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Agenda1 Globalized world: Development of the chemical industry 2 Regional raw material trends3 BASF’s approach
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150 years
Raw materials in the chemical industry –
regional trends in a globalized industry
Asia Petrochemical Industry Conference 2015, Seoul
Kurt Bock BASF May 8, 2015
150 years
150 years
05.07.2010 INTERN 2
Agenda
1 | Globalized world:
Development of the chemical industry
2 | Regional raw material trends
3 | BASF’s approach
150 years
Global challenges are shaping
the chemical industry
3
70% of the world population will live in cities by 2050
30% more food will be needed by 2050
>9 billion
people will live on this planet
by 2050
50% more primary energy will be needed in 2050
150 years
Chemistry is a key enabler to provide
solutions for today’s and future needs
4
Water & nutrition Health care
Mobility & transportation Construction & housing Consumer goods
Energy & resources
150 years
Highlighting the contribution of chemistry to mobility –
chemistry in today’s cars
standard and
engineering
plastics
chemicals
for adhesives
and coatings
coatings
fibers and
textiles
elastomers
lubricants
and oils
catalysts
carbon
black
plastizicers /
plastic additives
leather
metal
treatment
chemicals
engine
coolants fuel
additives
foams
brake fluid
rubbers
steel,
metals
adhesives,
sealants
glass
battery materials silica
ceramics
leather and
textile chemicals
polyurethanes
5
150 years
Global chemicals growth is above GDP growth,
driven by emerging economies
6
1.5
3.5
2.7
0.6
5.3
7.4
* Excluding pharma
Source: IHS Economics, Feri, BASF
Real chemicals* production versus GDP growth, 2000-2014 Percent (CAGR)
GDP Chemicals*
World
Advanced Economies
Emerging Economies
150 years
Emerging economies will account for 60 percent
of chemical production in 2020
7
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
2020 2014 2010 2000
2.1 %
CAGR 2014-2020:
1.4%
3.0%
2.9%
1.2%
6.8%
27%
73%
60%
40%
Western Europe
USA, Canada
Japan, South Korea, ANZ
Emerging Asia**
South America, incl. Mexico
Eastern Europe
Middle East, Africa
4.2 %
* Excluding pharma
** Asia Pacific excl. Japan, South Korea, ANZ
Source: IHS Economics, Feri, BASF
Real chemicals* production, 2000-2020 USD billions (2010 prices and exchange rates)
150 years
Trade in chemicals has strongly gained
in importance over the last 15 years
8
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
220
0
200
180
160
140
120
100
Trade
Production
Real global production and trade in chemicals*, 2000-2013 Index, 2000 = 100
* Excluding pharma
Source: IHS Economics, Feri, BASF
150 years
Trade in chemicals is strongest between
North America, Europe and Asia
Inter-regional trade
flows in chemicals*, 2013 % of global chemical production
* Excluding pharma
Source: UNCTAD, BASF
North America
Eastern Europe
Africa
Middle East Asia
Oceania
Western Europe
South America
>2.0%
1.0-2.0%
0.5-1.0%
<0.5%
Share in global production:
9
150 years
Increasing importance of intellectual property
in emerging markets
10
0
20000
40000
60000
80000
100000
120000
140000
160000
China Japan Germany France Great Britain South Korea USA
Source: Derwent World Patents Index
Number of priority chemical patent applications 2000 2011
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
150 years
Increasing investment into R&D: China already on EU level,
but still well below South Korea
11
0
1
2
3
4
5
% of GDP
Japan
3.5
USA*
3.1
4.2
1.7 1.9
EU 28
2.5
2.9
Germany
2.6 2.8
China
2.0
1.1
South Korea
2.4
Gross Domestic Expenditure on R&D, 2003-2013
* Data for 2012 instead of 2013
Source: OECD Main Science and Technology Indicators
2013 2003
150 years
How will the contribution of chemistry
based solutions look like in the future?
