World Vinyl Forum 2007 Vinyls Industry Update World Vinyl Forum ...
World Vinyl Forum 2007 Vinyls Industry Update World Vinyl Forum ...
World Vinyl Forum 2007 Vinyls Industry Update World Vinyl Forum ...
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<strong>Vinyl</strong>s <strong>Industry</strong> <strong>Update</strong><br />
<strong>World</strong> <strong>Vinyl</strong><br />
<strong>Forum</strong><br />
September <strong>2007</strong><br />
Singapore<br />
Shanghai<br />
<strong>World</strong> New <strong>Vinyl</strong> York<br />
<strong>Forum</strong><br />
London<br />
<strong>2007</strong><br />
Houston<br />
Steve Brien<br />
Global Business Director<br />
Chlor-Alkali & <strong>Vinyl</strong>s<br />
SBrien@cmaiglobal.com<br />
281-752-3237<br />
Düsseldorf<br />
Dubai
Plastics Compete with Other Plastics &<br />
Traditional Materials…<br />
PET<br />
PS<br />
Wood<br />
LL/LDPE<br />
Glass<br />
Paper<br />
PP<br />
Aluminum<br />
PVC<br />
ABS<br />
Steel<br />
HDPE<br />
<strong>World</strong> <strong>Vinyl</strong> <strong>Forum</strong> <strong>2007</strong>
Global Plastics Consumption<br />
<strong>2007</strong><br />
PVC<br />
19%<br />
PET<br />
7%<br />
PC<br />
2%<br />
HDPE<br />
17%<br />
LLDPE<br />
11%<br />
ABS<br />
4%<br />
PS<br />
6%<br />
PP<br />
24%<br />
LDPE<br />
10%<br />
<strong>World</strong> Polymer Demand = 183 Million Metric Tons<br />
<strong>World</strong> <strong>Vinyl</strong> <strong>Forum</strong> <strong>2007</strong>
Global earnings remain strong despite record energy<br />
prices. Additions of low-cost production will generate<br />
somewhat higher global earnings in the future.<br />
$200<br />
$175<br />
$150<br />
$125<br />
$100<br />
$75<br />
$50<br />
$25<br />
$0<br />
-$25<br />
-$50<br />
-$75<br />
Global Basic Chemicals and Plastics<br />
Segment Contribution to Weighted Average EBIT<br />
Olefins<br />
Current Dollars per Metric Ton<br />
Aromatics<br />
Energy<br />
Future<br />
Markets<br />
Benefits<br />
Took the<br />
From<br />
Peak…<br />
More<br />
but<br />
Low Not Cost the<br />
Capacity<br />
Span<br />
Chlor-Alkali<br />
85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15<br />
<strong>World</strong> <strong>Vinyl</strong> <strong>Forum</strong> <strong>2007</strong><br />
Re-Investment<br />
Level<br />
Earnings<br />
Methanol<br />
Plastics
Capital Costs<br />
Process<br />
EPC Cost / Ann.<br />
Ton ‘00-’03<br />
EPC Cost / Ann.<br />
Ton <strong>2007</strong><br />
Inflator Factor:<br />
’07 X ‘03<br />
Ethylene<br />
500 – 550 800 - 900 1.6 – 1.8<br />
Methanol 250 – 300 400 - 500 1.6 – 1.8<br />
HDPE<br />
650 – 700 1,000 – 1,200 1.6 - 1.8<br />
Aromatics<br />
600 – 650 1,000 – 1,100 1.6 - 1.8<br />
<strong>Vinyl</strong>s<br />
(Chlorine to <strong>Vinyl</strong>s)<br />
360 – 380 580 – 680 1.6 - 1.8<br />
The pattern repeats across numerous processes / products<br />
<strong>World</strong> <strong>Vinyl</strong> <strong>Forum</strong> <strong>2007</strong>
Key Driver on the Capital Is Higher<br />
Material Costs<br />
Material<br />
Cost : 1Q 2002<br />
($/Ton)<br />
Cost : 4Q 2006<br />
($/Ton)<br />
Inflator Factor<br />
’06 X ‘02<br />
Carbon Steel<br />
~ 200<br />
~ 900<br />
4.5<br />
316 Stainless<br />
~ 2,000<br />
~ 4,500<br />
2.2<br />
Nickel<br />
~ 7,000<br />
~ 35,000<br />
5.0<br />
Aluminum<br />
~ 1,400<br />
~ 2,500<br />
1.8<br />
Zinc<br />
~ 1,000<br />
~ 3,500<br />
3.5<br />
Stone & Webster / COMEX / London Metals Exchange Data<br />
<strong>World</strong> <strong>Vinyl</strong> <strong>Forum</strong> <strong>2007</strong>
Dollars per Barrel<br />
80<br />
70<br />
60<br />
50<br />
