Read Trends in Butadiene & SBS text version

AMAP 12th Annual Meeting February 2011

Trends in Butadiene & SBS

Tom Brewer [email protected] 713-562-1009

DeWitt & Company

DeWitt & Company ­ Hydrocarbon Resin Report

DeWitt & Company

2

Introductory Comments

Several Tsunami's of change coming to the chemical industry Biggest dynamic in the history of the chemical industry Much of the change has been masked by the global recession Economic recovery will reveals the hidden "icebergs" Overlay a natural rubber shortage just to make things worse

DeWitt & Company

3

2009 Perspective

Positives Tire demand for butadiene likely to fall with less domestic ethylene production Negatives Less ethylene production Lighter cracking slate

New NR prices could be lower against a US tariffs bolster domestic US short Crude C4's against tire production low growth market backing out butadiene purification capacity butadiene containing synthetic New car production rebounds rubber

New offshore SBS and butadiene capacity - Asia

DeWitt & Company

4

2009 Perspective

Positives Tire demand for butadiene likely to fall with less domestic ethylene production NR prices could be lower against a low growth market backing out butadiene containing synthetic rubber New offshore SBS and butadiene capacity - Asia Negatives Less ethylene production Lighter cracking slate US short Crude C4's against butadiene purification capacity

Natural rubber prices go through the roof Setting a new record every month

DeWitt & Company

5

2009 Perspective

Positives Tire demand for butadiene likely to fall with less domestic ethylene production NR prices could be lower against a low growth market backing out butadiene containing synthetic rubber New offshore SBS and butadiene capacity - Asia Negatives Less ethylene production Lighter cracking slate US short Crude C4's against butadiene purification capacity

DeWitt & Company

6

Presentation Covers 5 Steps in the Supply Chain

Ethylene

Crude Streams

Monomers

Polymers

Downstream Markets

Today we will be covering five steps in the supply chain Most of what you want to know is in the beginning, not in the end The end is a consequence of upstream factors that will continue for the foreseeable future

DeWitt & Company

7

US SBS Supply Chain

Ethylene

Recovered Crude C4's

Purified Butadiene

SBS Rubber

Benzene

Ethyl benzene

Styrene

Supply chain shows problem areas Upstream supply is the issue for Butadiene Shortage of crude C4's from ethylene production

DeWitt & Company

8

Ethylene

Crude Byproduct Streams

Purification

Monomers

Polymers

Global Ethylene Supply

DeWitt & Company

9

Where Do Raw Materials Come From ?

Polymers Basic Chemical Raw Materials Styrene Ethylene Propylene

SBS/SBR/SIS

Polyethylene Polypropylene Tackifiers Resins EVA Acrylics Ink Resins EPDM Rubber Butyl Rubber EP Metallocene Rubber Metallocene Polyolefins Polyethylene waxes

DeWitt & Company

Butadiene

Isoprene Pentadiene Cyclopentadienes Aromatic Resin Formers Isobutylene Amylenes Hydrogen Benzene 10

Where Do Raw Materials Come From ?

Basic Chemical Raw Materials Styrene Ethylene Propylene

Butadiene

Isoprene Pentadiene Cyclopentadienes Aromatic Resin Formers Isobutylene Amylenes Hydrogen Benzene

DeWitt & Company

Ethylene

11

Scale Of The Chemical Industry

Global Capacity Comparison

140 120 100

M to n s

120

Prime drivers for chemical production are ethylene and propylene Many monomers of interest are very small Strategic interest by most chemical producers are ethylene and propylene

80 60 40 20 0

Ethylene

80

Byproducts

Historically, many products used were disposal issues ­ gum formers in gasoline Businesses were built around these low valued byproducts of ethylene production

14 0.8 0.8

Byproduct streams are capturing more value now, but strategic interest remains low

Propylene

Butadiene

Isoprene

Tackifier

DeWitt & Company

12

Making Ethylene

Gas Feeds Furnace Liquid Feeds

Steam

Purification/ Separation Processes

Called a steam cracking process - Often referred to as "Cracker" Gas feeds makes mostly ethylene U.S. is the most flexible region on feeds Output is a mixture of ethylene to heavy products like tar Need downstream purification processes to separate products

DeWitt & Company

13

Historic US Ethylene Production

Fixed facilities ­ hard wired Little flexibility Majority liquid crackers +90%

Ethylene

Ethane Propane

Gas Cracker

Ethylene Propylene

Naphthas Gas Oils

Liquid Cracker

Liquid economics favored Excess byproduct streams

Propylene Byproducts

DeWitt & Company

14

Historic US Ethylene Production

Ethane Propane

Gas Cracker

Ethylene Propylene

Fixed facilities ­ now flexible 20-30% Flexibility Capitalizes on cheap gas feeds Feed slate now moves with weekly economics Byproduct streams vary with cracking slate N. American flexible approach moving into other regions

Naphthas Gas Oils

DeWitt & Company

Gas

Ethylene

Liquid Cracker

Propylene Byproducts

15

The First Tsunami

DeWitt & Company

16

When Did the Tsunami Hit?

