James Xie

16thIMPCA2013AsianMethanolConference
JamesXie MethanolMarketServicesAsia
(MMSA)
Global Acetic Acid Outlook

China in Charge
Preparedfor
16thIMPCAAsianMethanolConference
October30 November1,2013
Singapore
By:
JamesXie
C
Consultant(MMSA)
l
(MMSA)
MethanolMarketServicesAsia
ManhattanHouse,151ChinSweeRoad
Level907,Singapore169876
Phone:+6564652720
Email:services@methanolmsa.com
Todays Key Messages

z The global acetic acid industry continues to be oversupplied, and fate is largely
related to events in China
z Northeast Asia is adding most acid capacity,
capacity with the majority integrated upstream
to methanol/CO feedstock
z Coal to ethanol is a potential demand growth engine
z Global regions outside of China will remain well supplied, with modest growth
z West Europe and the U.S. are able to defend their markets economically from
imports barring supply upsets
z Acid production economics remain negative for most merchant producers
z CO cost is key for competitiveness
z Prices are pressured short term, with supply disruption the only reason for price
increases
z Longer term, margins return to reinvestment levels
16thIMPCA2013AMCMMSAPteLtd.AllRightsReserved.
(MMSA)
World Acetic Acid Supply and Demand

WorldAceticAcidSupplyDemand
22
100
20
90
18
80
14
70
12
60
10
50
8
6
Operating Rate
Million Metric Tons
16
40
4
30
2
0
20
2008
2009
2010
2011
2012
Demand
2013E
2014E
TotalCapacity
2015E
2016E
2017E
2018E
OperationRates
The global acetic

acid industry has
experienced
slowed
l
d operation
ti
rates due to
demand growth
slowdown and
capacity
expansion from
2008. Likely to
recover slowly
after 2013
underpinned by
demand recovery,
and a slowed
rate of capacity
expansion
Over investment in China clear, slowly being

digested, impacting global trade and operations
2012 Acetic Acid Capacities by Region
Methanol Carbonylation,-000- metric tons
820
Europe
China
North America
2,641
6,685
Asia
10,000
910
Taiwan
Russia
700
Singapore
350
China
Japan
Taiwan
South Korea
Malaysia
Singapore
Indonesia
Australia
New Zealand
Other SEA
India
Other South Asia
Russia
Saudi Arabia
Iran
Qatar
Oman
Other ME
US
Canada
Mexico
South America
Europe
Africa
(MMSA)
Acetic Acid Capacity

2012ChinaAceticAcidCapacity
byRegion
Northeast
3%
Southwest
8%
Northwest
5%
EastChina
55%
Cent.China
5%
NorthChina
24%
ChinaTotalCapacity:7.3 MillionTons
China Supply and Demand

2008ChinaDemand
2013ChinaDemand
11,300Kt
14,777Kt
24%
31%
20%
43%
57%
80%
69%
76%
China
ROW
China
ROW
In five short
years
years,
China now
represents
about 43%
percent of
the industry
capacity,
and almost
one third of
the demand
(MMSA)
World Acetic Acid Capacity vs China

WorldAceticAcidCapacityvsChina
Most of the
new capacity
are located in
China, but the
expansion
pace is
slowing down
25,000
Forecast
ThousandMetricTons
20,000
15,000
10,000
5,000
0
2008
2009
2010
2011
2012
2013E
TotalCapacityRestWorld
2014E
2015E
2016E
2017E
2018E
TotalCapacityChina
Global Acetic Acid Capacity Additions

GlobalAceticAcidCapacityAdditions
Global acid
additions
continue
ti
tto
grow,
especially in
China. but
will slow
down
MillionMetricTons
0
2008
2009
2010
2011
2012
2013E
2014E
2015E
2016E
2017E
1
Europe
MiddleEast
Asia
2018E
(MMSA)
China Acetic Acid Map
Henanshunda:200,000t
HenanYima:200,000t
TianjinSoda:200,000t
Hebei Yingdu:400,000t
Yanchang group:250,000t
Hualu hengsheng:300,000t
ShaanxiYulin:150,000t
Shandongyankuang:600,000t
Celanese:1200,000t
BP Nanjing:500,000t
Sh
h i W ji
800 000t
ShanghaiWujing:800,000t
Jiangsusopo:1200,000t
Shanghaihuayi(Anhui):500,000t
YangtzeRiver:350,000t
YunnanYunwei:200,000t
China Acetic Acid Industry Performance

