CARE Conference 2016 - Carpet America Recovery Effort · 2019-12-06 · Trusted commercial...

CARE Conference 2016

Oil and Natural Gas: Impact on Synthetic FibersAlasdair Carmichael, May [email protected]

Trusted commercial intelligencewww.woodmac.com

mailto:[email protected]

http://www.woodmac.com


2

Agenda

1. Introduction

2. Oil & Gas

3. Impact on Fibers

4. Total Fibers Market

5. Recycling Issues



3

3

Verisk Analytics, Inc., Acquires The PCI Group - Nov 20 2015

Acquisition of PCI will create an industry-leading chemicals business at Verisk’s Wood Mackenzie.

Verisk Analytics, is a New Jersey based company providing risk assessment and data analytics services to a variety of industries. 2014 revenues of $1.75 billion and over 6,000 full time people.

In Q1 2015 Verisk bought Wood Mackenzie, an Edinburgh, Scotland company est. in 1844. Wood Mackenzie developed an oil and energy business in 1973 and have built on that to become a global leader in commercial intelligence for the energy, metals and mining industries.

The PCI Group and its associates are now a part of Wood Mackenzie in an additive and complimentary function bringing downstream expertise through the supply chain across petrochemicals, xylenes and polyesters, resins, nylons and fibres, and films.

PCI Update



4

Product Coverage

Oil Refinery / Gas Field Petrochemical Complex Downstream Products

FertilisersExplosives ResinsPlastics and Films

EOD’s/DetergentsAntifreezePolyester Fibers

PlasticsAcrylic FibersPlastic Coatings

Synth RubbersTyres/Nylon66Plastics & FoamsNylonsNylons, PC Resins

Plasticizers/ResinsPolyester Fibers & ResinsUrethane Foams

Petroleum Refining

Crude Oil

Reformate

NaphthaGas Oil

Natural GasProcessing

Natural Gas

EthaneLPG

MethaneFeedstocks

End ProductsIntermediate

PetrochemicalsBasic

Petrochemicals

Gasoline

Kerosene Fuel OilDiesel

JetFuel

LubeOils

Asphalt

Reforming

Olefins Plant

AromaticsSeparation

p-Xylene

Toluene

o-Xylene

Benzene

Crude C4s

Syngas

Ethylene

Propylene

g

Olefant

Ar

Oma

tics

Processing MethanolAmmoniaUrea Polyethylenes

EDC/VCM/PVCEthyleneOxideEthylene Glycol

PolypropyleneAcrylonitrileOxo-alcohols

Butadiene

StyreneCyclohexaneCumene/Phenol/Acetone

Phthalic Anhydride

DMT/PTA

TDIBenzene / MDI

PCI Research Wood Mackenzie Future Research

4



5

Oil Prices $/barrel

20

40

60

80

100

120

140

WTI Brent

Oil Prices are Global. Brent & WTI expected to remain close.



6

3032343638404244464850

Daily WTI Oil Prices – April - May 2016, $/barrel

Oil up 26%, over 6 weeks.

PTA/MEG in China down 6.8%!

Highest since Nov 15 12 months ago -$60



7

Unlikely to see significant price appreciation until market sentiment finds a positive price catalyst

Brent price outlook (US$/bbl)

Source: History - Argus; Forecast - Wood Mackenzie

0

20

40

60

80

100

120

140

2013 2014 2015 2016 2017

Forecast



8

Need about 5 million b/d of new supply by 2020 to meet demandPrices of at least $60-$70/bbl needed to support necessary supply

0123456789

Oil SandsTight OilUltra-DeepwaterDeepwaterShallow WaterOnshore

86

88

90

92

94

96

98

100

2015

Dem

and

Dem

and

Grow

th

Onst

ream

Decli

ne

Unde

rDe

velo

pmen

t

Othe

r

Supp

ly G

ap

2020 supply gap (mb/d) Potential 2020 supply by breakeven tranche & asset type (mb/d)

Supp

lyG

ap

<$40

*

$40-

$60*

$60-

$70*

$70-

$80*

>$80

*

Tech

nica

lsan

d YT

F

* Planned Pre-FID projects + New US L48 Drilling



9

Natural Gas Prices – USA $/mm bthus

0

2

4

6

8

10

12

14

2007Jan

2008 2009 2010 2011 2012 2013 2014 2015 2016

Natural Gas prices are Regional. US to keep significant advantage.