40<br />
30<br />
20<br />
10<br />
0<br />
Natural Gas vs. Crude Oil<br />
Dollars per MMBtu<br />
10<br />
1991 1993 1995 1997 1999 2001 2003 2005 <strong>2007</strong> 2009 2011<br />
9<br />
8<br />
7<br />
6<br />
5<br />
4<br />
3<br />
2<br />
1<br />
0<br />
Natural Gas, Contract Burner Tip<br />
Crude Oil, WTI<br />
<strong>World</strong> <strong>Vinyl</strong> <strong>Forum</strong> <strong>2007</strong>
Dollars per MMBtu<br />
12<br />
Natural Gas vs. Crude Oil<br />
10<br />
8<br />
6<br />
4<br />
2<br />
0<br />
1991 1993 1995 1997 1999 2001 2003 2005 <strong>2007</strong> 2009 2011<br />
Crude Oil, MMBtu<br />
Natural Gas<br />
<strong>World</strong> <strong>Vinyl</strong> <strong>Forum</strong> <strong>2007</strong>
Chlor-alkali/<strong>Vinyl</strong>s Flow Chart<br />
Chlor-Alkali<br />
Caustic<br />
Direct<br />
Chlorination<br />
Ethylene<br />
Dichloride<br />
(EDC)<br />
<strong>Vinyl</strong><br />
Chloride<br />
(VCM)<br />
Polyvinyl<br />
Chloride<br />
(PVC)<br />
Ethylene<br />
OxyChlor<br />
Unit<br />
Hydrochloric<br />
Hydrogen<br />
Acid Chloride (HCL)<br />
Chlorine<br />
Oxy-<br />
Chlorination<br />
Oxygen<br />
HCL<br />
MDI/TDI<br />
<strong>World</strong> <strong>Vinyl</strong> <strong>Forum</strong> <strong>2007</strong>
U.S. Ethylene Cash Costs Rose with Higher Energy<br />
Prices<br />
Cents Per Pound<br />
40<br />
Since 2000, U.S. ethylene producers<br />
Forecast<br />
35<br />
have witnessed a step change in<br />
ethylene production cash costs,<br />
largely attributable to higher energy<br />
30<br />
and feedstock costs<br />
25<br />
20<br />
15<br />
10<br />
5<br />
0<br />
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11<br />
<strong>World</strong> <strong>Vinyl</strong> <strong>Forum</strong> <strong>2007</strong>
U.S. ECU Cash Costs Followed As Well<br />
Dollars per Short Ton<br />
350<br />
Since 2000, U.S. Chlor-Alkali<br />
producers have also witnessed a<br />
300<br />
step change in production cash<br />
costs, largely attributable to higher<br />
250 energy and feedstock costs<br />
Forecast<br />
200<br />
150<br />
100<br />
50<br />
0<br />
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11<br />
<strong>World</strong> <strong>Vinyl</strong> <strong>Forum</strong> <strong>2007</strong>
U.S. PVC Cash Costs<br />
Dollars Per Metric Ton<br />
1000<br />
900<br />
800<br />
700<br />
600<br />
500<br />
400<br />
300<br />
200<br />
100<br />
0<br />
-100<br />
Forecast<br />
90 92 94 96 98 00 02 04 06 08 10<br />
Ethylene<br />
Chlorine<br />
Other Cash Costs<br />
<strong>World</strong> <strong>Vinyl</strong> <strong>Forum</strong> <strong>2007</strong>
Regional PVC Netback Comparison<br />
After Disc. & Freight<br />
Dollars Per Metric Ton<br />
1,100<br />
1,000<br />
900<br />
800<br />
700<br />
600<br />
500<br />
400<br />
300<br />
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11<br />
NAM Contract-Market WEP Contract-Market NEA Spot<br />
<strong>World</strong> <strong>Vinyl</strong> <strong>Forum</strong> <strong>2007</strong>
PVC<br />
<strong>World</strong> <strong>Vinyl</strong> <strong>Forum</strong> <strong>2007</strong>
<strong>World</strong> PVC Consumption Detail<br />
*5.0% AAGR 07-12<br />
Wire & Cable 7%<br />
All Others 17%<br />
*5.4%<br />
*3.8%<br />
Pipe & Fittings 39%<br />
*6.0%<br />
Film & Sheet 17%<br />
*5.9%<br />
Bottles 2% Profiles & Tubes 18%<br />
*4.1% *4.7%<br />
<strong>2007</strong> Total Domestic Demand = 33.5 Million Metric Tons<br />
<strong>World</strong> <strong>Vinyl</strong> <strong>Forum</strong> <strong>2007</strong>
<strong>World</strong> PVC Capacity<br />
Other Regions<br />
