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com
Asia Polyester Chain
Challenges & Survival Strategies
Prepared & Presented by; Samuel Wong
ICIS Markets Editor
16 May 2014, APIC @ Pattaya 2014


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Agenda
A look at historical prices in the polyester chain
Market Overview
Comparison between price spreads from Naphtha-PTA
Strategies adopted so far and its outcome
Spread & Margins
A look at the Chinas economy
Expansion plans
Looming Problems & Results
Bearish outlook to continue?
Market Outlook
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Market Overview


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When One Suffers, A Chain Effect Begins
Crude oil Heavy naphtha Crude gasoline Mixed xylenes Para-xylene
Long-chained producers
Medium-chained producers
Short-chained producers
Para-xylene *.665 PTA *.86 Polyester *.34 MEG
Key End Use Markets Consumer Goods
Food & Beverage Personal Care & Home Care
Apparel, Home Textile Apparel, Home Textile Electronics
www.icis.com
Historical Polyester Prices
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PET
www.icis.com
Asia PX & PTA Spot Prices in H2 2013 - Present
1410
1440
1470
1415
750
850
950
1050
1150
1250
1350
1450
1550
Jul'13 Aug'13 Sep'13 Oct'13 Nov'13 Dec'13 Jan'14 Feb'14 Mar'14 Apr'14
P
X

&

P
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A

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(
$
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)

Period In Months
Asia PX & PTA Market Overview
PX Prices PTA ACP
www.icis.com
Where The Problem Lies In The Polyester Chain
0
50
100
150
200
250
300
PET Margins
PET Margins BREAKEVEN
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400
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POY Margins
POY Margins BREAKEVEN
BREAKEVEN
BREAKEVEN
www.icis.com
PTA Margins
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PTA-PX Spread
MARGINS PX PTA
Margins for PTA rebounded from lows of last year.
Margins insufficient to cover variable costs.
www.icis.com

P
X

M
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Jul'13 Aug'13 Sep'13 Oct'13 Nov'13 Dec'13 Jan'14 Feb'14 Mar'14 Apr'14
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Naphtha-PX Spread
MARGINS Break Even
0
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Jul'13 Aug'13 Sep'13 Oct'13 Nov'13 Dec'13 Jan'14 Feb'14 Mar'14 Apr'14
$
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MX-PX Spread
MARGINS BREAKEVEN
BREAKEVEN
BREAKEVEN
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Jul'13 Aug'13 Sep'13 Oct'13 Nov'13 Dec'13 Jan'14 Feb'14 Mar'14 Apr'14
$
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TDP Margins Based On Tol/BZ/PX
TDP Margins BREAKEVEN
BREAKEVEN
www.icis.com
Weak Polyester Demand, PTA Cutbacks
80%
72%
68%
55%
68%
63%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Jan'14 Feb'14 Mar'14 Apr'14 EMay'14 EJun'14
T
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China's PTA Operating Rates 2014
C
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C
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www.icis.com
PX Makers Attempt To Balance Market
South Koreas makers have largely maintained high operating rates as downstream PTA
makers were running at around 95%. Several makers continue to operate TDP at full,
while cutting operating rates at PX site, selling feedstock MX, or pushing it for blending.
0
200
400
600
800
1000
1200
1400
1600
1800
2000
60%
65%
70%
75%
80%
85%
90%
95%
100%
105%
Jan Feb Mar Apr
PX Operating Rates
China South Korea Japan China South Korea Japan
www.icis.com
Why The Squeezed Margins In Q1 2014?


76%
82%
74%
80%
72%
68%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
January February March
Import PX Requirement Local Build Up PX O/R PTA O/R
Build up in stocks in China

Weak downstream performance
www.icis.com
Various Strategies By Companies
PX producers cut operating rates/shut plants, sells feedstock, purchase spot PX.

Japans Teijin decides to dissolve PX business.

PTA Producers keeps term contract at average of 60-80% coverage.

PTA Producers selling feedstock PX to maintain healthy inventories.

PTA Producers operating higher rates to force shut smaller companies.

