aromatics & gasoline components overview (epca 2012 presentation)
TRANSCRIPT
Aromatics & Gasoline Components Overview Sean Bartlett , Gasoline Components & Biofuels, EMEA
David Potter, Aromatics & Crude C4 Chain, EMEA
Agenda
• Price trends in 2012
• Fundamentals behind the strength; recurring themes
– Benzene
– Toluene
– MTBE
• Where do we go from here?
NWE benzene & toluene in 2012 : A stellar year
• Strong prices through the year
• Record high benzene price of $1,506.50/mt on September 11
– Benzene premium over naphtha hits seven year high of $631.75/mt on June 8
• Record high toluene price of $1,445/mt on September 24
– Premium of toluene over gasoline hits $387/mt, September 20
Source: Platts
MTBE prices 2012
• All-time record outright price:
- $1,603/mt FOB ARA on April 3
• Factor to Eurobob gasoline through Q3 second highest since 2002:
- 2012 Q1-3 = 1.262
Source: Platts
Prices vs. 2008
2008 2011 2012 to Q3 2012 vs. 2008 (%)
ICE Brent $98.31 $110.84 $112.16 +14.1
Gasoline $836.79 $973.93 $1,042.18 +24.5
Naphtha $791.29 $930.41 $935.18 +18.2
MTBE $947.92 $1,145,95 $1,315.60 +38.8
Benzene $1,020.66 $1,152.64 $1,260.72 +23.5
Toluene $889.90 $1,088.22 $1,200.01 +34.8
Increase in product prices outstrips energy
Source: Platts
Where does the strength come from?
• Cracker rates reduced through the year
– Reduced pygas availability
– Reduced crude C4 and therefore raffinate-1 supply
Steam cracker margins suffer
7 Source: Platts On The Net
Where does the strength come from?
• Cracker rates reduced through the year. Reformers continue to run reduced in Europe and US.
• Lighter feedstocks used
– LPG’s used for large parts of the year due to favourable economics
European naphtha vs. propane
Source: Platts On The Net
Steamcracker product yields
Where does the strength come from?
• Cracker rates reduced through the year. Reformers continue to run reduced in Europe and US
• Lighter feedstocks used
• Inventories reduced:
- ‘Just in time’ policies keep focus on prompt market
- Credit constraints and payment terms
- Production issues lead to price shocks
- Lack of buffer volumes lead to increased volatility. Marginal demand sets direction
2012: Backwardation rules from Q2
Gasoline Brent Crude
Benzene
• No incentive to store • All demand at prompt dates • Perpetual state of short-covering
Source: Platts On The Net
Where does the strength come from?
• Cracker rates reduced through the year. Reformers continue to run
reduced in Europe and US
• Lighter feedstocks used
• Inventories reduced
• Strength in the energy complex
– Firm crude and strong economics for gasoline and gasoline blending,
despite reduced demand overall
2012: NWE benzene vs. naphtha
Average premium = $324.50/mt
Crackers reduced, pygas constrained
Dow’s Terneuzen shutdown
Styrene demand kicks in
Production issues
Source: Platts On The Net
Global benzene markets disconnected
Source: Platts On The Net
Benzene backwardation
Above the line = Backwardation
Below the line = Contango
Source: Platts On The Net
Toluene 2012: Also riding high
• Production remains reduced in Europe • Production in the Americas is also hit • Imports to Europe from US cut back
Source: Platts On The Net
Toluene: NWE still producing below capacity
0
500
1000
1500
2000
2500
3000
2007 2008 2009 2010 2011
Volu
me
(KT)
Year
Western European Toluene: Production vs. Capacity
Capacity
Production
Source: Platts
Firm US toluene reduces NWE import opportunities
Source: Platts On The Net
MTBE prices 2012
Latin American Export Demand
Extra imports kill factor
Source: Platts On The Net
MTBE supply
• Inventories depleted even though producers maximise run-rates:
- Prolonged period of backwardation, lack of incentive to store
- Sporadic feedstock shortages since July 2011 due to low utilization rates at NWE crackers (petrochemical margins poor)
• External re-supply in NWE limited:
- North West Europe/Singapore price spread at record highs, 2012 average $170/mt v 2011 average of $45/mt, but
- Arab Gulf product committed term to Asia?
- Increased demand for better/cleaner octanes in Arab Gulf
- Backwardation and volatility in NWE price made moving product risky
Flows/Interregional dynamics
MTBE demand
Demand maintained despite high factors to Ebob and gasoline backwardation:
- Record high gasoline-naphtha spreads seen, $219.50/mt June 25;
Strongest year for Ebob crack in history of Platts quote
Marginal blending demand minimal due to gasoline backwardation,
but refining margins on gasoline “never better”
- South American demand for octanes unable to be satisfied by traditional
sources of supply on the US Gulf Coast
Main driver of large price movements.
Breaking the cycle
• Economic conditions remain difficult, no incentive for the industry to change the current operational model
• Energy complex backwardated right through the barrel
• Volatility and backwardation discourages storing and inter-regional flows
