Acetyls Chain - World Market Overview

Keiji Wakatsuki

Chemicals Committee Meeting at APIC 2015

Seoul, 8 May 2015

APIC 2015ACETIC ACID/ACETYLS CHAIN

Vinyl AcetateMonomer

PVOH/PVA

EVA/VAEPVB/EVOH

Ethylene

Methanol Acetic Acid

Natural Gas

PTA Polyester/PET Resin

AceticAnhydride

EsterSolvents

Coal

MCAA

Ethyl/ButylAcetate

Acetate Flake/Acetate Tow

Source: Tecnon OrbiChem

Chlorine

Ethanol

Butanol

• Global acetic acid prices increased in late 2013/early 2014 due to long-term methanol plant outages in Southeast Asia and unplanned production problems for acetic acid in Saudi Arabia and the United States.

• Acetic acid prices peaked in Q2 2014 amid ongoing planned turnarounds in the US Gulf, unplanned production problems in other regions and persistent high methanol prices. An unplanned outage in the United Kingdom in Q3 supported prices in North America and Europe.

• US Gulf Coast producers maintained high utilisation rates – above 90% --in 2014 despite the ‘force majeure’ declaration by key downstream VAM and PTA consumers. Steady US economic activity and cheaper feedstock prices should underpin US production in 2015.

• Global utilisation rates were expected to remain close to 70% from 2015-2020 as over-supply conditions persist in China and various macro-economic scenarios keep markets unsteady.

Source: Tecnon OrbiChem

APIC 2015

ACETIC ACID • VINYL ACETATE MONOMER2014 – A Year of Contrasts

250

350

450

550

650

750

850

950

1,050

$/ton

APIC 2015

ACETIC ACID PRICES 2010 - 2015

USGExport

TaiwanImport

EuroContract

ChinaExport

Source: Tecnon OrbiChem

Total =12.9 Million Metric Tons

22%

6%

15%

8%

4%

2%

43%

19%

10%

13%

12%3%

1%

42%

N & S America

W Europe

NE Asia

S & SE Asia

ME & Africa

E Europe

China

Total =12.9 Million Metric Tons

Source: Tecnon OrbiChem

Production Consumption

APIC 2015

WORLD ACETIC ACID SUPPLY & DEMANDBY REGION 2014

VAM32%

Anhydride13%

Ethyl Acetate13%Butyl Acetate

7%

PTA20%

MCAA6%

Others9%

Total = 12.9 Million Metric Tons

Source: Tecnon OrbiChem

APIC 2015

WORLD ACETIC ACID CONSUMPTION 2014

1,000 Metric Tons

0

10

20

30

40

50

60

70

80

90

100

0

5,000

10,000

15,000

2010 2011 2012 2013 2014 2015

VAM

Anhydride

Ethyl Acetate

Butyl/OtherAcetates

PTA

All Others

AA Utilisation

% Utilisation

2014 = 12.9 Million Metric TonsSource: Tecnon OrbiChem

APIC 2015

WORLD ACETIC ACID CONSUMPTION GROWTH

APIC 2015

KEY ACETIC ACID TRADE ROUTES 2014

515

569

40

42

5

140

5

312

60

1,000 Metric Tons

44

29

34

24

123

11

11

Source: Tecnon OrbiChem

Company Country Change Year(ktpa)

Celanese USA 150 2012

Anhui Huayi Coal Chemical China 500 2012

Henan Yima Gas Co China 200 2013

China Great Wall Energy Co China 300 2014

Henan Longyu Coal Chemical China 400 2014

YARACO 2 China 650 2016

Other Projects US, India, etc ~500 2014-17

Reliance India 790 2017-18

BP-Oman Oil Co. Oman 1000 2019-20

APIC 2015

WORLD ACETIC ACID CAPACITY ADDITIONS

Source: Tecnon OrbiChem

• VAM prices increased rapidly in late Q1/Q2 2014 due to a combination of factors – production outages globally, several ‘force majeure’ declarations in the US Gulf, high feedstock costs and logistics/shipping delays. Spot market prices doubled over a period of 4-6 weeks.

• At one point, all four major US Gulf VAM producers were either on ‘force majeure’ or sales allocation during Q2. ‘Force majeure’ declarations remained in place until December as producers carried out further maintenance during Q3/Q4.

• Faced with record high prices and unsure about security of supply, consumers turned to alternative sources for VAM volumes in Q2. Large volumes of VAM were shipped from Singapore, Taiwan and China.

• Chinese VAM producers looked for export opportunities despite concerns expressed by western consumers about product quality. However, as market supplies improved in Q4, spot prices plummeted and Chinese producers cut production rates to avoid end-year inventory builds.

