european polyolefins webinar

of 34 /34
European PE PP webinar 17 December 2014 Linda Naylor Senior PE PP editor Europe

Upload: icis

Post on 17-Jul-2015



Economy & Finance

4 download

Embed Size (px)


Page 1: European polyolefins webinar

European PE PP webinar

17 December 2014

Linda Naylor

Senior PE PP editor


Page 2: European polyolefins webinar 2 2


• Overview of European PE PP


• Feedstock challenges facing


• Shale gas

• Outlook

• Questions

Page 3: European polyolefins webinar 3 3

European PE PP prices in global context

European PE PP prices among the lowest in the world

Page 4: European polyolefins webinar 4 4

Situation evolving rapidly…

Page 5: European polyolefins webinar 5 5

2014 PE and PP relatively stable, follow

upstream contracts

Page 6: European polyolefins webinar 6 6

2014 PE and PP relatively stable, follow

upstream contracts

Page 7: European polyolefins webinar 7 7

Relative stability came as a relief to many


Page 8: European polyolefins webinar 8 8


• Moderate price moves in PE PP

• Fine supply/demand balance

• Fewer imports

• More exports

• Weakening of the euro

Page 9: European polyolefins webinar 9 9

Game changer: Crude oil prices plummet

Page 10: European polyolefins webinar 10 10

Naphtha follows…

Page 11: European polyolefins webinar 11 11

Asian PE PP show dramatic falls…

Page 12: European polyolefins webinar 12 12

European prices relatively steady

Page 13: European polyolefins webinar 13 13

Nov/Dec margin improvement for European

producers • Feedstock collapse

• Lack of imports

• Strong exports

• Better-than-expected domestic demand

Page 14: European polyolefins webinar 14 14

Closer look at supply in Europe…

Page 15: European polyolefins webinar 15

Supply end 2014

• 1 Jan 2014 duties from GCC Brazil and others rose from

3% to 6.5%

• Initially little effect as extra end-2013 imports absorbed, but

2H 2014 C4 LLDPE, HDPE film became tight

• Strong dollar plus extra duty leaves better netbacks to Asia

for Middle Eastern sellers

• Strong dollar also supports export activity from Europe

Lack of imports- why?

Page 16: European polyolefins webinar 16 16

Euro weak against the dollar

Page 17: European polyolefins webinar 17

PE PP closures in Europe

Product Location

Dow HDPE Tessenderlo, Belgium 190kt Closed End 2012

Versalis LLDPE Priolo, Italy 150kt Closed Sep 2013

LBI HDPE Wesseling, Germany 100kt Closed Q3 2013

Eni LDPE Gela, Italy 150kt Closed End 2013

Borealis HDPE Burghausen, Germany 175kt Closed End Q3 2014

Total HDPE Antwerp, Belgium 70kt To close End 2014

SABIC PP Geleen, Netherlands To close End 2014

Repsol HDPE Puertollano, Spain 90kt To close 2015

Older non-profitable assets close in the face of competition from lower-cost

feedstock assets in the Middle East and North America

Page 18: European polyolefins webinar 18 18

Middle East Imminent Capacity

• Borouge 3: 960,000 t PP, 1.08m t HDPE/LLDPE,

350,000 t LDPE - imminent

• Sadara: 350,000 t LDPE – 2015

Page 19: European polyolefins webinar 19 19

Europe December 2014 snapshot

• PE PP prices still low in global context?