From molecules to multi-material systems
12
Chemicals,
base polymers
Performance
products
Advanced materials
Multi-material
systems
Value generation
Com
ple
xity
150 years
Having a look at the automotive industry again Lightweight composites will help to reduce weight
13
Legislation on reduction of CO2 emissions Germany (parallel in EU, J, KR, USA, CN)
2010
143g
2015
120g
2021
CO2/km
95g
2025
75g*
Hang-on parts
Whole modules
Body today
Structural parts
Composite Market Potential
Complete new vehicle concepts
2030
*under
discussion
150 years
Global common denominator – chemistry key enabler to provide solution for today’s 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
Conclusions –
trends in globalized chemical industry
14
150 years
05.07.2010 INTERN 15
Agenda
1 | Globalized world:
Development of the chemical industry
2 | Regional raw material trends
3 | BASF’s approach
150 years
Raw material change is a historic reality,
but the future will see a regional diversification
16
Pre industrial Epoch Coal Oil Regional
Diversity in
Feedstock
1800 1850 1900 1950 2000 2050
Renewables
Coal
Gas
Oil
150 years
Raw material landscape is changing,
Europe in a sandwich position
* Natural Gas Liquids
** Liquefied Petroleum Gas
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
South America Focus on renewable resources
Will remain net importer of chemicals from the U.S.
17
150 years
USA: The shale gas boom increased
competitiveness in ethylene production
18 Source: American Chemical Society
Change in the Global Cost Curve for Ethylene 2005 versus 2012
Production Costs ($/pound)
Global Supply (Cumulative in billions of pounds)
2005
2012
Other Northeast Asia
Western Europe
United
States Other
Northeast
Asia
China
Western
Europe China
United
States Middle
East
Middle East
307 247 172 136 73 0
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
150 years
Current projects in China (# of projects) Coal-based capacities in China
China: First wave of coal-based capacities
focusing on ammonia and methanol…
19
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
0
20
40
60
80
Million tons
per year
MEG
6
C2, C3
Olefins
32
PVC
24
Methanol
39
Ammonia
74
Under construction
Planned (until 2017)
Running Ningxia
(7)
Henan (11)
Jiangsu (5)
Shandong (5)
Anhui (2)
Inner Mongolia (42)
Shanxi (7)
Gansu (2)
Xinjiang (19)
Qinghai (4)
Shaanxi (11)
150 years
Coal
Calcium Carbide
Acetylene PVC
Coking Coal Tar Benzene
Syngas
Crude Methanol
Ammonia
Methanol
Ethylene
Propylene
Ethanol
MEG
MTO/MTP
Acetyl
Oxalate Ester
Old
Coal Chemicals
New
Coal Chemicals
… but product portfolio is broadening
20
150 years 0
2
4
6
8
10
12
14
16
18
1990 2000 2010 2020 20300
2
4
6
8
10
12
14
16
18
1990 2000 2010 2020 2030 2035
Renewables on the rise Strongly driven by national politics,
contributing to regional diversification of the raw material mix
21 International Energy Agency: World Energy Outlook 2009
Shares of energy sources (in billion toe)
Demand by region (in billion tons)
OECD
Non-OECD
2010 2030 1990
India
China
Other
Non-OECD
2010 2030 1990
Renewables
Fossil Fuels
Biomass
Nuclear energy
150 years
9%
68% 21%
Renewable feedstock in the chemical industry
Within the EU, renewables account for 9% of total feedstock
22
Shares in total organic raw materials (feedstock use only), 2011 Percent
Source: CEFIC
Natural gas
Coal
Renewables
Mineral oil
Coal 1%
Renewables
150 years
Washington
Canada
- Manitoba
Canada
- Ontario Japan
Thailand
Vietnam
Turkey
Ukraine
Mexico
Brazil
Chile
Russia
EU
Keep an eye on regulatory developments
Development of emission trading systems world-wide
In force
Scheduled
Considered
23
150 years
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
Process and product innovation key
Conclusions
24
150 years
05.07.2010 INTERN 25
Agenda
1 | Globalized world:
Development of the chemical industry
2 | Regional raw material trends
3 | BASF’s approach
150 years
BASF’s approach Investing close to the markets
26
Singapore Kuantan
Hong Kong
Nanjing
Freeport
Florham Park
Geismar
Ludwigshafen Antwerp
São Paulo Regional centers
Selected sites
Verbund sites
Selected research
and development sites
150 years
Major investment project start-ups in 2015
* Capacity not published
.