Source: Tecnon OrbiChem

APIC 2015

ACETIC ACID • VINYL ACETATE MONOMER2014 – A Year of Contrasts

700

900

1,100

1,300

1,500

1,700

1,900

2,100

2,300

$/ton

USGExport

EU Spotddp

ChinaImport

APIC 2015

VINYL ACETATE MONOMER SPOT PRICES2011 - 2015

NE AsiaImport cfr

Source: Tecnon OrbiChem

Total =5.8 Million Metric Tons

25%

7%

22%

8%

5%

1%

32%

23%

17%

17%8%

3%

1%

31%

Total =5.8 Million Metric Tons

Source: Tecnon OrbiChem N & S America

W Europe

NE Asia

S & SE Asia

ME & Africa

E Europe

China

Production Consumption

APIC 2015

WORLD VINYL ACETATE SUPPLY & DEMANDBY REGION 2014

PVAc43%

PVOH40%

EVA9%

Others8%

Total = 5.8 Million Metric Tons

APIC 2015

WORLD VAM CONSUMPTION 2014

Source: Tecnon OrbiChem

1,000 Metric Tons

0

10

20

30

40

50

60

70

80

90

100

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2010 2011 2012 2013 2014 2015

PVAc

PVOH

Others

AA Utilisation

% Utilisation

2014 = 5.8 Million Metric TonsSource: Tecnon OrbiChem

APIC 2015

WORLD VAM CONSUMPTION GROWTH

APIC 2015

KEY VAM TRADE ROUTES 2014

52

15183

150

17 175

1,000 Metric Tons

24

243

4

80

40113

102

15

22 22

Source: Tecnon OrbiChem

Company Country Change Year(ktpa)

Inner Mongolia Shuangxin China 200 2011

Sichuan Vinylon Works China 300 2011

Inner Mongolia Mengwei China 200 2011

Shaanxi Yanchang Group China 300 2013

Changdai Singapore 350 2013

China Great Wall Chemical China 450 2013

Various US, Europe ~150 2015-16

Reliance Industries India 300 2018-19

APIC 2015

WORLD VAM CAPACITY ADDITIONS

Source: Tecnon OrbiChem

China74%

Taiwan6%

Japan6%

Singapore5%

South Korea4%

Malaysia4%

India1%

China Total = 10 Million Metric Tons

Source: Tecnon OrbiChem

APIC 2015

ASIAN ACETIC ACID PRODUCTION CAPACITY 2014

Total = 5.38 Million Metric Tons

53%

2%12%

4%

18%

11%

25%

13%

17%7%

25%

13%

VAM

Anhydride

Ethyl Acetate

Butyl Acetate

PTA

Others

Total = 3.18 Million Metric Tons

Source: Tecnon OrbiChem

NE & SE Asia China

APIC 2015

ACETIC ACID DEMAND NE & SE ASIA vs CHINA 2014

0

100

200

300

400

500

600

700

800

Source: Tecnon OrbiChem

1,000 Metric Tons

Excluding China

APIC 2015

ASIAN ACETIC ACID CONSUMPTIONBY COUNTRY 2014

China61%

Taiwan12%

Japan13%

Singapore10%

South Korea4%

China Total = 3.4 Million Metric Tons

Source: Tecnon OrbiChem

APIC 2015

ASIAN VAM PRODUCTION CAPACITY 2014

Total = 1.79 Million Metric Tons

31%

44%

14%

11%

30%

62%

4%4%

PVAc

PVOH

EVA

Others

Total = 1.45 Million Metric Tons

Source: Tecnon OrbiChem

NE & SE Asia China

APIC 2015

VAM DEMAND NE & SE ASIA vs CHINA 2014

0

100

200

300

400

500

600

Source: Tecnon OrbiChem

1,000 Metric Tons

Excluding China

APIC 2015

ASIAN VAM CONSUMPTION BY COUNTRY 2014

APIC 2015

SUMMARY AND CONCLUSIONS

• World acetic acid consumption growth will average 4.0%-4.5% per annum through 2020 with China, Southeast Asia and North America setting the pace. VAM consumption growth will average 3.5%-4.0% per annum through 2020.

• Acetic acid utilisation rates globally are forecast to remain between 68%-70% during the period of 2014-2020 based on current capacity figures. Improved business conditions and further rationalisation could impact operating rates moving forward.

• Acetic acid/VAM prices remain more sensitive to regional supply/demand problems, rather than changes in feedstock prices, but feedstock volatility is a threat throughout the value chain.

• China has emerged as an important exporter of acetic acid, ethyl acetate and VAM, and will continue to export large volumes.

• Currency depreciation and exchange rate fluctuations remain troubling for major acetyls trade partners, producers.

Source: Tecnon OrbiChem

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