Ethylene Cash Costs

Cents/lb

70.0 60.0 50.0 40.0 30.0 20.0

Ethane Propane Lt Naphtha

Decisions on ethylene feed slate are based on cost of ethylene economics

Cost of ethylene economics net backs all the credits for the byproduct streams

10.0 0.0 Jan-08 Feb-08 Mar-08 Apr-08 May-08

The graph shows January to May 2008 cost of ethylene for N. America

DeWitt & Company

17

US Natural Gas Trends

US Nat Gas Production

bil cu ft per day

Expected decline averted

70

60

Unconventional recovery adds to supply

50

40

Unconventional Recovery

NG pricing expected to remain advantaged versus crude oil

30

20

Conventional Recovery

NG producers separate ethane as an upgrade

10

0 1990

1994

1998

2002

2006

2010

2014

2018

Ethane is a preferred ethylene cracking feed.

DeWitt & Company

18

US Liquid Cracking Trends ­ NPRA Data

Byproduct Production is Down 40-50%

DeWitt & Company

19

Liquid Crackers Flexing to Use More Gas

Estimated Liquid Cracker Flexibility

S. America

5% 0%

N. America

70% 30%

Europe

15% 5%

2009 Pre 2006

Asia

15% 5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Historically, N. America flexed 10-30% depending on feed costs - Now able to flex up to 70% Flexibility in Asia/Europe depends on access to refinery waste gas and a port to import LPG

­ Large liquid crackers can flex up to 30%, but dependent on availability of cheap gas

DeWitt & Company

20

The Second Tsunami

DeWitt & Company

21

Ethylene Capacity Additions

Ethylene Capacity Additions

60 50

Middle East/Africa

40

Millions of Tons

Asia Europe S. America N. America

30 20 10 0 2006 -10

2007

2008

2009

2010

2011

2012

2013

2014

TABrewer Consulting

Most all new capacity is in Asia and Middle East N. America, W. Europe, and Japan expect no growth in ethylene capacity Capacity growth is 3-7% per year

DeWitt & Company

22

Global Natural Gas

Natural Gas Reserves (Trillion Cubic Feet)

1800 1600 1400 1200 1000 800 600 400 200 0

U A E Ir an S au Qa di tar A ra bi a U S N ig er ia A lg e V en ria ez ue la R us si a

Excess natural gas in the world Terms often used ­ Stranded gas ­ Waste gas Most of the "Waste/Stranded" gas is in the Middle East Countries trying to exploit low cost gas by developing ­ Ethylene business ­ LNG

Value of Gas in Middle East is Essentially Zero

DeWitt & Company

23

Ethylene/PE Competitive Factors

70 60 50 40 30 20 10 0 Cost Contr USA Spot Cost ME Cost WE Cost C2Imp 1540 1320 1100 880 660 440 220 0 Transload Ship PE Conv C2 Price

Asia

DeWitt & Company

24

Capacity Position Perspective

Ethylene Capacity Positions 2006 Ethylene Capacity Positions 2014

N. America 30%

S. America 4%

Middle East/Africa 12%

N. America 21%

S. America 5%

Middle East/Africa 23%

Asia 28% Europe 26% Europe 20% Asia 31%

Western world capacity positions decline Developing regions slightly grow positions ­ S. America, Asia Africa/Middle East significantly increase capacity positions ­ well beyond demand growth

DeWitt & Company

25

Middle East Exports

Today's Lower Growth Case · ME Exports to all regions · Less N. American/Europe exports · Less production in N. America/Europe

DeWitt & Company

26

Global Ethylene

Global Ethylene Supply/Demand

180000 160000 140000 120000 100000 kt 80000 60000 40000 20000 0 2006 2007 2008 2009 2010 2011 2012 2013 2014

PRODUCTION CAPACITY OPERATING RATE

94% 92% 90% 88% 86% 84% 82% 80% 78% 76% % Operating Rates

Operating rates expected to be 8% lower than 2006/2007 Expect capacity rationalization in Western World and Japan to raise operating rates 2009-2014 Growth assumed to be 5%, which indicates a global GDP 3% Growth Rate Is A Critical Assumption

DeWitt & Company

27

N. American Ethylene

N. American Ethylene Supply/Demand

40000 35000 30000 25000 20000 15000 10000 5000 0 2006 2007 2008 2009 2010 2011 2012 2013 2014

TABrewer Consulting

PRODUCTION CAPACITY OPERATING RATE

100% 95% 90% 85% 80% 75% 70% 65% 60% % Operating Rates

Typical operating rate is 85% - shown in the red line on graph No rationalization reflected in data shown, but expected ­ small, less flexible liquid crackers most vulnerable N. American demand will remain flat as Middle East low cost material takes export business Some future risk of more Middle East imports, less domestic production Less Production Expected