Pasir Gudang
Theodore
Polymer dispersions*
Trilon® M*
Automotive coatings*
Shanghai
Camaҫari
Acrylic acid
+160,000 mt
SAP
+60,000 mt
Automotive
catalysts*
Chennai
Chongqing
Nanjing
Geismar
Maoming
Neopentylglycol
+40,000 mt
Specialty amines*
Ethylene oxide*
MDI
+400,000 mt
Isononanol*
TDI complex
+300,000 mt
Specialty amines*
Crop protection products*
Formic acid
+50,000 mt
Polyurethane systems
Polyamides
+100,000 mt
Ludwigshafen
Yesan
Specialty plastics*
Precious metals
recycling*
Cinderford
Guaratingueta
Crop protection
formulations*
Major capex projects for start-up in 2015
Upstream businesses
Downstream businesses
27
150 years
Chemical
Intermediates
Portfolio of technologies needed to adapt
to regional feedstock mix
28
Oil
Coal
Natural Gas
Renewables
150 years
Cost leading gas-to-propylene technology covers supply gap
U.S. Gulf Coast (Freeport, TX)
World-scale plant
Port Arthur cracker and new on-purpose propylene complex to cover entire captive propylene demand
Lower cost than alternative PDH technology
Propylene supply North America
Acrylic acid Oxo-alcohols Polyols …
Propylene Propylene (Port Arthur cracker)
Down- stream
products
Methanol
Methane (from shale gas)
Flexible feed (NGL’s, Naphtha)
Natural gas Exploiting the shale gas potential in North America – Methane to Methanol
to Propylene (MMTP) project
29
150 years
Plant oil processor
Lignocellulosic Biorefinery
Vegetable oils
Glucose
Saccharose
Glucose
Xylose
Lignin
Renewable feedstock
Biorefineries giving access to known and new chemicals
30
1st generation
Rape seed
Corn
Sugar cane
Wood
Switchgrass
Straw
Corn mill
Sugar mill
2nd generation (ex non-edible biomass)
Food,
Fuels,
Chemicals
Fuels,
Chemicals
150 years
Operational excellence
Running existing plants highly efficiently – example: the energy Verbund
Steam consumption in Ludwigshafen
Steam export
Acrylic acid plant
Sulfuric acid plant
Urea plant
Adipic acid plant
Steam consumption
Power plant
Administration
31
150 years
Growth fields
White
Biotechnology
Materials, Systems
& Nanotechnology
Raw Material Change
Key customer industries
Health & Nutrition
Consumer Goods
Transportation
Energy & Resources
Electronics
Agriculture
Construction
Technology fields
...
Batteries for Mobility
Enzymes
Heat Management for Construction
Organic Electronics
Functional Crop Care
Plant Biotechnology
E-Power Management
Wind Energy
Lightweight Composites
Water Solutions
Continue to invest in chemistry-based innovations
Growth and technology fields
32
150 years
BASF‘s approach in a nutshell
33
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
Globalizing R&D platform to exploit regional innovation potential
Continued investment in chemistry-based innovations
150 years
150 years
150 years
China has become the biggest chemicals producer
within the last 15 years
35
Real chemicals* production USD billions (2010 prices and exchange rates)
2000 2014
614
506
225
205
183
86
China
South Korea
Germany
Japan
United States
EU 28 659
549
205
194
148
1,181
* Excluding pharma
Source: IHS Economics, Feri, BASF
150 years
Global chemicals growth is above GDP growth,
driven by China
36
4.0 4.0
9.1 13.3
0.8
3.5 2.7
-0.7
1.0 0.4
1.8 0.6
0.5 1.2
GDP Chemicals*
Real chemicals* production versus GDP growth, 2000-2014 Percent (CAGR)
EU 28
Japan
Germany
United States
South Korea
China
World
* Excluding pharma
Source: IHS Economics, Feri, BASF
150 years
Overview on raw material costs
Heating value as a proxy, disadvantage for renewables
37
5-year-average 2009-2013 (€/GJ)
0
5
10
15
20
25
Europe Brazil USA
Western
China
Naphtha Sugar Natural gas Coal
*Source: BASF
150 years
C5 / C6 sugar & aromatic structures
based value chains
Woody Biomass
Hydrolysis
C6 - Glucose Lignin
Example: BASF Venture Capital –
Renmatix Biorefinery RENMATIX Plantrose®
Technology scope
C5 - Xylose
US-based biotech start up
Hydrolysis of woody biomass
with super critical water
Separation of sugar streams and lignin
Renewable feedstock
2nd generation biorefineries not in competition to food
38