Polyamide & Intermediates Markets

(Grace) Shen Hong

Synthetic Fibres Raw Materials Committee Meeting at APIC 2013

Taipei, 10 May 2013

APIC 2013

AGENDA

Polyamide 6 Intermediates

• World Caprolactam Supply and Demand

• Polyamide 6 Demand

• Economic Analysis

• Conclusion

Polyamide 66 Intermediates

• World Adipic Acid Supply and Demand

• World Adiponitrile Supply and Demand

• Polyamide 66 Demand

• Conclusion

2,500

3,000

3,500

4,000

4,500

5,000

5,500

6,000

6,500

7,000

7,500

1984 1988 1992 1996 2000 2004 2008 2012 2016 2020

Growth 3.4% p.a.

Capability to produce

Growth 3.0% p.a.

Growth 2.7% p.a.

Caprolactam Consumption

Including uncertain plants

Including highly probable new plants

Effect of unscheduledplant downtime 2010-2011

Oversupply

Forecast Growth 3.0%

p.a.

Source: Tecnon OrbiChem

APIC 2013

WORLD CAPROLACTAM CAPABILITY vs DEMAND

1,000 Metric Tons

BA

SF

DSM

Ube

Hone

ywel

l

CPD

C

Capro

Corp

Lanx

ess

Sum

itom

o

Dom

o

C.I.

S

Pola

nd

India

Oth

ers

Sin

opec

Bohu

i

Sha

ndong

Hong

ye

Zhe

jiang

Juh

ua

Sha

ndong

Lux

i

Hub

ei S

ann

ing

Fujian

Lihe

ng

Fujian

Tianc

hen-200

0

200

400

600

800

1,000

1,200

Hengyi

Baling

Uncertain New Projects In China

2011

Closure2014

Additions 2012

Additions 2014

Additions 2015-2016

Additions Uncertain

Additions 2013

Fujian

Guangdong

China

China

China

APIC 2013

CAPROLACTAM CAPACITY 2011– 2016

1,000 Metric Tons

Source: Tecnon OrbiChem

2,500

3,000

3,500

4,000

4,500

5,000

5,500

6,000

6,500

7,000

7,500

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Source: Tecnon OrbiChem

APIC 2013

WORLD CAPROLACTAM CAPABILITY vs DEMAND

Rest of the World Caprolactam Consumption

Capability to produce

World Growth 2.7% p.a.

ChinaConsumption

1,000 Metric TonsIncluding uncertain plants

Including highly probable new plants

World Growth 2013-2020 3.0% p.a.

Growth 2013-20208.4% p.a.

1,000 Metric Tons

Source: Tecnon OrbiChem

APIC 2013

WORLD CAPROLACTAM REGIONAL NET TRADE

-800

-700

-600

-500

-400

-300

-200

-100

0

100

200

300

400 S &

SE A

sia

E E

uro

pe

W E

uro

pe

N A

merica

S A

merica

ME &

Africa

Taiw

an &

S K

ore

a

Chin

a2005

2004

2006

2007

2008

2009

2010

Japan

2011

2012

2004

2012

1,000 Metric Tons

Source: Tecnon OrbiChem

APIC 2013

WORLD CAPROLACTAM REGIONAL NET TRADE TRENDS TO 2020

S &

SE A

sia

E E

uro

pe

W E

uro

pe

N A

merica

S A

merica

ME &

Africa

Taiw

an &

S K

ore

a

Chin

a

Japan

Forecast Trend to 2020

-800

-700

-600

-500

-400

-300

-200

-100

0

100

200

300

400

APIC 2013

WORLD POLYAMIDE 6 CONSUMPTION BY END-USE

Source: Tecnon OrbiChem

1,000 Metric Tons

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500

6,000

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Textile Fibre

Bulked Carpet

High Ten Yarn

Staple

PA6 Resin

3.1%

1.8%

4.1%

Growth 2012 - 2020

-2.5%

APIC 2013

WORLD POLYAMIDE 6 DEMAND BY REGION

Source: Tecnon OrbiChem

1,000 Metric Tons

2005

2012

2005

2012

2005

2012

2005

2012

2005

2012

2005

2012

2005

2012

2005

2012

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Nor

thAmer

ica South

America W

est

Euro

pe East

Euro

peM

E & A

frica

S&SE

Asia

Nor

theas

t Asia

China

Textile Filament

High Ten Yarn

BCF & Staple

PA6 Resin

0

500

1,000

1,500

2,000

2,500

3,000

3,500

0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150

$/ton Caprolactam

Brent Crude oil price $/bbl

Cyclohexane

Energy related costs (steam, ammonia, etc.)