Polyester producers to maintain healthy PTA/MEG inventories, avoid build ups.
www.icis.com
Asian PTA producers in weaker pricing position; a buyers
market
< 10% of total import volume to link with PX
price
China
No polyester makers accepted PX-link contracts
India
Cost portion mostly at 50-70%
Middle East
Cost portion mostly at 50-70%
Turkey
PTA producers push for PX-linked contract formula to enlarge spread
www.icis.com
Looming Problems & Results


www.icis.com
Proportions In The Downstream Markets
PFY
67%
PSF
15%
PET
18%
China's Polyester Production
PFY
50%
PSF
21%
PET
29%
India's Polyester Production
www.icis.com
Why Are All Eyes On China?
China
63%
NE Asia
14%
India
10%
SE Asia
9%
Middle East,
1.9
Asia Polyester Market Shares by
Region
-4%
0%
4%
8%
12%
16%
2011 2012 2013E 2014E 2015E 2016E
Polyester Growth Forecast by Regions
China India NE Asia SE Asia Middle East
www.icis.com
0%
2%
4%
6%
8%
10%
12%
0
10000
20000
30000
40000
50000
60000
2011 2012 2013 2014E 2015E 2016E
Asia Polyester Growth
China S. Korea Taiwan
Japan India Thailand
Middle East Indonesia Others
India's Polyester Growth Rate China's Polyester Growth Rate
Is downstream markets growth that strong?
www.icis.com
27.5
31.3
36.3
41.3
45.3
48.3
0
20
40
60
2010 2011 2012 2013 2014E 2015E
Unit: million
tonnes/year
China's Polyester Capacity Expansion
16%
11%
16%
5.1
5.6
6.2
7.8
8.6
8.9
0
3
6
9
2010 2011 2012 2013 2014E 2015E
Unit: million
tonnes/year
India's Polyester Capacity Expansion
19%
15%
10%
End market continues expansion
www.icis.com
Asia PTA market to remain oversupplied
Demand expected to grow 6-7%/year; capacity growth to
accelerate again in 2014
Source: Industry
3%
12%
25%
12%
20%
12%
5%
14.5%
7.3%
6.2%
6.5%
7.1%
6.7% 6.8%
0%
5%
10%
15%
20%
25%
30%
2010 2011 2012 2013 2014E 2015E 2016E
G
r
o
w
t
h

r
a
t
e
,

%

Asia PTA Supply vs Demand Growth
Supply growth rate Demand growth rate
www.icis.com
Asia PX capacity growth peaks in 2013-2015
Data source: Industry sources
Asias PX demand growth is expected to remain at 5-6% annually.
Capacity growth forecast at 14-17% annually in 2013-2015; to decline to 5%
in 2016. Supply growth acceleration to keep up with downstream capacities

9%
2%
17%
15%
14%
5%
8%
5%
6%
5%
5%
6%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
2011 2012 2013E 2014E 2015E 2016E
G
r
o
w
t
h

r
a
t
e
,

%

Asia PX Supply vs Demand Growth
Supply growth rate Demand growth rate
www.icis.com
45.5
50.7
59.2
66.3
70.3
73.6
+12%
+8% +7%
+6%
+6%
+5%
85%
82%
76%
72%
72%
73%
60%
65%
70%
75%
80%
85%
90%
0
20
40
60
80
2010 2011 2012 2013 2014 2015
Operating rates
Unit: million tonnes/year
Asia polyester capacity Asia polyester production Utilisation rates
Polyester operating rates to lower
www.icis.com
Asia PTA plants to run at lower operating rates
Source: Industry
PTA capacity reached 60.5m tonnes/year in 2013, up by
12% from 2012, after a 25% growth in 2012
Continued expansions will lower operating rates further
91%
77%
73%
66%
63%
64%
55%
70%
85%
100%
0
20
40
60
80
100
2010 2011 2012 2013 2014E 2015E
O
p
e
r
a
t
i
n
g

r
a
t
e
s

U
n
i
t
:

m
i
l
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i
o
n

t
o
n
n
e
s
/
y
e
a
r

Asia and Middle East PTA Capacity Expansion
PTA capacity PTA operating rates
www.icis.com
96%
95%
98%
89%
82%
76% 76%
0%
20%
40%
60%
80%
100%
120%
0
5
10
15
20
25
30
35
40
45
50
2010 2011 2012 2013 2014E 2015E 2016E
O
p
e
r
a
t
i
n
g

r
a
t
e
s

U
n
i
t
:

m
i
l
l
i
o
n

t
o
n
n
e
s
/
y
e
a
r

Asia PX Plants Operating Rate
Asia PX capacity Asia PX O/R
To balance supply/demand conditions
www.icis.com
A Fundamentally Short Market To Turn Long?
0
5000
10000
15000
20000
25000
0
10000
20000
30000
40000
50000
60000
2013E 2014E 2015E 2016E
B
a
l
a
n
c
e
,

U
n
i
t
:

'
0
0
0

t
o
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a
r

U
n
i
t
:

'
0
0
0

t
o
n
n
e
s
/
y
e
a
r

Year
PX Effective Demand & Supply In Asia
Effective PX supply Effective PX demand Balance
www.icis.com
Challenges Ahead
China to continue to
Be the driving force
for Asia.

