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MPMA Seminar
14 March 2013, Johor
Plastic Raw Materials-Present
and Future Trends
Prema Viswanathan
Head of Middle East, South Asia Markets
www.icis.com
Corporate Structure
www.icis.com
ICIS Global Presence
www.icis.com
What information does ICIS produce?
Chemicals Energy Fertilizers
“Trusted market intelligence for the global petrochemical, fertilizer and energy industries”
www.icis.com
Petchems on a roller-coaster ride
• Petchem prices up on high crude, snug supply
• China polymer demand growth not up to expectations
• Margins squeezed down the chain
• Middle East players still lead on cash costs
• But new US supply could be a game changer
• India - the new demand driver, after China?
• China - the polymer price setter
• Southeast Asian polymer market trends
• Feedstock market trends
www.icis.com
Demand growth slows in China
• China’s GDP growth has declined from the
double-digit pace seen in past decade
• Post-2008 stimulus package no longer
available to sustain polymer demand growth
• Slowdown of EU, US economies has caused
sharp fall in Chinese finished goods exports
• Chinese domestic market not expanding fast
enough to make up for export decline
• Polymer demand growth in China in 2010-
2012 below 5%/year
• PE imports from Iran into China continues
despite sanctions
www.icis.com
Middle East a key exporter, but faces hurdles
•Middle East moving up the cost curve
•Mideast PE capacity to hit 28m tonnes by
2015
•Propylene/PP economics not as good as
ethylene/PE, so less expansions for PP
•Gas shortage in GCC, only Iran. Qatar have
surplus supply
•Sanctions impact Iran investments, trade
flows
•Labour shortages, logistics woes, supply
constraints
• Shifting govt priorities in GCC
www.icis.com
US ethylene capacity to expand by 38% by 2019
*Assumption of world-scale cracker at 1.25m tonnes/year Source: ICIS
• Exports of
PE, PVC from
US expected
to surge in
2016-17
www.icis.com
India - the new demand driver, after China?
• Polyolefins demand grew steadily in
2012, overriding a sluggish
economy.
• April to Nov 2012 Market
Estimate: PP demand increased by
16%, LLDPE by 15%, HDPE by 11%
and LDPE by 21%.
www.icis.com
India PE, PP demand (2013)
• Consumption in India is likely to see
steady growth in Q1 2013 on
domestic demand
• However, in early Feb 2013, India
projected weaker GDP growth in the
current fiscal
• Logistics challenges caused by weak
infrastructure
• Significance: Sluggish growth may
dampen polyolefins buying sentiment
Source: Plasopedia
www.icis.com
China – a key price driver
• Regional prices tend to gain support when China is
buying.
• China produced 57.81m tonnes of plastics finished goods in January-December 2012, up 9% year-on-year, a much lower growth rate compared with 2011.
• China’s manufacturing activity still in expansion mode, but lower export index for February indicates unstable external demand.
Source: ICIS
www.icis.com
China PE, PP stable to higher in March
Bullish factors:
• High feedstock prices in Asia
• Low end-user inventory
• Relatively tight export supply from Mideast
because of planned and unplanned plant
shutdowns in December and January
Bearish factors:
• High producer inventory post Lunar New Year
• Low operating rates at Chinese processors
as workers returned from holiday only after
24 February
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SE Asia’s PE market to
experience mixed trends
• Regional LLDPE prices may be dampened on the start-up of new plants.
• New Middle East
supply started up in 2012 may affect HDPE and LDPE prices in SE Asia.
www.icis.com
Tighter regional supply may
support SE Asia’s non-dutiable
PP prices
• Supply in Indonesia and Malaysia may be tight because of local production issues.
• ExxonMobil’s new
PP plant in Singapore may ease the tight regional supply.
www.icis.com
• C2 exports from Iran to China infrequent
• Saudi spot exports tight because of derivative
demand
• Most Asian crackers running at 90-100% in Feb
• Japanese crackers still at low rates (80-90%)
• Near term outlook positive on tight supply
Asia C2 outlook for 2013 positive
www.icis.com
• China to remain key driver
• China’s propylene supply to increase
• 8 new PDH/MTO units in China due to start
in 2013
• But imports to rise on demand from new
phenol-acetone and PO units
• Demand to grow in line with China’s GDP
growth
• Asian prices may hover at high levels on
China’s imports
Asia C3 supply, imports to rise
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ICIS pricing methodology
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ICIS pricing plays a special role
• Complex markets need trusted and independent price
discovery mechanisms to manage risk and ease business
negotiations.
• Competition laws prohibit market participants from direct
communication, producers cannot speak to each other on
pricing.
• ICIS pricing has grown to be a key information conduit for
global chemical markets. ICIS pricing has a privileged and trusted position as the
independent clearing house for business-critical market
pricing information
www.icis.com
The process of price reporting
Buyers
Producers Traders
Information Exchange, phone, yahoo, email – daily or weekly Other Interested
Parties* Other Interested
Parties*
*Shipbrokers, storage companies, government organisations, etc
Trusted as the central repository of price information
www.icis.com
Our commitment
• Provide unbiased and accurate
price assessments
• Information gathered from wide
cross section of contacts
• Rigorous cross-checking of
information.
• Build close contacts with the
industry.
Reflect The Market, Not Lead It
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Critical skill – Staff market expertise
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Types of Market Information
Confirmed Deals
Bids and Offers
Inventory Levels
Freight Rates
Plant Production Data
Derivatives/Feedstock
Historical Data
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Check Parameters
Volume
Time Period
Product Specification
Geographic Basis
Spot or Contract
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Price Reporting Challenges
Manipulation
Illiquid, opaque markets
Conflicting news
Confidentiality
www.icis.com
Cartels and price fixing
• Anti-trust legislation prevents producers from discussing prices
• Price Reporting Agencies provide a route for producers to convey
their views to the market
• ICIS’s procedures are subject to rigorous internal and external
RBI compliance
• ICIS conferences avoid presentations in which producers forecast
prices
www.icis.com
Methodology for Asia polyolefins
• Fridays at 1730 hours in Singapore.
• Cargoes typically loading or delivered 2-4 weeks forward from the date of
publication.
• Assessments for China, Hong Kong, Taiwan, southeast Asia and India are
based on a LC at sight basis only, although deals with differing credit terms
will be taken into consideration.
• Bulk parcels are in the range of 100-1,000 tonnes.
Contributions
Chow Bee Lin (Asia polyolefins)
Tel. +65 6780 4398
Muhamad Fadhil (Middle East and South Asia polyolefins)
Tel: +65 6780 4334
Peh Soo Hwee (Asia olefins)
Tel. +65 6780 4347
Joseph Chang (ICIS Chemical Business)
Malini Hariharan (ICIS training)