Energy dependant costs

Delivery

Packing, loading

Fixed costs of supplying plants

Cats & Chemicals

Fixed costs of caprolactam plant

Cost of Production in Asia

APIC 2013

CAPROLACTAM PRODUCTION COST vs OIL PRICE

Source: Tecnon OrbiChem

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150

$/ton Caprolactam

Cyclohexane

Packing, loading shipping

Fixed costs of supplying plants

Cats & Chemicals Fixed costs of

caprolactam plant

Cost of Production in Asia

Crude Oil Price $/bbl

Delivery

Energy dependant costs

Energy related costs (steam, ammonia, etc.)

11

1 2 3 45

6 78

9

10

12

2009

2008

12

34

5 6

7

89

1011

12

2010

Profit zo

ne

12

34

5

7

6

8 910

1112

2011

1 2

3 4

510

9

8

6 7

11

12

2012

2013

51

2 3

4

6

7

89

10

11

12

APIC 2013

CAPROLACTAM PRODUCTION COST vs OIL PRICE

Source: Tecnon OrbiChem

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150

$/ton Caprolactam

Cyclohexane

Packing, loading shipping

Fixed costs of supplying plants

Cats & Chemicals Fixed costs of

caprolactam plant

Cost of Production in Asia

Crude Oil Price $/bbl

Delivery

Energy dependant costs

Energy related costs (steam, ammonia, etc.)

11

1 2 3 45

6 78

9

10

12

2009

2008

12

34

5 6

7

89

1011

12

2010

Profit zo

ne

12

34

5

7

6

8 910

1112

2011

1 2

3 4

510

9

8

6 7

11

12

2012

2013

51

2 3

4

6

7

89

10

11

121 2

3

APIC 2013

CAPROLACTAM PRODUCTION COST vs OIL PRICE

Source: Tecnon OrbiChem

0

500

1,000

1,500

2,000

2,500

3,000

3,500

0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150

$/ton Caprolactam

Brent Crude oil price $/bbl

Cyclohexane

Energy related costs (steam, ammonia, etc.)

Energy dependant costs

Delivery

Packing, loading

Fixed costs of supplying plants

Cats & Chemicals

Fixed costs of caprolactam plant

Cost of Production in Asia

APIC 2013

CAPROLACTAM PRODUCTION COST vs OIL PRICE

Source: Tecnon OrbiChem

0 1000 2000 3000 4000 5000 6000

0

500

1000

1500

2000

2500

3000

3500

Cumulative Capacity ktpa

US Dollars per Ton

Fixed Cost

Variable Cost

Source: Tecnon OrbiChem

APIC 2013

CAPROLACTAM INDUSTRY CASH COST CURVEOctober 2012

Each Column Represents an Existing Caprolactam Plant

APIC 2013

TIGHTNESS INDEX

(Sloppy)

Over-Supplied75.0%

Loose 84.0%

Balanced 90.0%

Tight 93.7%

Very Tight 96.0%

Markets Utilisation Rate

WorldWorld Capacity

Source: Tecnon OrbiChem

0.6

0.8

1

1.2

1.4

Index

Tightness

Source: Tecnon OrbiChem

For a given year:

World Tightness Index = log10

Capability

Capability - Consumption

Capability = Annual Nameplate Capacity less Capacity off line*

* Due to unscheduled stoppages, not scheduled maintenance turnarounds

APIC 2013

TIGHTNESS INDEX

Source: Tecnon OrbiChem

APIC 2103

WORLD CAPROLACTAM CAPABILITY vs DEMAND

1,000 Metric Tons

2,500

3,000

3,500

4,000

4,500

5,000

5,500

6,000

6,500

7,000

7,500

1984 1988 1992 1996 2000 2004 2008 2012 2016 2020

Growth 3.4% p.a. Growth 3.0% p.a.

Growth 2.7% p.a.

