capacity growth trends in hydrocarbon resin production...commodity trading and production centres...

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Capacity Growth Trends in Hydrocarbon Resin Production

2020 Pine Chemicals Association International Virtual Conference

Steve WilliamsVP, C5 Monomers and Polymers1 October 2020

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2

• About Argus

• Monomer Supply Fundamentals

• HCR Production Capacities/Dynamics

◦ C5/C9/HHCR capacities

◦ HHCR Capacity Growth

• Market Structure

• Summary Points

Agenda


3

A view of Argus


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4

Market Reporting

Consulting

Events

Monomer Supply Fundamentals


Feed supply chain and tackifier resins & polymers

• Tackifier resin

feeds come

primarily from

naphtha and

gas oil

• Isoprene is

the key driver

for recovery of

Crude C5

stream

Ethylene Cracker (Liquids)

CrudeC5’s

(CC5)DCPD

Piperylenes

Isoprene

Unsaturated Polyester ResinHydrogenated Waterwhite Tackifers

Ink Resins

C5 Tackifier Resins

SIS

Polyisoprene Rubber

C9 Aromatic Resin Oil

Ink ResinsC9 Resins

Hydrogenated Resins Isoprene Extractive

Distillation Unit (IED)


Natural rubber vs isoprene

New tree plantings

Price of isoprene is expected to remain depressed as demand is slack due to continued slow demand for natural rubber

-Argus.

IED expansions

Longest “quiet” period

in recent history


Naphtha Cracker Capacity by Region

NEA dominates in terms of naphtha cracking capacity, with only WE and SEA with significant other capacity

- Argus


Global feedstock and polymer balance

Short on monomers to

supply existing and future

demand

Growing

monomer

extraction

and

polymer

capacity

and

capability

Americas and European monomer consumers and polymer producers will continue to rely on Asian manufacturers to supply monomers and to balance polymer demand with products made in Asia. European crack slates are moving a little lighter, exacerbating this issue.

Market Reporting

Consulting

Events

HCR Production Capacities/Dynamics


Resin end-use matrix

• Some applications very flexible, others much less so

• Some markets have significantly higher affordability

• HHCR has increased market share in Label and Adhesives markets at the expense of non-hydrogenated hydrocarbon resins and rosin ester resins

Inks

Hydrocarbon Resins

Rosin/HCR Hybrids

LabelsRoadmarking

Tapes

Rosin

Hot Melt Adhesives

Tires

HydrogenatedHydrocarbon

Resins


Global HCR Picture

- Argus

We are seeing capacity expansions well in excess of demand growth, hence global operating rates are expected to decrease. Most growth is seen in HHCR capacity.

-Argus


Global C5 HCR Capacity

- Argus

Nearly all growth in C5 resin capacity has come from Asia-Pacific over the last five years. 2018 saw new Yikesi Huizhou facility, 2019 Xinjiang Tianli, 2021 will see HengHe and Jinhai Chenguang expansions.


Global C9 HCR Capacity

- Argus

Some C9 capacity has been converted to HHCR production and several facilities shutdown due to stricter regulations, with little capacity growth on the horizon. HengHe planning 2021 expansion.


Global HHCR Capacity

Most (but not all) capacity growth for HHCR has taken place in Asia-Pacific, with most of this occurring within China.


Hydrogenated resin volume expansion

- Argus

With readily available hydrogenation technology and the Made in China 2025 mandate, producers in China are both installing new facilities and upgrading current facilities to produce more hydrogenated resins. Based on all expansions already in place and planned, by 2021, producers in China are expected to make 130% of the entire global capacity of 2012. Between 2015 and 2021, 712kT of capacity will have been added, most in China

,000t


Hydrogenated resin volume expansions

- Argus

Producer 2018 2019 2020E 2021E

Arakawa 20

Braskem 9

Eastman 4

ExxonMobil 90

Hanwha 50

Henghe 50 20 100

Huizhou Wanbangde 50

Idemitsu 25

Jinhai Chenguang 20

Kolon 3

Luhua 30 20

Neville 15

Rain Carbon 50

Shandong Qilong 20

Taixing Tianma 20

Xiamen Zhongyi 20

Xinjiang Liming Xintong 40

Xinjiang Tianli 15

Zeon 18

Zhejiang Derong 50

Totals 188 163 153 235

,000t


Hydrogenated resin capacity footprint

-Argus

Half of all HHCR manufacturing sites in the world are expected to be located in China by 2021 producing 43% of the total volume


Effect of higher HHCR volume

• Through 2019, over 350kT of capacity has been added globally since 2015, There is a further 358 kT of capacity being added to the market during 2020-21, and 596kt during 2020-23

◦ Most, but not all of the new facilities going forward are in Asia-Pacific

• The price gap between HHCR and C5, C9 and Rosin Ester resins has narrowed/almost flat in some cases and HHCR resins have taken increased market share

◦ This market share shift is expected to be irreversible in most cases

• It is expected HHCR resin manufacturers will experience higher volume growth but at lower margins

◦ Rapid HHCR volume growth has lead to margin compression, and during 2020, reduced pricing for all HCR’s. Going forward we expect HHCR growth at organic levels of 2X GDP

Dem

and

HHCR dynamic C5, C9 and RE resin dynamic

Supply Demand

Price

Market Reporting

Consulting

Events

HCR Market Structure


Market Structure

• Industry continues to consolidate with newer, larger facilities and more integrated producers. Quality of resins from new production meets adhesives standards

• Hydrogenated market seeing consolidation faster with newest facilities, C9 remains the most fragmented with a number of smaller facilities still operating in China

HCR Market Number of Producers

Top Five Producers as pc of Capacity

Pc of Producers for 80pc of Capacity

Overall 60 41 47

C5 25 53 56

C9 37 34 59

Hydrogenated 20 67 40-Argus

Market Reporting

Consulting

Events

Summary


Key Summary Points

• Ethylene crackers continue to crack lighter in North America and to a lesser extent Europe, as a result NA and Europe continue to import both C5 monomer feeds and hydrocarbon resins

• C5 monomer market will continue to be dependent on price and availability of natural rubber and global tire demand. At the moment, NR and in turn isoprene are in a sustained period of lower pricing

• HHCR are taking market share from C5, C9 and rosin esters. This has been going on for several years and HHCR should return to organic growth (2X GDP) going forward

• HCR capacity has been increasing, with most expansion coming from hydrogenated resin capacity expansions. Most, but not all of the capacity increases are coming from Asia-Pacific

• HCR production is consolidating to fewer, larger players led by the hydrogenated HCR market

Argus has offices around the world’s key energy and commodity producing, trading and consuming centres

Global reach, local expertise


Steve WilliamsVP, C5 Monomer and Polymers

[email protected]

+1 (713) 968-0000

Houston, Texas

www.argusmedia.com

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