10

Natural Gas Prices $/mm Btus

02468

1012141618

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

JapanGermanyUKUS

Source: BP

2015 US 2015 US avg.$2.67



11

Energy Overview

Ã Crude markets are poised for a rebound. Capital expenditures have fallen, keeping the production outlook constrained. Breakeven economics for those plays that are still viable will likely require crude above the $60-$70 range.

Ã Gas markets will continue to be range-bound near $3-$4 per MMBTU in North America for the next several years. Significant expansions in consumption still cannot overtake the huge, cheaply available inventory of gas reserves.

Ã What does this mean for fibers? When there are no supply demand constraints in petrochemicals then oil is going to be the leading price driver – but not on a one for one basis.



12

Oil to US Raw Materials – Indexed to Jan 2005

0

50

100

150

200

250

300

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Oil PTA/MEG Capro Propylene



13

0

500

1000

1500

2000

2500

3000

2014 2015 2016

Oil PTA/MEG Capro Propylene

Oil to US Raw Materials – $/ton



14

0

16

32

48

64

80

96

112

128

144

0

2

4

6

8

10

12

14

16

18

2000 2002 2004 2006 2008 2010 2012 2014US Henry Hub Natural Gas Brent North Sea Crude OilChina Qinhuangdao Coal Saudi Arabia Natural Gas

$pe

r mill

ion

btu

$per barrel (crude oil)

$per ton (coal)

0

40

79

119

159

198

238

278

318

357

Emergence of the North America

Gas-based & China Coal-based ChemicalIndustry Advantage

Ethylene - The Gas & Coal Based Chemical RenaissanceThe “rollercoaster” of volatility of regional energy valuations drives investment decisions across the chemical industry

Source: ArgusMedia, NYMEX, SXCoal

Key Global Energy Benchmarks

North America Lost Competitiveness

to Asia/Middle East

2016



15

-4

0

4

8

12

2005 2010 2015 2020

Americas Europe + Japan Russia and The Caspian Middle East + Africa China + India Rest of World

Source: Wood Mackenzie Long-Term Ethylene Service

million tons

Ethylene - The Gas & Coal Based Chemical RenaissanceAs a result of low natural gas prices (and ethane) relative to high crude oil prices (and naphtha), N. America adding most of the new ethylene capacity in the world

Global Ethylene Capacity Additions

Emergence of the North America Gas-based & China Coal-based Chemical

Industry AdvantageNorth America

Lost Competitivenessto Asia/Middle East



16

Ethylene = 1,000 ktons

Propylene = 570 ktons

C4s (Butadiene) = 365 ktons

Pygas (Benzene) = 525 ktonsOther = 520 ktons

Lt. Naphtha = 2,980 k tons

Typical Naphtha Steam Cracker

Ethane = 1260 k tons

Ethylene = 1,000 ktons

Propylene = 25 ktons

C4s (+Butadiene) = 30 ktons

Pygas (Benzene) = 35 ktonsOther = 170 ktons

Typical Ethane Steam Cracker

Outputs from Different Routes to Ethylene

Impact of feedslates on pygas volumes is very significantImpact of feedslates on pygas volumes is very significant



17

Polyester - US Competitiveness Change?

A new scenario is developing in the US, partly as a result of lower cost petrochemicals, which is moving the US into a potential overcapacity which will rely on exports to keep plants operational. (Just like China!)

