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Confidential. © 2017 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited.Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
Rising Stars of AsiaIt’s not just about China….
APIC Marketing Seminar
20 August 2018 | Kuala Lumpur, Malaysia
Tony Potter
Vice President, Specialty Chemicals, IHS Markit
Confidential. © 2017 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited.
-220
0
220
440
660
880
1,100
-10
0
10
20
30
40
50
2000 2003 2006 2009 2012 2015 2018 2021
US Ethane WEP Naphtha SEA Naphtha
Regional ethylene annual cash margins
Source: IHS Markit
Cents
Per
Pound
Dolla
rs P
er
Metr
ic T
on
© 2018 IHS Markit
Margins driving 2021+ olefin capacity additions in Asia
Strong margins
encouraged builds
Weak margins
stalled builds
Another wave
in the works?
Confidential. © 2017 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited.
Agenda
• Demographics
>Population and urbanisation
• Industry dimensions
• Olefins capacity build and trade
evolution
• Aromatics capacity build
• India
• ASEAN
3
Confidential. © 2017 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited.
Customers: India and ASEAN populations are growing faster than China
4
0
400
800
1200
1600
2000
2000 2005 2010 2015 2020 2025 2030 2035 2040
China India Japan/Korea/Taiwan ASEAN
© 2017 IHS MarkitSource: IHS Markit
Mill
ions
Population
Population 2017 Millions
Indonesia 261
Philippines 105
Vietnam 95
Thailand 68
Myanamar 55
Confidential. © 2017 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited.
Customers: India and ASEAN populations are growing faster than China
5
0
50
100
150
200
250
300
2015 2020 2025 2030 2035
Millio
ns
China India ASEAN
Source: IHS Markit © 2017 IHS Markit
Cumulative Population Growth (2015 = 0)
Confidential. © 2017 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited.
Urbanisation will sustain demand growth even as population plateaus in China
6
0
50
100
150
200
250
300
2015 2020 2025 2030 2035
Millio
ns
China India ASEAN China Urban India Urban ASEAN Urban
Source: IHS Markit © 2017 IHS Markit
Cumulative Urban Population Growth (2015 = 0)
Confidential. © 2017 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited.
7
Chemicals and polymers continue to penetrate our economies with substantial
demand growth potential
0
2
4
6
8
10PE
PP
Average Polyolefin Demand Growth 2017-2022
Source: IHS Markit © 2017 IHS Markit
Avera
ge
Dem
an
d G
row
th %
p.a
.
0 20 40 60 80 100
USA
S. Korea
Malaysia
Thailand
Japan
China
Singapore
Indonesia
India
PE + PP Consumption per Capita, 2017
Source: IHS Markit © 2017 IHS MarkitKG per Capita in 2017
Confidential. © 2017 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited.
8
0
10
20
30
40
Japan Korea Taiwan India Thailand Singapore Malaysia IndonesiaPhilippines Vietnam
2017 2022
Asia Base Chemicals Capacity (Selected Countries)
© 2017 IHS Markit
Millio
n T
on
s
Source: IHS Markit
Asia ex. China base chemical capacity stands at 137 million tons. Investments will
add 15 million tons in the next five years
Base Chemicals: Ethylene, Propylene, Benzene, Paraxylene, Chlorine, Methanol
Confidential. © 2017 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited.
9
Asia is its own marginal ethylene supplier. Growing domestic deficits of ethylene
derivatives in some ASEAN countries are investment opportunities
-35.0
-25.0
-15.0
-5.0
5.0
15.0
12 13 14 15 16 17 18 19 20 21 22
Millio
n M
etr
ic T
on
s
Japan China Taiwan S. Korea Singapore Indonesia
Malaysia Phillipines Thailand Vietnam Aust/NZ Net Trade
Asia (ex India) Ethylene Net Equivalent Trade
Source: IHS Markit © 2017 IHS Markit
Confidential. © 2017 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited.
South Asia aggressive investment on steam crackers
Hyosung PDH 600KTA C3 (2020)
Long Son PC 1000KTA C2 (2023)
PTTGC 500KTA C2(2021)
IRPC 200KTA C2(2019)
Petronas 1260KTA C2 (2019)
Lotte Chem 92KTA C2 (2018)
Lotte Chem 1000KTA C2 (2023+)
Chandra Asri 1000KTA C2 (Plan)
Pertamina(?) 1000KTA C2 (?)
HPCL Mittal Energy 1200KTA(2022)
Indian Oil/HPCL/BPCL 1500KTA(2023+)
GAIL or Essar 1~2 PDH (2021+)
Pakistan 700KTA (2025+) ExxonMobil tba (2022+)
Confidential. © 2017 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited.