In 2013, East Asia and Pacific
region marked a growth of 7.2%.

Overall growth in the region
expected to stay flat at 7.2% in
2014.

China expected to grow at 7.5%

New PX capacities to
lighten tight supply
burden.


Moderation of
economic activity
from Indonesia,
Malaysia and Thailand
because of weak
commodity revenues,
and policy tightening.

Credit tightening and
banks in China,
restrict cash-flows.

Non-integrated
facilities to face high
costs pressure, might
be forced to shut.



Tailwinds Headwinds
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The Polyester Chain Expansions


www.icis.com
PX capacity expansion to accelerate in Asia
Source: Industry
www.icis.com
PTA capacity expansion continues in Asia
Source: Industry
www.icis.com
Source: Industry
Polyester capacity expansion continues in Asia
www.icis.com
China Import PX Stats
0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000
S Korea
Japan
Taiwan
SE Asia
Middle East
Others
India
2012 2013
www.icis.com
CHINA
Imp: 2,743
KOREA
Exp: 3,941
JAPAN
Exp: 119
TAIWAN
Exp: 580
INDIA
Imp: 852
SE ASIA
Imp: 350
Exp: 1,100
MIDDLE EAST
Imp:560
EU (incl. Turkey)
Exp 650
Imp: 370
Asia PTA 2013 Trade Flow
220kt
188kt
23kt
390kt
81kt
380kt
12kt
7kt
170kt
1800kt
www.icis.com
0%
20%
40%
60%
80%
100%
0
1000
2000
3000
4000
5000
6000
7000
8000
2013 2014E 2015E 2016E 2017E
South Korea Expected Operating Rates
CAPACITY PRODUCTION DEMAND EXPORT O/R
0 200 400 600 800 1000 1200 1400 1600 1800 2000
2013
2014E
2015E
2016E
2017E
South Korea Expected Exports
OTHERS TURKEY INDIA CHINA
Will South Korea Follow Taiwans Strategy?
www.icis.com
Market Outlook


www.icis.com
End-
users
Asia PX price trend outlook
PX 2014 Contract:
In China, term contracts were fixed mostly at flat to a premium of
$3/tonne, based on a 50% ACP: 50% CFR quotes formula.
Contracts were largely fixed at a premium of $7-9/tonne in 2013.
Since the start of 2014, there have been 3 breaks in the PX ACP.
PX Spot Prices
Supply and Demand
www.icis.com
End-
users
PX 2014 Contract
PX Spot Prices
Naphtha/PX spread to be lowered from highs of $500/tonne to
estimates of $250-260/tonne in 2014
MX/PX spread to remain below the breakeven point, estimated at
$150-160/tonne in 2014
Strong uptrend to be limited
Supply and Demand
Asia PX price trend outlook
www.icis.com
End-
users
PX 2014 Contract
PX Spot Prices
Supply and Demand
Market dynamics to shift from fundamentally short to balanced-to-
long.
China to remain key importer, with imports per month expected to
increased to around 800,000-850,000 tonnes.
India to be in an export position following OMPL start-up.
Asia PX price trend outlook
www.icis.com
End-
users
Asia PTA price trend outlook
PTA 2014 Term:
PTA makers continue to push for PX-linked formula contracts to
mitigate losses.
PTA Spot Prices
Supply and Demand
www.icis.com
End-
users
PTA 2014 Term
PTA Spot Prices
Inventories to remain high in China
Despite huge influx of PX capacities, PTA prices under pressure
PX-PTA margins estimated at $80-90/tonne.
Supply and Demand
Asia PTA price trend outlook
www.icis.com
End-
users
PTA 2014 Term
PTA Spot Prices
Supply and Demand
PTA expansion continues, market to remain oversupplied.
China PTA makers to push cargoes out from the country.
Supply growth to continue to outstrip demand growth.
Asia PTA price trend outlook
www.icis.com


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