Polyester raw materials are PTA and MEG (0.86 + 0.35 approximately). PTA production in US has been in hands of BP and DAK. BP has sold 1 of its 2 US plants to Indorama and the Italian company M&G is building a 1.2 million ton PTA plant to partially feed its new PET resin plant. Indorama has also bought the only PTA plant in Canada.

MEG: Because of US cheap Natural Gas, the US becomes the world’s low cost producer of MEG and from 2018 to 2020 has 3 million tons of new capacity projects. US demand forecast to increase 500,000 tons. The US has to become a major exporter, and therefore has to price below Asian levels to compete.



18

Polypropylene - US Competitiveness Change?

The scenario that helps Polyester (MEG) become more competitive hurts Propylene.

MEG comes from ethane production and Natural Gas is the most cost efficient route in the US, whereas Propylene is generally a by product from Naphtha (oil). Due to low cost Natural Gas in the US (regional pricing) there is a major expansion into natural gas cracking and this is producing much less propylene.

This is leading to investments in on purpose propylene



19

Textile Mill Consumption (million tonnes)

0

20

40

60

80

100

12019

91

1994

1997

2000

2003

2006

2009

2012

2015

2018

2021

2024

2027

2030

PolypropyleneCellulosicsPolyesterNylonAcrylicCottonWool



20

Fibres in context 2015 (ktes)

1,705

3,532

4,098

5,325

24,055

48,030

Acrylic

PP

NylonCellulosics

Cotton

Polyester

An Astronomers View



21

Global Mill Consumption - 1980

WoolCotton 47%AcrylicNylonPolyester 17%CellulosicsPolypropylene

1980 = 30.3 million tons



22






23






24






25

Overcapacity in synthetic raw materials 2015

2015 overcapacity levels With no additions in capacity demand would catch up by:

0 10 20 30 40 50 60Percent

Adiponitrile 33.0%

Adipic acid 50.0%

Caprolactam 30.0%

MEG 18.0%

PTA 27.0%

Paraxylene 23.0% 2020

2022

2019

2047

2037

2038



26

Overcapacity in synthetic fibre chains 2015

0 10 20 30 40 50 60 70 80 90Percent

NTF 78.5%

NIF 66 34.0%

NIF 6 55.0%

PIF 37.0%

PTF 38.3%

PSF 57.4%

Source: PCI Fibres Red Book 2015

2015 overcapacity levels With no additions in capacity demand would catch up by:

2055

2024

2025

2045

2027

Never!



27

Nylon 6 and Polyester US Raw Materials Comparison ($/ton)

0200400600800100012001400160018002000

0

500

1000

1500

2000

2500

3000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Delta WTI Oil PTA/MEG Caprolactam



28

Nylon Polymer v Polyester – US Prices per ton

28

0

500

1000

1500

2000

2500

3000

3500

4000

2007 2008 2009 2010 2011 2012 2013 2014 20… 20…

66 Polymer6 PolymerPolyester



29

Carpet & Rug Face Fiber US Consumption (000 tons)

0

200

400

600

800

1000

1200

1400

1600

1800

PP StPP BCFPET StPET/PTT BCFNylon StNylon BCF



30

Carpet & Rug Face Fiber US Consumption (% Share)

0%10%20%30%40%50%60%70%80%90%

100%

PP StPP BCFPET StPET/PTT BCFNylon StNylon BCF



31

Carpet & Rug Face Fiber US Consumption (000 tons)

0

100

200

300

400

500

600

700

800

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Nylon BCF

Nylon St

PET/PTT BCF

PET St

PP BCF



32

Monthly US Shipments of Polyester BCF (million lbs)

40

50

60

70

80

90

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2013 2014 2015 2016



33

Housing Activity (000 units)

33

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

Existing Home Sales New Home Starts



34

New Home Starts (000 units)

34

0

500

1000

1500

2000

2500

1959 1972 20051986 201519781963 200919911982

US Population 1959: 178 million; 2015: 312 millionUS Home Starts 1959: 1.5 million; 2015: 1.1 million



35

North American Light Vehicle Build (millions)