11
The development of aromatics “mega-complexes” in China threatens existing
exporters
0.0 5.0 10.0 15.0 20.0 25.0
India
SE Asia
Jap/Kor/Twn
China
Million Metric Tons
2012-2017 2017-2022
Asia Incremental Benzene + Paraxylene Capacity 2012-2022
Source: IHS Markit © 2017 IHS Markit
Confidential. © 2017 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited.
12
China self-sufficiency in PTA created a PX opportunity in South Korea that
threatens to be eroded post 2020
0
10
20
30
40
50
60
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021
Domestic Molecule PTA Imports PX Imports
China Polyester Production
Source: IHS Markit © 2017 IHS Markit
Millio
nM
etr
ic T
on
s
Confidential. © 2017 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited
India
13
Confidential. © 2017 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited.
14
Investment in chemicals and polymers is not keeping up with domestic demand
growth
-9.0
-7.0
-5.0
-3.0
-1.0
1.0
12 13 14 15 16 17 18 19 20 21 22
Ethylene Vinyls Styrenics Polyethylene
Glycol Others Net Trade
Indian Subcontinent Ethylene Net Equivalent Trade
Net Exports
Net Imports
Millio
n M
etr
ic T
on
s
Source: IHS Markit © 2017 IHS Markit
• Despite the start up of new
crackers/expansions by BCPL, GAIL and
OPAL in 2016, and Reliance’s Jamnagar
cracker in 2017, India’s ethylene derivative
deficit is only in temporary respite
• Equivalent ethylene deficit will approach
seven million tons by 2022.
• New crackers under study by Indian
Oil/HPCL/BPCL and by GAIL
• Collaboration of state owned companies is
perhaps a signal of consolidation in the
refining/chemicals space. Too many public
companies created inefficiency rather than
competition
Confidential. © 2017 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited.
India thermoplastics demand will increase four-fold by 2040
15
PE35%
PP33%
PVC22%
PS2%
PET Resin6%
ABS1%
PC1%
Source: IHS Markit © 2017 IHS Markit
2016 India Thermoplastics Demand = 13.3 MM Tons
PE38%
PP38%
PVC15%
PS1%
PET Resin6%
ABS1%
PC1%
Source: IHS Markit © 2017 IHS Markit
2040 India Thermoplastics Demand = 56.3 MM Tons
Confidential. © 2017 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited.
India’s per capita thermoplastics demand will remain modest relative to the US and
China but necessitates the building of 12-15 new world scale steam crackers
16
0 10 20 30 40 50 60 70 80 90 100 110 120 130
India
Global
China
Malaysia
Indonesia
United States
2016 2040Source: IHS Markit © 2017 IHS Markit
KG/person
Thermoplastics Demand per Capita
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ASEAN
17
Confidential. © 2017 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited.
Singapore, Malaysia and Thailand are mature petrochemical operators that have
outgrown domestic markets
• Singapore and Thailand must compete with
lower cost Middle East and US olefin derivative
exports
• Malaysia will become exporter with RAPID
start-up
• New crackers would be export oriented with no
feedstock advantage
• But, some parts of the region eg Indonesia are
at least as accessible from these countries as
by potential domestic producers
18
-500
0
500
1000
1500
2000
2500
3000
3500
Singapore Malaysia Thailand
Thousand M
etr
ic T
ons
Ethylene Equiv Propylene Equiv Benzene Paraxylene
Net Trade 2022 Outlook
Confidential. © 2017 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited.
Substantial and growing domestic deficits of base chemicals and polymers offer
investment opportunities in Indonesia, Vietnam and the Philippines
• Refining investments to counter transportation
fuels deficits also provide feedstock platform
for petrochemical investments
• Indonesia and Vietnam studying joint venture
cracker opportunities
• Aromatics complexes being built in Vietnam
and Brunei
• NOC involvement: decision making process is
slow
19
-3000
-2500
-2000
-1500
-1000
-500
0
500
1000
Indonesia Vietnam Philippines
Thousand M
etr
ic T
ons
Ethylene Equiv Propylene Equiv Benzene Paraxylene
Net Trade 2022 Outlook
Confidential. © 2017 IHS MarkitTM. All Rights Reserved. Reproduction in whole or part without permission is prohibited.
Strategic Implications
• It’s not just about China
• APAC ex. China
> 2.5 billion potential customers driving petrochemical and polymer demand growth
> 450 million newly urbanized customers over the next 20 years deficits
• Large and growing domestic deficits of petrochemicals and polymers represent investment
opportunities, especially for olefins and derivatives, in India, Indonesia, Vietnam and The
Philippines
• India needs to build 12-15 world scale crackers by 2040 to meet domestic demand – a pace of one
project to FID every 18 months – not happening!
• Olefin margins will remain robust. Aromatics margins under threat from China Mega-units.
• Actually - it’s still a lot about China, which will remain an important export market for ASEAN
20