemical (PDH II) * TBD/USG TBD 2018
Enterprise Products (PDH II) * TBD/USG TBD TBD
Williams (PDH II) * Alberta, Canada TBD TBD
BASF (MTO) * TBD/USG TBD TBD
PetroLogistics (PDH) Houston, TX Expansion ---
LyondellBasell (metathesis) Texas Expansion ---
news
news
news
US PP: Wait-and-see approach
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Company Location ,000 mt/yr ETA
RexTac Odessa, TX 270 H2 2016
• Despite several on-purpose propylene projects, only one PP expansion has been announced
• For the past few years, the business has looked unattractive, with the likes of Dow and Sunoco exiting it all together
• In 2012, Chevron Phillips and Sumika ended a JV in Pasadena, Texas, taking 320,000 mt/year out of the market
Source: Company announcements, Platts
US PP uncompetitive globally
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$1,200
$1,400
$1,600
$1,800
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PP Homo CFR Peru
PP Homo Inj CFR Brazil
PP Inj CFR FE Asia
PP Homo FAS Houston
$/m
t
Source: Platts
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© 2013 Platts, McGraw Hill Financial. All rights reserved.
North American butadiene at a glance Demand expected to outstrip supply globally, with the automotive sector the key driver; US expansions limited despite feedstock availability
Butane: On-purpose butadiene
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• Restart of dehydrogenation assets to provide isobutylene
feedstock for MTBE, PIB, HP isobutylene and diisobutylene
• Engineering design optimization for TPC OXO-D unit due late 2013
• Engineering also underway for PIB expansion
Company Location ,000 mt/yr ETA
TPC Group (BDH) Houston, TX 295 (isobutylene) 2014
TPC Group (OXO-D) Houston, TX 272 (butadiene) 2016
Global butadiene comparison
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$/m
t
Source: Platts
© 2013 Platts, McGraw Hill Financial. All rights reserved.
North American benzene at a glance
The region, but especially the US, is net-short; dropping production at the cracker will only tighten supply and apply price pressure to downstream markets
Shifts to lights also squeezes benzene
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• Pygas to decrease 40% • Crude C4 to decrease 20% • Propylene to decrease 20%
• 69% growth in ethane based output • 32% decrease in naphtha based output
Source: Platts Petrochemical Analytics
Ethane yields lowest amount of aromatics
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0%
10%
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30%
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50%
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70%
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90%
100%
Ethane Propane Butane LightNaphtha
Yields by feedstock
Hydrogen/Fuel
Gas Oil
Aromatics
Crude C4s
Propylene
Ethylene
Source: Platts Petrochemical Analytics
US benzene depends on Asia
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1200
1250
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1350
1400
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1550
1600
1650
1700
$/m
t
Global benzene prices
Europe
US
Asia
Europe at premium to US on limited supply
US reaches record-high at $1,655/mt FOB basis
© 2013 Platts, McGraw Hill Financial. All rights reserved.
North American methanol at a glance
Cheap natural gas could bring unprecedented capacity growth to the US Gulf Coast region and elsewhere, with Asia a likely importer
US methanol – announced projects
39 39 Source: Platts and published releases
China will be thirsty for methanol
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• CTO and MTO projects in China could add up to 10 million mt of new PE capacity in the country by 2020 – nearly equal to China’s forecast demand growth
© 2013 Platts, McGraw Hill Financial. All rights reserved.
Implications for Mexico
Major imports of polymers to continue despite new PE capacity coming online; production of basic petrochemicals to remain insufficient
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Tempered expectations
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• Etileno XXI will be the first new steam cracker and polyethylene project in North America in over a decade, but…
• Mexico is expected to remain an importer of PE, with the US as its main supplier
• Polypropylene imports account for at least half of consumption, and a portion of the raw material is outsourced
• Will remain net short butadiene, styrene, among others, which are key to a booming automotive industry
• Energy reform will likely invite petrochemical investment, but realization of major petchem projects is easily 5-10 years away