Capability to produce

Caprolactam Consumption

Tightness Index for 2014 = Log10CB

B

C

Including uncertain plants

Including highly probable new plants

APIC 2013

CAPROLACTAM PRICE HISTORY - ASIA

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

1.5

1.6

60 70 80 90 100 110 120 130 140

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

1.5

1.6

60 70 80 90 100 110 120 130 140

Tightness Index

Brent Crude Oil Price $/bbl

$3400$3200$3000$2800$2600$2400$2200$2000

VERY TIGHT

TIGHT

BALANCED

OVER-SUPPLIED(SLOPPY)

LOOSE

H2 2009

H1 2010

H2 2010

H1 2011

H2 2011

H1 2012

H2 2012

H1 2013

Source: Tecnon OrbiChem

APIC 2013

CAPROLACTAM PRICE – ASIA – 2010 by month

2010

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

1.5

1.6

60 70 80 90 100 110 120 130 140

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

1.5

1.6

60 70 80 90 100 110 120 130 140

Tightness Index

Brent Crude Oil Price $/bbl

$3400$3200$3000$2800$2600$2400$2200$2000

H1 2010

H2 2010VERY TIGHT

TIGHT

BALANCED

OVER-SUPPLIED(SLOPPY)

LOOSE

Source: Tecnon OrbiChem

2011

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

1.5

1.6

60 70 80 90 100 110 120 130 140

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

1.5

1.6

60 70 80 90 100 110 120 130 140

Tightness Index

Brent Crude Oil Price $/bbl

$3400$3200

$3000$2800$2600$2400$2200$2000

VERY TIGHT

TIGHT

BALANCED

OVER-SUPPLIED(SLOPPY)

LOOSE

H1 2011

H2 2011

APIC 2013

CAPROLACTAM PRICE – ASIA – 2011 by month

Source: Tecnon OrbiChem

APIC 2013

CAPROLACTAM PRICE – ASIA – H1 2012 by month

H1 2012

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

1.5

1.6

60 70 80 90 100 110 120 130 140

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

1.5

1.6

60 70 80 90 100 110 120 130 140

Tightness Index

Brent Crude Oil Price $/bbl

$3400$3200$3000$2800$2600$2400$2200$2000

VERY TIGHT

TIGHT

BALANCED

OVER-SUPPLIED(SLOPPY)

LOOSE

H1 2012

Source: Tecnon OrbiChem

H2 2012

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

1.5

1.6

60 70 80 90 100 110 120 130 140

Tightness Index

APIC 2013

CAPROLACTAM PRICE – ASIA – 2012 by month

Brent Crude Oil Price $/bbl

$3400$3200$3000$2800$2600$2400$2200$2000

VERY TIGHT

TIGHT

BALANCED

OVER-SUPPLIED(SLOPPY)

LOOSE

H2 2012

Source: Tecnon OrbiChem

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

1.5

1.6

60 70 80 90 100 110 120 130 140

Tightness Index

Brent Crude Oil Price $/bbl

$3400$3200$3000$2800$2600$2400$2200$2000

VERY TIGHT

TIGHT

BALANCED

OVER-SUPPLIED(SLOPPY)

LOOSE

2013

Forecast by the US Energy Information Administration

APIC 2013

CAPROLACTAM 2013 PRICE FORECAST – ASIA(Dec 2012 Forecast)

Source: Tecnon OrbiChem

$2400

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

1.5

1.6

60 70 80 90 100 110 120 130 140

Tightness Index

Brent Crude Oil Price $/bbl

$3400$3200$3000$2800$2600

$2200$2000

VERY TIGHT

TIGHT

BALANCED

OVER-SUPPLIED(SLOPPY)

LOOSE

2014

APIC 2013

CAPROLACTAM 2014 PRICE FORECAST - ASIA

Source: Tecnon OrbiChem

Forecast by the US Energy Information Administration

April 2013

APIC 2013

CONCLUSIONS - POLYAMIDE 6 INDUSTRY

• World caprolactam consumption showed little growth in 2011, then returned to growth in 2012 -- but only in China

• Caprolactam consumption has grown about 18% in 2012 in China, a bounce-back after stagnation in 2011, boosted by both textile applications and engineering plastics applications

• Outside China, caprolactam growth has been zero or negative in 2012• Six new 100 ktpa caprolactam units have been brought on stream in China

in 2012, by Haili (2), Hengyi (2), Hongye (1) and Sinopec (1), doubling China’s capacity within 12 months

• These additions have moved the world caprolactam balance into over-supply, yet more capacity of 400 ktpa will come on stream in H2 2013 and various other projects are under construction or planned in China

