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Global Vinyls:

Shale Gas as Driver

Joel Lindahl, Director Chlor-Alkali & Vinyls


Joel.Lindahl@ihs.com
Phone: 1 (281) 752-3218
Vinyl India April 2013

The Vinyl Chain in the Shale Gas Era


The vinyl chain is.
Energy intensive via chlorine
And, connected to oil/gas through ethylene

Changed by the Shale Gas Era


North American chemical rebirth is underway
US chlor-alkali and vinyl producers are globally

advantaged
But what does it mean to the global landscape?
2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Shale: Double Benefit to Vinyls Chain


Electricity

Salt

Caustic

OxyChlor
EDC

HCL

Direct
Chlor EDC

VCM

Chlorine
Ethylene

2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

PVC

U.S. Energy Cost Structure:


The Bedrock for the New Landscape
Low cost gas
Chlorine

derivatives,
vinyls go
offshore
.Changing

trade
Generating

caustic soda
2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Low Cost Electricity: First Advantage

2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

The United States Exports to the World

2007
2012
2017

PVC Net Trade, Million Metric


Tons

2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

The US Exports the Shale Advantage


Million Metric Tons

2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Shale: Double Benefit to Vinyls Chain


Electricity

Salt

Caustic

OxyChlor
EDC

HCL

Direct
Chlor EDC

VCM

Chlorine
Ethylene

2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

PVC

NAMs Low Cost Ethylene Is Hard to Beat

Ethylene Aggregate Demand

2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Announced (-000- MT)


BASF/Total (Port Arthur)
ChevronDrives
Phillips (Cedar
Shale
NewBayou)
Ethylene
Dow (Taft / Freeport)
inEastman
North America
Equistar (All locations)
Exxon (Baytown)
Formosa (Point Comfort)
Ineos (Chocolate Bayou)
Oxy (Ingleside)
Sasol (Lake Charles)
Shell (Northeast)
Westlake (Lake Charles/Calvert City)
Williams (Geismar)
Nova (Sarnia)
Braskem/Idesa (Mexico)
Total
Cumulative
Total
* Shell, NOVA, and Oxy capacity
additions shown are
IHS estimates

2012-2014
180

Projects

386
90
521

10

1500
1500

1500
800
107
550*
1400
1000*
310
300

1,894

2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Dow, Shell, NOVA, and Oxy capacity additions shown are CMAI estimates

2016-2020

250*
1000
9,500
11,394
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U.S. PVC Cost Leadership Shale Part II


* NEA excludes China

Integrated - Asset Sharing Method

ADVANTAGE
ADVANTAGE $150
$150 +
+

2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
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11

NAM Profits Remain Highest

Avg. diff. = $130 US per MT

2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Consequences for North America


Vinyls: Future Looks Different
Past: PVC producers stood alone, often buying chlorine

and ethylene
Present: Consolidation, Chlor-alkali integration strategies

completing, gained caustic soda benefit


Next Phase: Vinyls producers focus on ethylene

integration strategy
Large Vinyls producers populate top tier of chlor-alkali

producers
Chain operating rates depend on global picture
Differentiation not chlor-alkali, it is ethylene
2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

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Integration Drives Chlor-Alkali Investment

2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

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Who Benefits?
Implications along the Value Chain
Ethylene

Chlorine

EDC

VCM

PVC Resin

Compounding

Fabrication

Full Chain Integrated Players


Formosa, Westlake

Partially Integrated Players


Oxy

Non Fully Integrated Players


PPG/Georgia Gulf

Non Fully Integrated Players


Shintech

Non Fully Integrated Players


Dow

Non Fully Integrated Players

Mexichem
Pemex

Mexichem, CertainTeed

Non Fully Int. Players

Specialties

Pemex

PolyOne

2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

PVC Converters

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Global Shaping of Chlor-Alkali/Vinyls

North America
Shale Gas Changing the Industry

Asia
Overcapacity Makes the Market

Europe
Challenges of Technology, Demand, Margins
2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

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PVC Capacity China and Rest of World


Total Global Capacity, Million Metric Tons
Avg. Demand Growth
2007 2017:
1.1 Million Metric Tons

2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

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West Europe PVC: Issues Ahead


Poor growth

profile
High cost

structure
Old technology

in chlor-alkali
Lack of

reinvestment

2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

(% AAGR = 07-12/12-22)

Top European PVC Producers


More Consolidation Likely and Beneficial

Picture Source: INEOS

2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Regional Realities
North America
Able to make money with shale gas advantage
Reinvesting and expanding

Europe
Lights flickeringexpensive energy
Weak economy keeps Europe from growing, reinvesting

Asia/China
Still the growth engine, but severely overbuilt
Demand growing, but at slower pace

India, Brazil, etc huge potential met mostly by imports


2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

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