DeWitt & Company

kt

28

European Ethylene Supply/Demand

European Ethylene Supply/Demand

40000 35000 30000 25000 kt 20000 15000 10000 5000 0 2006 2007 2008 2009 2010 2011 2012 2013 2014

TABrewer Consulting

PRODUCTION CAPACITY OPERATING RATE

100% 95% 90% 85% 80% 75% 70% 65% 60% % Operating Rates

European region includes Eastern and Western Europe No rationalization included the graph, but expected ­ smaller, less flexible crackers to be most vulnerable European region expected to be the region most impacted by Middle East imports Assumption is that Western Europe has no growth Some future risk of lower production should Middle East producers get more aggressive No Production Growth in W. Europe

DeWitt & Company

29

Ethylene Summary

Gas is bad for byproduct production, liquids are good Byproduct production has been reduced in N. America Caused by the ethylene cracking slate going lighter to more gas cracking Expect to see some additional ethylene capacity rationalization in N. America Expect to see some "creep" in cracking more gas in N. America ­ 10% in five years This will make most byproduct consumers increasingly dependent on imported butadiene or imported SBS from Asia

DeWitt & Company

30

Ethylene

Crude Byproduct Streams

Purification

Monomers

Polymers

Butadiene & Rubber Supply Perspective

DeWitt & Company

31

Natural Rubber Shortage Makes Things Worse

Natural rubber is a harvest crop that is in short supply and prices have skyrocketed up Reasons for price increase demand growth, weather limiting harvest, and speculation NR fundamentals don't bode well for future Bd supply

DeWitt & Company

32

Natural Rubber Shortage Makes Things Worse

Natural Rubber Industry Fundamentals · Takes 7 years before a new tree produces · Farmers moving to the city · Trees destroyed to make furniture · Renewed tire demand growth Reasons for price increase demandexceeding production growth speculation growth, weather limiting harvest, and

NR fundamentals don't bode well for future Bd supply Natural rubber is a harvest crop that is in short supply and prices have skyrocketed up

DeWitt & Company

33

Global Rubber Perspective

Global 2010 forecasted rubber demand is ~23 M tons

14 12

Global Rubber Demand 2010 F/C

SBS ESBR SSBR PBR IR Butyl

Synthetic Rubber Natural Rubber

Demand is forecasted to be up 3-6%

M tons

10 8 6 4 2

Largest applications are Tires & Autos

Most synthetic rubbers based on Bd

0

DeWitt & Company

34

Relative Rubber Pricing

Global Rubber Demand 2010 F/C

14 12 10 8 6 4 2 0

$3.00 $2.70 $2.50

US Rubber Prices

SBS

$2.00 $1.80 $1.50 $1.50 $1.54

ESBR SSBR PBR IR Butyl

Synthetic Rubber Natural Rubber

$/lb

M tons

$1.00

$0.50

$0.00 NR IR SBS eSBR

Significant Cost Driver to Switch

DeWitt & Company

35

Shale and New Recovery Technology

DeWitt & Company

36

Butadiene

Comes from liquid cracking Suffering under same lighter, gas, cracking supply issues ­ no crude butadiene Europe has been surplus in crude butadiene US was the biggest buyer of crude butadiene to fill up their spare purification capacity Europe went to a lighter cracking slate and there was less crude to export to US US now imports butadiene from Asia at a premium Import costs are $300/ton or 12-14 cents/lb

DeWitt & Company

37

N. American Butadiene Supply/Demand

Production flat

Capacity flat

Crude Bd limited from crackers

Low operating rates

DeWitt & Company

38

N. American Butadiene Supply Picture

Based on early 2010 ethylene/Bd assessment

Any growth to be supplied by imports

Best case projected to be flat Potential for 5-10% less production over next 5 years Imports now account for 15% No impact from ME ethylene included

DeWitt & Company

39

Worldwide Bd Supply/Demand

Growing supply Growing production Low operating rates Deceptive picture

DeWitt & Company

40

SBS Raw Material Cost Trends

Prices peaked with crude oil in 2008 Prices plummeted with low demand due to global recession Now moving back onto the increasing cost trend line

DeWitt & Company

41

Butadiene Summary

Major Factors Affecting Butadiene Supply Lighter cracking creating less supply of domestic crude Bd Less crude Bd to import to purify as the world goes to lighter cracking Higher than anticipated US tire production to Chinese tire tariffs Global crude Bd supply not keeping up with demand in a recovering economy Natural rubber creating a big crossover opportunity for Bd based rubbers US Price and Supply Implications More dependent on imports Prices set by natural rubber in other regions of the world US prices set by overseas prices plus freight

DeWitt & Company

42

Information

Trends in Butadiene & SBS

42 pages

Find more like this

Report File (DMCA)

Our content is added by our users. We aim to remove reported files within 1 working day. Please use this link to notify us:

Report this file as copyright or inappropriate

370999


You might also be interested in

BETA
Petchem Arabia V2.qxp
Trends in Butadiene & SBS