• World caprolactam over-supply is thus inevitable over the next few years, possibly mitigated by closure of some old plants

• This has dire consequences for caprolactam industry profitability over the next few years

• Caprolactam producers need to develop and promote PA6 engineering plastics applications in order to boost consumption

Source: Tecnon OrbiChem

1,500

2,000

2,500

3,000

3,500

4,000

4,500

1995 1999 2003 2007 2011 2015 2019

Source: Tecnon OrbiChem

APIC 2013

WORLD ADIPIC ACID CAPABILITY vs DEMAND

Adipic Acid Consumption

ForecastGrowth 2.7%

Capability to Produce

Invista closes 450 ktpaat Wilton & Maitland, rebuilds Orange

Growth 4.0%

1,000 Metric Tons

APIC 2013

WORLD ADIPIC ACID PRODUCERS

Source: Tecnon OrbiChem

1,000 Metric Tons

Invis

ta

Rhod

ia

Asc

end

BA

SF

Asa

hi K

ase

i

Ra

dic

i

Lanx

ess

Uk

rain

e

Lia

oya

ng P

etr

och

em

ica

l

Chin

a S

henm

a

Sha

nd

ong H

ongye

Sha

nd

ong H

aili

Dush

anzi Ti

anli

Hua

lu H

engsh

eng

Chongq

ing F

ux

iang

Ya

ngm

ei Fengx

i

Ka

ilua

n E

nerg

y

Zhejia

ng S

huya

ng0

200

400

600

800

2011→

2013 closure

Additions 2013

Additions 2012

China

Singapore

APIC 2013

WORLD ADIPIC ACID CONSUMPTION BY END-USE

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Polyamide 66

Plasticisers

Polyurethane

Others

Source: Tecnon OrbiChem

1,000 Metric Tons

2.4%

2.9%

2.2%

Growth 2012 - 2020

3.1%

Source: Tecnon OrbiChem

APIC 2013

WORLD ADIPONITRILE CAPABILITY vs DEMAND

1,000 Metric Tons

800

900

1,000

1,100

1,200

1,300

1,400

1,500

1,600

1,700

1,800

1995 2000 2005 2010 2015 2020

AdiponitrileConsumption

Capability to Produce

BASF closes 116 ktpaat Wilton, UK

Growth 3.1%Invista’s 254 ktpa unit atOrange, USA out of action

Assumed new300 kpta plant

ForecastGrowth 2.8%

Capability = 0.95 x Nameplate Capacity

APIC 2013

WORLD POLYAMIDE 66 CONSUMPTION BY END-USE

Source: Tecnon OrbiChem

1,000 Metric Tons

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Textile Fibre

Bulked Carpet

High Ten Yarn

Staple

PA66 Resin

1.7%

2.4%

3.9%

Growth 2012 - 2020

1.9%

APIC 2013

WORLD POLYAMIDE 66 DEMAND BY REGION

Source: Tecnon OrbiChem

1,000 Metric Tons

PA66 Fibre

PA66 Resin

Nor

thAmer

ica South

America W

est

Euro

pe East

Euro

peM

E & A

frica

S&SE

Asia

Nor

theas

t Asia

China

2005

2012

2005

2012

2005

2012

2005

2012

2005

2012

2005

2012

2005

2012

2005

2012

0

200

400

600

800

1,000

1,200

1,400

• The world adipic acid market is seriously oversupplied. China has the biggest adipic acid capacity of any country, but the average utilisationrate in China is now as low as 50%.

• Adipic acid demand for both polyurethane and polyamide applications will grow steadily, with major increases taking place in China

• However, fierce competition will lead to low profit, even for top quality adipic acid producers. A reshaping of the adipic acid industry is possible if the global economy stays volatile in 2013 and beyond

• If adiponitrile capacity is not increased in the near future, adiponitrilewill be extremely tight from 2016, possibly earlier

• PA66 producers have to grapple with high and volatile costs which are likely to persist and may damage long term PA66 growth

• Polyamide 66 resin demand in engineering plastics applications shows more dynamism than polyamide 66 fibre

• PA66 faces substitutional pressure from PA6, due to the widening pricing difference

Source: Tecnon OrbiChem

APIC 2013

CONCLUSIONS - POLYAMIDE 66 INDUSTRY

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