• Producers able to expand margins on tight availability

• 2015 discussions tough for some grades

• Euro zone forecasts weak

• Expectations of lower contract prices to come

• Inventories low on both buy and sell side

• Asian prices fall

• European plants close on high costs, unprofitability

• New low-cost production on the way

Page 20: European polyolefins webinar 20 20

Page 21: European polyolefins webinar 21

US ethane advantage vs naphtha

Page 22: European polyolefins webinar 22

US contract ethylene margins at record highs

Page 23: European polyolefins webinar 23 23

US ethylene capacity could expand by 60%

• 12 new crackers = 14.8m tonnes/year

10 on US Gulf Coast, 2 in Northeast US

• Plus 8 expansions at existing facilities = 1.6m tonnes

• TOTAL of 16.4m tonnes of new capacity, or 60% of existing capacity base, to

43.7m tonnes/year

• Even if only 6 US Gulf Coast crackers are built (5 under construction, plus Sasol),

plus expansions = 36% capacity increase

• US PE capacity could rise by 8.1m tonnes, or 53%, to 23.4m tonnes/year (US)

• Also 5-7 new PDH plants, BASF’s new MTP plant (methane-to-propylene) –

largest single-plant investment ever

Page 24: European polyolefins webinar 24 24

The competition: lower energy costs

• Gas-based plants in the Middle East

• More recently shale gas exploration in North America

“Our main threat is the cost of energy in the US… which puts

Europe and Asia at a distinct disadvantage, and this is of utmost

significance… we need a coherent energy policy.”

“The industry has a track record of crying out against change, but

Europe cannot compete with energy costs elsewhere.”

Karl Foerster, executive director at Plastics Europe

Page 25: European polyolefins webinar 25 25

PolyTalk 2014, 4 November, Brussels

“The US has unbeatable economics, they have cheap feedstocks and

cheap energy, and we will see a wave of products coming across to Europe.”

“My outlook for chemicals in Europe is rather gloomy…In ten years we

won’t have a chemical industry.”

2 weeks later Ratcliffe announced $1bn investment in shale gas

exploration and production in the UK

Jim Ratcliffe, INEOS CEO

Page 26: European polyolefins webinar 26

European investment to import cheap US ethane

Company Location Amount/year Target date

INEOS Rafnes, Norway 400,000

tonnes 2015

INEOS Grangemouth,

UK NA 2016

Borealis Stenungsund,



tonnes Q3 2016

SABIC Teesside, UK NA 2016

Versalis Dunkirk, France NA 2016

Page 27: European polyolefins webinar 27


Page 28: European polyolefins webinar 28

Close-term outlook

• January timing of deliveries crucial

• Low stocks with converters

• High cracker output during holiday season

• Lower ethylene and propylene contracts expected

• January PE PP pricing uncertain

• Time is needed for imports to arrive

Page 29: European polyolefins webinar 29 29


• Euro expected to remain weak against the dollar

• Crude oil to stay low following recent OPEC decision not to

cut output

• European exports to remain viable, imports reduced…

unless Asian prices fall low enough for Europe to become

attractive to importers…

Asian pricing key

Page 30: European polyolefins webinar 30

Europe outlook for 2015

Demand lacklustre – EU growth forecasts revised down

Cefic cuts growth forecast for EU chemicals sector in 2015 to 1% from 1.5%, GDP forecasts also down

Page 31: European polyolefins webinar 31 31

Moody’s rating agency view December

• Europe to remain highest-cost region for ethylene, but margins better due to

weaker oil prices

• Europe remains high compared to Asian naphtha, North American natural

gas, US ethane and propane

Page 32: European polyolefins webinar 32

Increased supply in Asia

• Impact: Likely to exert downward

pressure on PE and PP prices

amid new supply

• China’s Wuhan Petrochemical

and Sichuan Petrochemical also

started operations in 2013

• Producers in Sichuan, located in

inland China, face logistical

issues as facilities are further

from the coast or ports

• Cost of land transport likely to be

higher and delivery times longer

Wuhan: HDPE and LLDPE plants of

300,000 tonnes/year each; 400,000

tonne/year PP plant

Sichuan: 450,000 tonne/year PP plant;

600,000 tonne/year PE plant

Source: ICIS Pricing

Page 33: European polyolefins webinar 33 33


• January monomers to fall.

• Could PE PP producer margins improve again?

• Crude oil to remain low

• Euro to remain weak

• Imports/exports continue to be affected

• More imports but when?

• Asian markets key

Page 34: European polyolefins webinar

Any questions?

Linda Naylor

[email protected]