Global Light Olefins Market Outlook

Impact Of A Global Recession

Petrochemical Feedstock Association of the Americas Houston !"

#a$ %& %''(

Chuck Carr
Director , Propylene Studies CMAI !ouston, "# ccarr$c%aiglobal&co%
Singapore Shanghai Feedstock Houston New York London Dsseldorf Dubai Petrochemical Association of the Americas - May 2009

Petroche%ical Supply Chain Dyna%ics

Consu%ers )etail Con(erters

'nergy

Petroche%icals

Deri(ati(es

Petrochemical Feedstock Association of the Americas - May 2009

Global Light Olefins Market Outlook

Current Market Conditions I%pact of 'cono%ic * 'nergy +actors ,alancing -e. Capacity * Slo.ing De%and Gro.th Cycle "rough Conditions /nder.ay 0uestions * Ans.ers
Petrochemical Feedstock Association of the Americas - May 2009

)urrent State of the *ndustr$

#arket Fundamental
De%and Supply Capacity Cash Costs Sector Prices Chain Margins

Status

+hat it is !elling ,s

Slow reco-er$ from ./'0 Cautious consu%ers Aggressi-e 1ate )uts Ample and 23panding #o-ing with energ$ Protecting min margins #ost at 5are #inimums Li%ited Market /pside Cyclic Do.nturn /nder.ay Short ter% %argin gains )esponding to slo. de%and !igh Cost ,eing Pushed Out

#arkets ha-e entered a structurall$ long period with muted demand growth more capacit$ still to come4
Petrochemical Feedstock Association of the Americas - May 2009

/&S& )etail Sales

Percent ;<= >ear?>ear Change 14&2 15&2 16&2 12&2 3&2 4&2 5&2 6&2 2&2 6&2 5&2 4&2 3&2 12&2 31 37 38 39 3: :1 :7 :8 :9 :: 21 27 28 29 2: )ecession )ecession )ecession )ecession

Petrochemical Feedstock Association of the Americas - May 2009

/&S& GDP (s& Manufacturing Production

Percent ;<=, Seasonally Ad@usted AnnualiAedChange
12 Forecast 8

2 8 12 18 62 68
SourcesB /S Dept& of Co%%erceC /S +ederal )eser(e ,oardC +orecast CMAI

GDP Manufacturing

22 07 21 07 26 07 27 07 25 07 28 07 24 07 29 07 23 07 2: 07 12 07

Petrochemical Feedstock Association of the Americas - May 2009

/&S& 'thylene Supply?De%and Outlook

Petrochemical Feedstock Association of the Americas - May 2009

!urricane I%pact

"rade data through Dec 23

Petrochemical Feedstock Association of the Americas - May 2009

Petrochemical Feedstock Association of the Americas - May 2009

Petrochemical Feedstock Association of the Americas - May 2009

Petrochemical Feedstock Association of the Americas - May 2009

Petrochemical Feedstock Association of the Americas - May 2009

Global Light Olefins Market Outlook

Current Market Conditions I%pact of 'cono%ic * 'nergy +actors ,alancing -e. Capacity * Slo.ing De%and Gro.th Cycle "rough Conditions /nder.ay Other OlefinsD 0uestions * Ans.ers
Petrochemical Feedstock Association of the Americas - May 2009

#an$ Factors Are )urrentl$ )reating Se-ere 9olatilit$ *n the :lobal #arkets

!he 5ad News

+orse global recession since &(60 7 no one remembers )onsumer ad-erse to spending8 o-erl$ indebted alread$ Auto *ndustr$ li-ing on in-entor$ 7 focused on sur-i-al *nflation likel$ to become a significant issue near term )redit still somewhat restricted8 high debt load might be fatal De-eloped economies in decline 7 rest barel$ growing if at all

Petrochemical Feedstock Association of the Americas - May 2009

#an$ Factors Are )urrentl$ )reating Se-ere 9olatilit$ *n the :lobal #arkets

!he :ood News

#uch lower energ$ prices ;releases< beneficial spending= )onsumers see prices falling for food and other commodities ,nemplo$ment benefits e3tended > foreclosures dela$ed )onstruction costs declining8 interests rates at historic low Ser-ices remain strong 7 especiall$ health care and ;legal< Perception is realit$8 all are engaged in fighting back !rillions being poured into restarting economic growth )hina has the cash ?@A% !rillionB and the manpower to fight this
Petrochemical Feedstock Association of the Americas - May 2009

'cono%ic Gro.th Co%parison

Percent Change 3&2 4&2 5&2 6&2 2&2 6&2 5&2 :2 :6 :5 :4 :3 22 26 25 24 23 12 16 15
Eorld -& A%erica S& A%erica E& 'urope S' Asia -' Asia