15%<br />
Asia<br />
27%<br />
1992<br />
North<br />
America<br />
28%<br />
West Europe<br />
26%<br />
South<br />
America<br />
4%<br />
Total Capacity = 22 Million Metric Tons<br />
Other Regions<br />
13%<br />
2012<br />
North<br />
America<br />
19%<br />
South<br />
America<br />
4%<br />
Asia<br />
50%<br />
West Europe<br />
14%<br />
Total Capacity = 50 Million Metric Tons<br />
<strong>World</strong> <strong>Vinyl</strong> <strong>Forum</strong> <strong>2007</strong>
Regional Demand Comparison<br />
Domestic Demand Growth Rates<br />
2002-<strong>2007</strong> <strong>2007</strong>-2012<br />
North America<br />
0.2 1.8<br />
West Europe<br />
1.9 0.7<br />
Northeast Asia<br />
7.9 7.0<br />
<strong>World</strong> 5.1 5.0<br />
<strong>World</strong> <strong>Vinyl</strong> <strong>Forum</strong> <strong>2007</strong>
PVC Trade Flows<br />
1990,2000, 2010<br />
.40 .54<br />
-.23 .30<br />
-.15 2.0<br />
Million Metric Tons<br />
NAM<br />
WEP<br />
NEA<br />
<strong>World</strong> <strong>Vinyl</strong> <strong>Forum</strong> <strong>2007</strong>
What Factors Influence China<br />
PVC Growth<br />
• Developing economy<br />
– PVC is durable and<br />
a relatively cheap building<br />
block<br />
• Huge construction<br />
sector<br />
– Strong GDP,<br />
most populous country<br />
• Push for self reliance<br />
• 2008 Beijing Olympics<br />
<strong>World</strong> <strong>Vinyl</strong> <strong>Forum</strong> <strong>2007</strong>
What Makes China Different<br />
Chlor-Alkali<br />
Anhydrous<br />
HCL<br />
Caustic<br />
Soda<br />
Coal<br />
Lime<br />
Calcium<br />
Carbide<br />
Acetylene<br />
<strong>Vinyl</strong><br />
Chloride<br />
(VCM)<br />
Polyvinyl<br />
Chloride<br />
(PVC)<br />
<strong>World</strong> <strong>Vinyl</strong> <strong>Forum</strong> <strong>2007</strong>
Thousand Metric Tons<br />
500<br />
China and PVC<br />
0<br />
-500<br />
-1000<br />
-1500<br />
Wire &<br />
Cable<br />
6%<br />
All Others<br />
21%<br />
Pipe & Fittings<br />
42%<br />
-2000<br />
-2500<br />
Film & Sheet<br />
21%<br />
Bottles<br />
2%<br />
Profiles & Tubes<br />
8%<br />
China Demand by Application<br />
2001 2002 2003 2004 2005 2006 <strong>2007</strong> 2008 2009 2010 2011<br />
PVC Net Trade<br />
<strong>World</strong> <strong>Vinyl</strong> <strong>Forum</strong> <strong>2007</strong>
China Becoming Self-Sufficient<br />
PVC, Million Metric Tons<br />
16<br />
14<br />
12<br />
10<br />
8<br />
6<br />
4<br />
2<br />
0<br />
Self-Sufficient<br />
Sufficient<br />
01 02 03 04 05 06 07 08 09 10 11<br />
Domestic Demand<br />
Net Imports<br />
<strong>World</strong> <strong>Vinyl</strong> <strong>Forum</strong> <strong>2007</strong><br />
Self-Sufficiency, Percent<br />
Self-Sufficiency<br />
Sufficiency<br />
1.00<br />
0.95<br />
0.90<br />
0.85<br />
0.80<br />
0.75<br />
0.70<br />
0.65<br />
0.60<br />
0.55<br />
0.50<br />
0.45<br />
0.40<br />
0.35
Million Metric Tons<br />
3.5<br />
3.0<br />
<strong>World</strong> Net PVC Capacity Vs.<br />
<strong>World</strong> PVC Margin<br />
High Capacity<br />
Additions<br />
Dollars Per Metric Ton<br />
350<br />
300<br />
2.5<br />
2.0<br />
1.5<br />
1.0<br />
0.5<br />
0.0<br />
250<br />
200<br />
150<br />
100<br />
50<br />
0<br />
-0.5<br />
-50<br />
1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 <strong>2007</strong> 2009 2011<br />
<strong>World</strong> PVC Net Capacity<br />
<strong>World</strong> PVC Margin<br />
<strong>World</strong> <strong>Vinyl</strong> <strong>Forum</strong> <strong>2007</strong>
<strong>Vinyl</strong>s vs. Aluminum vs. Plastics<br />
Market Share, Percentage<br />
100<br />
90<br />