35

0

2

4

6

8

10

12

14

16

18

20

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

TrucksCars

We love our SUVs & Trucks, 2015 = 10.41m - 59% of total & 5.4% more than previous record



36

Total World Polyester Production 2015 (million tons)

0

5

10

15

20

25

30

35

TextileFil

IndustrialFil

Other Fil Staple PETResin

Film OtherResins

Fibers = 48.68 PET Resin = 20.48Film = 3.65Other Resins = 2.13

= 75 million tons



37

Competition for Recycling Polyester

Fibers = 48.68 PET Resin = 20.48Film = 3.65Other Resins = 2.13

= 75 million tons

2015 – 20.48 million tons (45 billion lbs) of PET Resin globally, most of which is a single use product easy to recycle and produces a clean and low cost rPET stream.

2015 – 3.1 million tons (6.8 billion lbs) of PET Resin in US & Canada. In US, only 31% is recycled – strong potential for growth in recycle volume

2015 – Approx 15 US polyester fiber producers using rPET with approx450k tons (100mm lbs)



38

US East Coast Bottles – Picked up (c/lb). March 2011 – May 2016

0

5

10

15

20

25

30

35

40Low cost of

of bottles

Low cost of virgin polyester

has driven down the cost

of bottles



39

Global collection 2016 (P)

10.8 Million Tonnes 13%

7%

18%

2%6%

54%

North America South America West EuropeEast Europe Africa & Middle East Asia Pacific



40

Collection rates in key countries/regions

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

China Japan R of Asia AME WE EE USA R of NAM S America World

2012 2013 2014 2015 (P)



41

RPET penetration of global end use applications

0

5

10

15

20

25

30

35

40

45

Staple fibre Sheet Blow-moulding - Foodcontact

Blow-moulding - Non foodcontact

% Pen

etratio

n

2012 2013 2014 2015 2016



42

Global RPET balance 2016

Collection10,794,000

Tonnes

Process Loss

1,763,000 Tonnes

Flake Available

9,031,000 Tonnes

Fibres – 6,081,300 tonnes

Strapping – 306,900 tonnes

Sheet – 1,043,900 tonnes

Food Contact – 884,700 tonnes

Non-food contact – 269,600 tonnes

Moulding – 83,300 tonnes

Other – 361,400 tonnes



43

Conclusions

Oil prices to increase over coming 2 years, but not to spike to previous highs (Middle East conflicts permitting)

Natural Gas a major benefit to US industry and Petrochem –2019/20

Polyester continues to dominate in total fiber applications….. but are we seeing the growth of polyester in carpets slowing?

Difficult to compete with recycled bottles end uses

Eco issues a very serious threat to plastics and synthetic fibers – microfiber pollution becoming an increasing issue.

THANKS



44

Disclaimer

Ã This report has been prepared for the CARE 2016 Conference by Wood Mackenzie Limited. The report is intended solely for the benefit of attendees and its contents and conclusions are confidential and may not be disclosed to any other persons or companies without Wood Mackenzie’s prior written permission.

Ã The information upon which this report is has either been supplied to us by the market or comes from our own experience, knowledge and databases. The opinions expressed in this report are those of Wood Mackenzie. They have been arrived at following careful consideration and enquiry but we do not guarantee their fairness, completeness or accuracy. The opinions, as of this date, are subject to change. We do not accept any liability for your reliance upon them.

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Email [email protected] www.woodmac.com

Wood Mackenzie™, a Verisk Analytics business, is a trusted source of commercial intelligence for the world'snatural resources sector. We empower clients to make better strategic decisions, providing objective analysisand advice on assets, companies and markets. For more information visit: www.woodmac.comWOOD MACKENZIE is a trade mark of Wood Mackenzie Limited and is the subject of trade mark registrations and/or applications inthe European Community, the USA and other countries around the world.

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CARE Conference 2016 - Carpet America Recovery Effort · 2019-12-06 · Trusted commercial...

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