;Constant 6229 /&S& Dollars=

Petrochemical Feedstock Association of the Americas - May 2009

,asic Che%icals * Plastics ".o >ear )olling A(erage De%and Gro.th

Million Metric "ons 78 72 68 62 18 12 8 2 :1 :7 :8 :9

".o >ears 'nding inD

:: Current 21 27 28 29 2: 11 17 18

Log& "rend ;Current=

Petrochemical Feedstock Association of the Americas - May 2009

Ma@or Setback In 6223

Global 'thylene De%and Gro.th

Petrochemical Feedstock Association of the Americas - May 2009

Petrochemical Feedstock Association of the Americas - May 2009

Ad(antageB Middle 'ast

Dollars Per "on 6223 Global 'thylene Cash Cost Cur(e 1382 /&S& Gulf Coast -atural Gas F G3&::?MM ,tu 1482 ,rent Crude Oil F G:9&81?,bl ;G17&14?MM ,tu= 1582 1682 1282 382 482 582 682 82 2 62 52 42 32 122 162 152 142 132 Cu%ulati(e 'thylene Capacity ;Million "ons= MD' S'A Alberta -AM SAM -'A E'P

AC'' per metric ton ad-antage in %''0

Petrochemical Feedstock Association of the Americas - May 2009

-orth A%erica Light Olefins ,y Source

'thylene Production by +eedstock
'thane 87<

Propylene Production by Source

St%& Crackers 53<

Others 8< Gas Oil 5<

Propane 19< ,utane 5< Others 7< +CC?Splitters 5:<

-aphtha 19<

6223 "otal Production 69 Million Metric "ons

6223 "otal Production 17&8 Million Metric "ons

Petrochemical Feedstock Association of the Americas - May 2009

-& A%erica 'thylene Production "rends

;< 'thylene ,y +eedstock=

Petrochemical Feedstock Association of the Americas - May 2009

Middle 'ast "akes Market Share

'thylene -et 'Hui(alent 'Iports ,y Country

Petrochemical Feedstock Association of the Americas - May 2009

Global Light Olefins Market Outlook

Current Market Conditions I%pact of 'cono%ic * 'nergy +actors ,alancing -e. Capacity * Slo.ing De%and Gro.th Cycle "rough Conditions /nder.ay Other OlefinsD 0uestions * Ans.ers
Petrochemical Feedstock Association of the Americas - May 2009

J,aseCaseK CaseK,eco%es One >ear)eality Ago JEorst

Global Surplus 'thylene Capacity MA)C! 622: SC'-A)IO

Petrochemical Feedstock Association of the Americas - May 2009

De%and Collapse +orces Slo.er Additions * Closures

'thylene Capacity Additions Lersus De%and Gro.th
De%and change based on 6 >ear rolling a(erage

Petrochemical Feedstock Association of the Americas - May 2009

'thylene Cash Cost ,y +eedstock

!he combination of rising crude oil prices lower natural gas prices and weaker demand for eth$lene in the ,=S= results in a -er$ fa-orable forecast for North America ethane cracking=

Petrochemical Feedstock Association of the Americas - May 2009

'thylene Cash Margins ,y +eedstock

1ein-estment cash margin threshold

Petrochemical Feedstock Association of the Americas - May 2009

"he Gap Continues for Propylene

On Purpose

Petrochemical Feedstock Association of the Americas - May 2009

On Purpose Propylene Capacity In All )egions

"housand Metric "ons
7475 17:2 1763

8376 :22 1:92 588

6227

6223

6217

Petrochemical Feedstock Association of the Americas - May 2009

Moti(ation +or Adding /nitsM

Middle East: PDH/metathesis/HS FCC Advantaged feedstoc s and desi!e to dive!sif" Asia: Metathesis/MTP/PDH Desi!e fo! self s#fficienc" NAM and SAM: PDH Availa$le feedstoc and logistics India: HS FCC %efining &!o'th
Petrochemical Feedstock Association of the Americas - May 2009

Cycle "rough Conditions Ahead

Surplus capacity in basic che%icals and plastics .ill force lo.er utiliAation on a global basis starting end 6223 eItending into 6212& Cash %argins and prices .ill decline reaching botto% of trough le(els for 622:?12& Slo.ing de%and gro.th .ill dri(e surplus capacity to historically high le(els forcing assets to be idled or closed on a global basis&
Petrochemical Feedstock Association of the Americas - May 2009

Dollars Per Metric "on

Petrochemical Feedstock Association of the Americas - May 2009

Lision Of "he -eIt +i(e >ears In Global 'thylene * Deri(ati(es MarketsD

Global de%and gro.th suffers for another year or %ore -ear ter%, ne. capacity slightly delayed but i%pact on %arkets is una(oidable -orth A%erica retains so%e JeIport opportunitiesK but finished goods i%ports .ill continue to accelerate ,otto% of cycle profitability likely to persist for 6 7 years Consolidations and closures occurC reco(ery signs appear by 6216N
Petrochemical Feedstock Association of the Americas - May 2009

!HAND YE, F
)ontact an$ )#A* location to assist in $our petrochemicals market anal$sis

New York Houston

London Duesseldorf

Shanghai

Dubai Singapore

C!'MICAL MA)O'" ASSOCIA"'S, I-C&

Contact Infor%ation A(ailable at )#A*:LE5AL=)E#

Petrochemical Feedstock Association of the Americas - May 2009

/&S& Propylene Supply?De%and Outlook

Petrochemical Feedstock Association of the Americas - May 2009