Phenol

Asias Rising Capacity and Changing Trade Flow

Trisha Huang
Senior Editor, ICIS Pricing

APIC Conference
May 2014, Pattaya, Thailand
www.icis.com
Agenda
Phenol / Acetone
Rising Asian capacity led by China
Phenol supply/demand
Acetone supply/demand
Prices and margins
Bisphenol A (BPA)
Capacity expansion
Prices and margins
Potential Market
India
Supply/demand

www.icis.com
China: High phenol/acetone import dependency until 2010
365kt
489kt
0%
10%
20%
30%
40%
50%
60%
70%
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
2005 2006 2007 2008 2009 2010 2011 2012 2013
Phenol Import Volume Acetone Import Volume
Phenol Import Reliance Acetone Import Reliance
MT/Year
Source: ICIS China
www.icis.com
Asian Phenol/Acetone capacity May 2014
Unit: metric tonnes/year Phenol Acetone Note
Asia excluding China, India 3.43 million 2.02 million
China 1.65 million 1 million
Subtotal (May 2014) 5.08 million 3.02 million
Less plant closure (250kt) (90kt)
Mitsui Chemicals,
Sept 2014
2014 Expansion 1 million 600kt
Total by end 2014 5.83 million 3.53 million
2015 Expansion 550kt 335kt
www.icis.com
Phenol/Acetone capacity expansion 2014-2017
Company Location Country
Phenol
(kt/year)
Acetone
(kt/year)
Start-up
Sinopec Yanshan Beijing China (+) 125 (+) 75 Q3 2014
Kingboard Huizhou China (+) 75 (+) 45 Q3 2014
Sinopec Mitsui (SSMC) Caojing, Shanghai China 250 150 Q3 2014
FCFC Ningbo, Zhejiang China 300 180 Early Q4 2014
Cepsa Caojing, Shanghai China 250 150 Q4 2014
Kumho Yeosu South Korea 300 180 H2 2015
PTT Phenol II Map Ta Phut Thailand 250 155 Q4 2015
Ineos Nanjing, Jiangsu China 400 250 End 2016
CNOOC Huizhou Huizhou, Guangdong China 220 130 2016/2017
PTT Map Ta Phut Thailand (+) 50 (+30) Q2 2017
2.22 million 1.35 million
www.icis.com
Chinas phenol import dependency may slump further


594kt
365kt
0
20
40
60
80
100
2005 2006 2007 2008 2009 2010 2011 2012 2013
10 kt/Year
China imported 365kt
of phenol in 2013,
down by 39% from
2012
Sources: ICIS China, China Customs
Chinas 2014 phenol imports may decline by 45% from 2013 (ICIS China)
www.icis.com
Chinas slowing phenol apparent demand growth

0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2,000,000
2005 2006 2007 2008 2009 2010 2011 2012 2013
Phenol Import Volume
Phenol Output
Phenol Apparent Demand
MT/Year
1.65m
1.73m
Chinas phenol apparent demand growth may slow to 1-1.5% in 2014
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www.icis.com
Chinas acetone import dependency may fall further
690kt
489kt
0
20
40
60
80
100
2005 2006 2007 2008 2009 2010 2011 2012 2013
10 kt/Year
China imported
489kt acetone in
2013, down by 29%
from 2012
Chinas 2014 acetone imports may fall by 14% from 2013 (ICIS China)
Sources: ICIS China, China Customs
www.icis.com
Chinas acetone apparent demand growth also slowing
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
2005 2006 2007 2008 2009 2010 2011 2012 2013
Acetone Import Volume
Acetone output
Acetone Apparent Demand
MT/Year
1.34m
1.4m
Source: ICIS China
Chinas acetone apparent demand growth may slow to 1-1.5% in 2014

www.icis.com
Phenol/Acetone margins squeezed on slowing demand, prompting
producers to reduce plant op rates
-$400
-$200
$0
$200
$400
$600
$800
$0
$500
$1,000
$1,500
$2,000
$2,500
Jun 2009 Jun 2010 Jun 2011 Jun 2012 Jun 2013
Margin Benzene FOB Korea * Propylene CFR NE Asia Phenol CFR China Acetone CFR China
Unit: USD/tonne
Source: ICIS Pricing
Margin
www.icis.com
Chinas phenol/acetone plant op rates fall
50%
60%
70%
80%
90%
100%
110%
120%
0
20
40
60
80
100
120
140
160
180
2006 2007 2008 2009 2010 2011 2012 2013
KT/year
Capacity Output
Average plant op rate
Source: ICIS China
2013 ave
op rate:
83%
www.icis.com
Phenol margins largely negative since 2011
-$400
-$200
$0
$200
$400
$600
$800
$0
$500
$1,000
$1,500
$2,000
$2,500
Jun 2009 Jun 2010 Jun 2011 Jun 2012 Jun 2013
Phe Margin
Benzene FOB Korea *
Phenol CFR China
Margin

Unit: USD/tonne
Source: ICIS Pricing
www.icis.com
But lower plant op rates boost acetone margins

