© 2014 Platts, McGraw Hill Financial. All rights reserved.

Evaluating the performance cracker co-products

1

Key Takeaways - Propylene

Cracking light feedstocks changes C2, C3 trade flows – means EU C3 could stay at premium

Higher EU propylene prices could suck in imports

US, Asia eye PDH expansions to fill propylene shortage

Europe on high end of propylene investment curve

Like with ethylene, CTO/MTO are big question mark 2

3

The Global Feedstock Slate Is Getting Lighter

62%

20%

11%

3%

4%

Global Feedstock Use 2014

Naphtha

Ethane

Propane

Butane

Gas oil

57% 28%

9%

3% 3%

Global Feedstock Use 2024

Naphtha

Ethane

Propane

Butane

Gas oil

Source: Platts

4

European LPG Versus Naphtha (%)

5

US LPG Export Cause Global Price Pressure

6

Propylene Pricing At Premium To Ethylene

Source: Platts

Record propylene premium on ethylene

0

200

400

600

800

1000

1200

1400

1600

1800

16

/07

/20

12

16

/08

/20

12

16

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/01

/20

15

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/20

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Ethylene CIF NWE

Propylene Poly Grade CIF NWE

Propylene at a record premium to ethylene

$/mt

European C3 Imports Rise

7 Source: Eurostat

0

50000

100000

150000

200000

250000

2012 2013 2014

EU Imports Rise

Propylene Imports

mt

Impact of the Increase to the EU Custom Tariffs not felt on PP

8

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

HDPE LLDPE LDPE PP

Jan-Nov 2013

Jan-Nov 2014

Source: Eurostat

9

On Purpose Expansions Form Bulk of Capacity Addition in Propylene

Asian PDH Projects

10

11

CTO/MTO Expansion in China

PDH Expansions Drive Asian C3 Lower

12 Source: Platts

0

200

400

600

800

1000

1200

1400

1600

1800

Supply Glut In Asia

Propylene Poly Grade FOB Korea

13

North American PDH Projects

Europe To Become More C3 Import Reliant

14

Key Takeaways – Butadiene

Increased global supplies depress prices

EU producers wary of expansions as export demand fails to materialise

Asia aiming for self sufficiency, adding to European sellers woes

Downside to prices on falling natural rubber prices, tyre demand

15

Butadiene Prices Unlikely To Recover to 2011,2012 Highs Soon

16 Source: Platts

0

1000

2000

3000

4000

5000

6000

07/01/2011 07/01/2012 07/01/2013 07/01/2014 07/01/2015

CIF USG

CFR Taiwan

FOB Rotterdam

European Export Demand Fails To Materialise

17

Western Europe, the second largest

butadiene producing region with

18% capacity share (1.925 million

in 2013) expected rapid export

increase

About 500,000 mt of capacity

growth between 2014-2016

0

50000

100000

150000

200000

250000

300000

2012 2013 2014

Exports

Source: Eurostat

EU producers re-think expansions

• Versalis suspends Dunkirk, France butadiene plant

• Ineos shuts Grangemouth butadiene plant

18

Expansions still underway

Plant Capacity (‘000) Notes

OMV , Austria 20 May 2014

BASF, Belgium 155 Started up Sep 2014 (delayed from Q1 start up)

TVK, Hungary 130 May 2015

OMV, Germany 60 Q2 2015

Evonik, Belgium 100 2015

Source: Platts

Asia aims for self sufficiency

Butadiene plants Capacity Notes

PetroChina Sichuan, China 150 Started up in late March 2014

Wanda Chemical, China (Dehydrogenation) 150 Started up in Q1-Q2 2014 BCPL, India 16 Expansion

PT Chandra Asrii, Indonesia 100 Started up in December 2013

PTTGC, Thailand 75 Started up June 2014

Shanghai SECCO, China 90 Started up August 2014

Fujian Refining & Petrochemical, China 60 To start in Q4 2014

Petrochemical Corp of Singapore, Singapore 100 To start in Q4 2014

Zhuhai Zhongguan, China (Dehydrogenation) 70 To start in Q4 2014

19

Asia 2014 expansion to amount to about 800,000 mt of butadiene, of which

there are couple of on-purpose butadiene producers

Source: Platts

Derivatives Also Facing Overcapacity

0

1000

2000

3000

4000

5000

6000

7000

8000

2011 2012 2013 2014E 2015E

('0

00

t)

SBR supply and demand balance

Capacity

Demand

Source: Standard Chartered

Fall In Auto Sales Trend In China

21 Source LMC, Marklines

Negative Substitution Effect From Natural Rubber

22

$/mt

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

03/10/2011 03/10/2013

Rubber FOB Singapore

Propylene -

• Change to light feed will see C3 trade at a premium over C2

• European ethylene, propylene trade flow changes – ethylene exports increase, propylene imports increase

Butadiene-

• Butadiene supply and demand fundamentals point to further downside risks

• Natural rubber price slump weighing on prices too

23

Conclusions:

© 2014 Platts, McGraw Hill Financial. All rights reserved.

Thank You!

24

Nandita Lal, Team Leader, Polymers

nandita.lal@platts.com