80<br />
70<br />
60<br />
50<br />
40<br />
30<br />
20<br />
10<br />
0<br />
Aluminum<br />
PVC<br />
PET<br />
HDPE<br />
LDPE<br />
LLDPE<br />
PP<br />
PS<br />
Containers & Packaging<br />
Durables<br />
Machinery<br />
Construction<br />
Non Durables<br />
Other<br />
Transportation<br />
Electrical<br />
<strong>World</strong> <strong>Vinyl</strong> <strong>Forum</strong> <strong>2007</strong>
<strong>Vinyl</strong>s vs. Aluminum vs. Polymers<br />
Million Metric Tons<br />
70<br />
60<br />
50<br />
40<br />
30<br />
20<br />
10<br />
0<br />
Aluminum PET Total PE PP PVC Styrenics<br />
PS<br />
ABS<br />
EPS<br />
<strong>World</strong> <strong>Vinyl</strong> <strong>Forum</strong> <strong>2007</strong>
Relative Demand Growth<br />
Demand Growth %, 2002-<strong>2007</strong><br />
10<br />
GDP<br />
8<br />
6<br />
4<br />
2<br />
0<br />
-2<br />
Aluminum PET Container<br />
Glass<br />
PS PE PP PVC<br />
<strong>World</strong> <strong>Vinyl</strong> <strong>Forum</strong> <strong>2007</strong>
PVC vs. Aluminum<br />
U.S. Dollars Per Metric Ton<br />
3,000<br />
Crude Oil, U.S. Dollars Per Barrel<br />
120<br />
2,500<br />
2,000<br />
1,500<br />
1,000<br />
500<br />
100<br />
80<br />
60<br />
40<br />
20<br />
0<br />
0<br />
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11<br />
Crude Oil, Brent NAM PVC (after disc.)<br />
ALU (3 mth LME) Alumina Forecast<br />
<strong>World</strong> <strong>Vinyl</strong> <strong>Forum</strong> <strong>2007</strong>
North America PVC Consumption<br />
Profiles & Tubes Pipe and Fittings<br />
2010<br />
2000<br />
1990<br />
26%<br />
24%<br />
20%<br />
46%<br />
45%<br />
41%<br />
1990<br />
5%<br />
16%<br />
9%<br />
3%<br />
2000<br />
5%<br />
15%<br />
3%<br />
1%<br />
2010 4% 13%<br />
3%<br />
1%<br />
Wire and Cable<br />
All Others<br />
Film & Sheet<br />
Bottles<br />
<strong>World</strong> <strong>Vinyl</strong> <strong>Forum</strong> <strong>2007</strong>
• Growing at 5% per year<br />
driven by:<br />
– China and developing<br />
countries<br />
– Construction<br />
• North America PVC<br />
market has changed<br />
• Trade & Capacity trends<br />
have shifted<br />
• Margins – regional<br />
variance<br />
• Prices higher forever<br />
PVC Market Factors<br />
Wire &<br />
Cable<br />
7%<br />
Film & Sheet<br />
17%<br />
Bottles<br />
2%<br />
<strong>World</strong> <strong>Vinyl</strong> <strong>Forum</strong> <strong>2007</strong><br />
PVC Per Capita Consumption<br />
KG Per Person<br />
2001 2006 2011<br />
<strong>World</strong> 4 5 6<br />
China 4 7 9<br />
US 19 21 22<br />
India 1 1 2<br />
West Europe 14 14 14<br />
CIS 1 3 4<br />
Central Europe 4 6 8<br />
Africa 0 0 0<br />
All Others<br />
17%<br />
Pipe & Fittings<br />
40%<br />
Window Profiles<br />
& Tubes 17%<br />
Total <strong>World</strong> Demand = 33.5 Million Metric Tons
PVC - The Future<br />
• Capacity will be built in Asia to meet demand<br />
• China will become a net exporter of PVC<br />
• Important demand potential in Central Europe/CIS<br />
and Africa<br />
• Prices levels will be higher in the future due<br />
to higher energy costs<br />
• PVC will remain a leading infrastructure building<br />
product<br />
<strong>World</strong> <strong>Vinyl</strong> <strong>Forum</strong> <strong>2007</strong>
CMAI & OUR CLIENTS<br />
Providing high quality, client-focused<br />
services directed towards developing<br />
valuable relationships for now…<br />
and in the future<br />
Thank you for your time<br />
<strong>World</strong> <strong>Vinyl</strong> <strong>Forum</strong> <strong>2007</strong>
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