global macroeconomic outlook and key trends in petrochemicals
TRANSCRIPT
Global macroeconomic outlook and key trends in petrochemicals
Joseph Chang, Global Editor, ICIS Chemical Business
APLA virtual annual meeting 2020
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65Ju
l-0
8
Jan
-09
Jul-
09
Jan
-10
Jul-
10
Jan
-11
Jul-
11
Jan
-12
Jul-
12
Jan
-13
Jul-
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Jan
-14
Jul-
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Jan
-15
Jul-
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Jan
-16
Jul-
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Jan
-17
Jul-
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Jan
-18
Jul-
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Jan
-19
Jul-
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Jan
-20
Jul-
20
US
Eurozone
China
EXPANSION
CONTRACTION
NOTE: Figures through Sep 2020, US = ISM, Eurozone = IHS Markit, China = Caixin
US leads withall 3 regions nowIn expansion
Global Manufacturing PMI
5.0
7.0
9.0
11.0
13.0
15.0
17.0
19.0
Jan
-07
No
v-07
Sep
-08
Jul-
09
May
-10
Mar
-11
Jan
-12
No
v-12
Sep
-13
Jul-
14
May
-15
Mar
-16
Jan
-17
No
v-17
Sep
-18
Jul-
19
May
-20
US light vehicle sales (SAAR)
Source: US Bureau of Economic Analysis (BEA)
US automotive and housing – V-shaped recovery
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Jan
-07
No
v-07
Sep
-08
Jul-
09
May
-10
Mar
-11
Jan
-12
No
v-12
Sep
-13
Jul-
14
May
-15
Mar
-16
Jan
-17
No
v-17
Sep
-18
Jul-
19
May
-20
US housing starts (SAAR)millions thousands
Source: US Census Bureau
-18%
-79%
-43%
+0.5% +9%+12%
+17% +12%
+13%
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Jan Feb Mar Apr May Jun Jul Aug Sep
China vehicle sales
2019 2020
Source: China Association of Automobile Manufacturers (CAAM)
China, Europe automotive trends
millions
Source: European Automobile Manufacturers Association (ACEA)
-8% -7%
-55%
-76%-52% -22%
-6%
-19% +3%
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
Jan Feb Mar Apr May Jun Jul Aug Sep
EU passenger car registrations
2019 2020
1st YoY gain
millions
6 consecutive months of YoY gains
Brazil automotive market – less robust recovery
5
20
70
120
170
220
270
320
370
Brazil light vehicle sales
10% 15%-12%
-74%-73%
-36%-21% -15% 0%
0
50
100
150
200
250
300
Jan Feb Mar Apr May Jun Jul Aug Sep
Brazil light vehicle sales
2019 2020
thousands thousands
Source: ANFAVEA (National Association of Vehicle Manufacturers)
Latin America vs World – GDP recovery 2021
6
-4.4%
-5.8%
-3.3%
-8.1%
5.2%
3.9%
6.0%
3.6%
-9.0%
-7.0%
-5.0%
-3.0%
-1.0%
1.0%
3.0%
5.0%
7.0%
World Advanced Emerging Latin America
GDP % change
2020 2021
Source: International Monetary Fund (IMF)
Key trend – oil, chemical companies slash capex
• Even pre-coronavirus, crude oil collapse leads to big capex cuts by oil companies, also impacting their petrochemical expansion plans
• Chemical companies also cutting capex heavily
• Projects slowed/delayed -LyondellBasell Texas PO/TBA, ExxonMobil deferring new projects
• Final investment decisions (FID) slow to come, if at all
• Sharpens investment focus
7
CompanyCapex 2020
original
Capex 2020
revised% Change
Shell $25bn $20bn or less -20%
Chevron $20bn $14bn -30%
Saudi Aramco $35-40bn $25bn -33%
ExxonMobil $33bn $23bn -30%
Total $18bn <$15bn -17%
Eastman $450-475m $325m -30%
LyondellBasell $2.4bn $1.9bn -21%
Dow $1.5bn $1.25bn -17%
Westlake $675m $525m -22%
Huntsman $300-325m $225-235m -26%
Key trend – ‘minimizing molecular tourism’ (keep it local)
• Shift in mindset and investment dollars to localization of supply
• Drivers include:
o Supply disruptions brought into greater focus amid Covid
o Tariffs and trade uncertainty
o Logistics costs – freight, storage
• For PE, PP, that means more direct investment in China, India
o Saudi Aramco/ADNOC target India for mega project
o ExxonMobil’s next major project in Guangdong, China
o Russia’s SIBUR starts construction on 2.3m tonnes/year PE, 400kt PP capacity in East – close to border with China
o LyondellBasell/Bora JV in China (800kt PE, 600kt PP)
o “The thesis around that investment is producing in China, for China” – LyondellBasell CEO Bob Patel
8
Top: Saudi Aramco/ADNOC India JV
Bottom: LyondellBasell Bora China JV
US ethylene capacity additions
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
9Source: ICIS Supply and Demand Database, as of Oct 2020
‘000 tonnes/year
1st wave
2nd wave10.9m tonnes/year
4.8m tonnes/year
China ethylene capacity additions
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
10Source: ICIS Supply and Demand Database, as of Oct 2020
‘000 tonnes/year
During US 1st wave During US 2nd wave
9.2m tonnes/year16.4m tonnes/year
US vs China ethylene capacity additions
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
2017-2019
11Source: ICIS Supply and Demand Database, as of Oct 2020
‘000 tonnes/year
US outpaces
China outpaces2020-2024
Key trend – European oil majors pivot to green energy
• Total, BP in massive pivot to green energyo Solar, wind, EV batteries, EV charging stations, biofuels,
hydrogen
• Drivers include:o EU’s European Green Deal – zero net GHG emissions by
2050o Rapid electric vehicle (EV) adoption to dramatically reduce
oil demando Future growth of plastics recycling
• Implications for petrochemicalso More oil companies may de-prioritize chemicals investment
in favor of green energyo Refinery shutdowns and conversions to bio-refineries to
reduce naphtha supply for petrochemicals in some regionso Less need for new crackers IF more plastics recycling
o Total sees plastics recycling rates rising from 7% today to 40-50% by 2050, reducing need for virgin plastics
12
Recent bio-refinery conversion announcements
13
Renewables offer an simpler step to stay in a traditional space, limit investment and fit into the environmental shift. COVID-19 has spurred a number of refiners to make this step.
Company Location Project Capacity Notes
Marathon Petroleum Martinez, California, USPotential conversion to
renewable fuels48 kbd
Closure of existing
refinery (166 kbd)
Total Grandpuits, FranceConversion to
renewable fuels7 kbpd
Closure of existing
refinery (101 kbd)
Phillips 66 Rodeo, California, USConversion to
renewable fuels52 kbpd
Closure of existing
refinery (76 kbd)
HollyFrontier Cheyenne, Wyoming, USConversion to
renewable diesel13 kbpd
Closure of existing
refinery (45 kbd)
Source: ICIS Analytics