-$250
-$200
-$150
-$100
-$50
$0
$50
$100
$150
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
Jun 2009 Jun 2010 Jun 2011 Jun 2012 Jun 2013
Acetone Margin
Propylene CFR NE
Asia
Acetone CFR China
Margin
Unit: USD/tonne
Source: ICIS Pricing
www.icis.com
Phenol import parity largely negative since 2011
60-70% of phenol/acetone producers in China base their prices on Sinopec pricing

USD/tonne

-$250
-$200
-$150
-$100
-$50
$0
$50
$100
$150
$200
$250
$300
$0
$500
$1,000
$1,500
$2,000
$2,500
Jan 2010 Jan 2011 Jan 2012 Jan 2013 Jan 2014
Difference ICIS Phenol CFR CMP Phenol import parity
Source: ICIS Pricing
www.icis.com
Acetone import parity increasingly volatile
USD/tonne

-$100
-$50
$0
$50
$100
$150
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
Jan 2010 Jan 2011 Jan 2012 Jan 2013 Jan 2014
Difference ICIS Acetone CFR CMP Acetone Import Parity
Source: ICIS Pricing
www.icis.com
BPA capacity expansion 2014-2015
By end 2014, 725kt/year of new BPA capacity to consume 630kt/year of phenol and 210kt/year of acetone

Capacity
(kt/year)
Nanya Plastics Ningbo, Zhejiang 150 End 2014
Changchun Plastic Jiangsu 135 End 2014
Shandong Lihuayi Shandong 120 2014
Sinopec-Sabic Tianjin Tianjin 200 2014
Kingboard Yangzhou, Jiangsu 120 2014
Subtotal (end 2014) 725
Sinopec-Mitsui (SSMC) Shanghai 150 2015
Bayer Shanghai Shanghai 200 2015
1.08 m
Company Location Start-up
Total (2014-2015)
www.icis.com
BPA margins under pressure
-$400
-$300
-$200
-$100
$0
$100
$200
$300
$0
$500
$1,000
$1,500
$2,000
$2,500
Jan-2012 Jul-2012 Jan-2013 Jul-2013 Jan-2014
USD/TONNE
USD/TONNE
BPA Margin Benzene FOB Korea Phenol CFR China Bisphenol A CFR China
Source: ICIS Pricing
www.icis.com
India: Phenol and acetone stats
India needs to import around 80% of the phenol & acetone it consumes
No domestic capacity expansion planned in the immediate future
Indian local phenol prices tend to follow international (China) trends
Domestic benchmark price: ex-tank, Kandla port (more than 90% of
phenol imports are discharged at Kandla, west coast of India)
Usually prices are based on CIF + Basic Customs Duty + Costs = Import
Parity Basis
Producers Location
Phenol Capacity
(kt/year)
Acetone Capacity
(Kt/year)
Hindustan Organic
Chemicals
Kochi (Southwest India)
42 25
SI Group India Ltd
Navi Mumbai (West
India)
37 21
www.icis.com
India phenol prices tend to follow China prices
-$100
-$50
$0
$50
$100
$150
$200
$0
$500
$1,000
$1,500
$2,000
$2,500
Jan-2010 Jan-2011 Jan-2012 Jan-2013 Jan-2014
India vs China
ICIS CFR India
ICIS Phenol CFR CMP
USD/tonne

Source: ICIS Pricing
www.icis.com
India: Rising phenol import volume
0
50,000
100,000
150,000
200,000
250,000
2008 2009 2010 2011 2012 2013
Phenol import volume (MT)
Between 2011 and 2013, Indias phenol import volume rose by 18-19% year on year
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India: Rising acetone import volume
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
2008 2009 2010 2011 2012 2013
Acetone import volume (MT)
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Between 2011 and 2013, Indias acetone import volume rose by about 10% year on year

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India: ADDs and duties determine product flow
In 2012, the US was the top supplier of phenol to India, accounting for 57% of imports

Top 7 phenol suppliers to India by country in 2012. Source: the Ministry of Commerce

United States
Taiwan
South Africa
South Korea
Thailand
Brazil
Finland
S Africa 8%
Thailand
5.6%
United States 57%
Taiwan
20%
South
Korea 6%
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In 2013, Taiwan was the top supplier of phenol to India, overtaking the US and accounting
for 29% of imports.

India: ADDs and duties determine product flow
United States
Taiwan
South Africa
South Korea
Thailand
Singapore
Netherlands
Taiwan 29%
United States
23%
Thailand 10%
Singapore
6%
South Africa 9%

Top 7 phenol suppliers to India by country in 2013. Source: the Ministry of Commerce

South
Korea
17%
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Indias phenol imports may catch up with China in 2014
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
2008 2009 2010 2011 2012 2013 2014 (Est)
India China
Unit: MT

www.icis.com
Indias acetone imports outpaced by China
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
2008 2009 2010 2011 2012 2013 2014 (Est)
India China
Unit: MT
www.icis.com
Conclusion
Phenol to remain in oversupply in the next three years,
as phenol capacity expansion outpaces downstream
capacity increase
Asian phenol makers margins to stay squeezed
Asias phenol/acetone plant op rates to stay low on poor
economics; older plants may be idled
Phenol exports from China may increase
Exporters to target growing markets such as India



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Thank you


Trisha Huang
Trisha.Huang@icis.com
Tel: +61 3 9602 6304
With contribution from the ICIS China Team