2007 Plastics Processors Conference 2007 Plastics Processors Conference Singapore Singapore Shanghai Shanghai Houston Houston New York New York London London Düsseldorf Düsseldorf Dubai Dubai Global Plastics Industry Update Global Plastics Industry Update Global Plastics Industry Update Howard Rappaport Howard Rappaport Global Practice Leader Global Practice Leader - - Plastics Plastics [email protected][email protected]September 17 September 17 - - 18, 2007 18, 2007 Huntington Beach, CA U.S.A. Huntington Beach, CA U.S.A.
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2007 Plastics Processors Conference2007 Plastics Processors ConferenceSingaporeSingapore ShanghaiShanghai HoustonHouston New YorkNew York LondonLondon DüsseldorfDüsseldorf DubaiDubai
Global Plastics Industry Update Global Plastics Industry Update Global Plastics Industry Update
Howard RappaportHoward RappaportGlobal Practice Leader Global Practice Leader -- PlasticsPlastics
The Third Wave Is Not A MythThe Third Wave Is Not A MythThe Third Wave Is Not A MythMiddle East Capacities, Million Metric TonsMiddle East Capacities, Million Metric Tons
•• PLA (polylactic acid) represents over 40% of the PLA (polylactic acid) represents over 40% of the ““nonnon--petroleum basedpetroleum based”” polymer market todaypolymer market today
•• Projection Projection -- PLA consumption could reach 150 PLA consumption could reach 150 -- 200 200 thousand metric tons by 2011thousand metric tons by 2011
2007 Supply Limiting Events2007 Supply Limiting Events2007 Supply Limiting Events•• May to Oct? May to Oct? -- Metaxylene & Isophthalic Acid Metaxylene & Isophthalic Acid force force
majeuresmajeures–– Isophthalic Acid (PIA): made from metaxylene, critical Isophthalic Acid (PIA): made from metaxylene, critical
modifier for PET to control crystallinity and increase gas modifier for PET to control crystallinity and increase gas barrierbarrier
•• June to August? June to August? –– Acetic Acid & Terephthalic Acid Acetic Acid & Terephthalic Acid force majeuresforce majeures–– Acetic Acid is the solution in which Terephthalic Acid is Acetic Acid is the solution in which Terephthalic Acid is
reacted and is partially consumed in the processreacted and is partially consumed in the process•• Results Results
–– Total impact of new PET capacity somewhat diminished due Total impact of new PET capacity somewhat diminished due to limits on raw materials butto limits on raw materials but……
–– Production levels in N. America still sufficient enough to Production levels in N. America still sufficient enough to drive out imports, increase exports and meet domestic drive out imports, increase exports and meet domestic demand.demand.
–– Therefore, consumers felt no significant impact and PET Therefore, consumers felt no significant impact and PET margins remained flat.margins remained flat.
Recent Supply Limiting EventsRecent Supply Limiting EventsRecent Supply Limiting Events• PTA – Canadian supplier declares force majeure from
mid-August to early September – limited impact. • MEG –
– Significant Saudi assets representing 13% of global capacity running at 70% due to disruptive oxygen supply.
– Resolution may take as much as 6 months.– Spot MEG prices move from the $990s to $1250.– N. American supply not heavily impacted (less than 5%) but
prices will escalate and likely remain that way through the end of the year.
– Higher MEG prices potentially more than offset fall in PX and PET costs rise through end of year contrary to normal.
•• PTA PTA –– Canadian supplier declares Canadian supplier declares force force majeuremajeure from from midmid--August to early September August to early September –– limited impact.limited impact.
•• MEG MEG –––– Significant Saudi assets representing 13% of global capacity Significant Saudi assets representing 13% of global capacity
running at 70% due to disruptive oxygen supply.running at 70% due to disruptive oxygen supply.–– Resolution may take as much as 6 months.Resolution may take as much as 6 months.–– Spot MEG prices move from the $990s to $1250.Spot MEG prices move from the $990s to $1250.–– N. American supply not heavily impacted (less than 5%) but N. American supply not heavily impacted (less than 5%) but
prices will escalate and likely remain that way through the end prices will escalate and likely remain that way through the end of of the year.the year.
–– Higher MEG prices potentially more than offset fall in PX and Higher MEG prices potentially more than offset fall in PX and PET costs rise through end of year contrary to normal.PET costs rise through end of year contrary to normal.
Gasoline 2006Gasoline 2006Gasoline 2006•• MTBE PhaseMTBE Phase--outout•• Ethanol In Ethanol In
–– Short supplyShort supply–– High Octane but High RVPHigh Octane but High RVP
•• Refining limping from 2005 Refining limping from 2005 hurricaneshurricanes
•• Aromatics (PX) pulled back Aromatics (PX) pulled back into gasoline to offset MTBE into gasoline to offset MTBE and Ethanol impactsand Ethanol impacts
ConclusionsConclusionsConclusions•• Strong global PET consumption Strong global PET consumption
growth will continue to be growth will continue to be masked by extreme global and masked by extreme global and regional overcapacityregional overcapacity
•• Asian cash costs will set the Asian cash costs will set the tone for pricing worldwide.tone for pricing worldwide.
•• AsiaAsia’’s export opportunities will s export opportunities will fall as other regions increase fall as other regions increase capacity and improve in capacity and improve in competitiveness. competitiveness.
•• Raw material prices will be Raw material prices will be strong through 2008 before strong through 2008 before falling due to increasing capacity falling due to increasing capacity in China and the Middle East in in China and the Middle East in 20092009
•• Pricing will continue to follow Pricing will continue to follow global raw material movements global raw material movements with limited margin growth.with limited margin growth.