ChinaAceticAcidIndustryStory
10
100
90
70
60
4
50
40
2
30
0
20
2008
2009
Demand
2010
2011
TotalCapacity
2012
2013E
2014E
OperationRates
2015E
2016E
2017E
2018E
PercentageofUpstreamIntegrated
Operating Rate %
Million Metric Tons
80
Acid continues
to be in
oversupply,
l as
overcapacity
will force
lower
utilization
rates until
2015 when
2015,
capacity
growth slows
(MMSA)
China Acetic Acid Consumption Slate

ChinaAceticAcidConsumptionSlate
7
6
MillionMetricTons
5
4
3
2
1
0
2008
Exports
2009
Others
2010
2011
AcetateEsters
2012
2013E
AceticAnhydride
2014E
2015E
2016E
TerephthalicAcid
2017E
2018E
VinylAcetateMonomer
China methanol
demand remains
underpinned by
PTA and
d VAM
growth, and
growth is driven
by rapid PTA
capacity
expansion.
Revolutionary
demand
de
a d into
to
ethanol is on the
horizon and may
change future
industry patterns
Acetic Acid Derivatives 2008 vs 2013
2008AceticAcidDerivatives
2013AceticAcidDerivatives
VinylAcetateMonomer
33.07%
33%
TerephthalicAcid
13%
VAM
23%
Others
21%
Others
24%
AcetateEsters
15%
TerephthalicAcid
15%
AcetateEsters
14%
AceticAnhydride
16%
Total:2.8Million Ton
AceticAnhydride
17%
Total:4.3Million Ton
(MMSA)
China Methanol Industry Performance

The main drivers of acetic acid have been acetic esters, PTA
and vinyl acetate monomer, among which PTA capacity
witnessed drastic growth in China. The other downstream
remained mostly stable in the past years.
VAM capacity to produce is still increasing, mostly acetylene
based in inland China, and integrated with downstream PVOH
production. Merchant volumes will be much less than the
substantial capacity increase.
China VAM Capacity Expansion

ChinaVAMCapacityExpansion
3,000
Acetylenebased VAM
capacity
increases
mainly in
Ningxia and
Inner
Mongolia
Forecast
ThousandMetricTons
2,400
1,800
1,200
600
0
2008
2009
2010
2011
2012
Ethylenebased
2013E
2014E
2015E
2016E
2017E
AcetyleneBased
2018E
(MMSA)
China Ethanol Possibilities

ChinaEthanolPossibilities
800
MillionMetricTons
600
400
200
0
2013E
2014E
OthersPlanned
2015E
2016E
HenanShunda
2017E
2018E
Celanese
The first ethanol

plant has been
started up and
another is under
construction by
local producers,
more projects
have been
announced by
local producers,
which hopefully
will absorb the
excess acetic
acid in the
industry
Acetic Acid Price Drivers

Long term
Industry Supply Demand
Excess Supply
Demand recovery from both conventional derivatives and
revolutionary demand will dictate the future.
Cost Curve behaviour
The average price will be set by the marginal producer.
Sh t Term
Short
T
Unexpected supply disruptions will continue to cause price
to spike, and incite exports from China.
(MMSA)
Global Acetic Acid Cost Curve 2013

GlobalAceticAcidCashCost2013
(CummulativeDemand,MillionTons)
R tP d
RestProducers
China IntegratedProducers
DollarsperMT
Global Leading Producers
China NonIntegrated
Producers
200
0
10
12
14
16
18
20
TotalCashCost
Leading global
producers have
taken the lead
in the industry
production due
to competitive
technology. CO
cost is the key.
Many of Chinas
acetic acid
plants are
upstream
integrated
China Acetic Acid Production Cost &Margin

ChinaAceticAcidProductionCost
3,500
3,000
2,000
1,500
1,000
500
500
1,000
TotalCashCost
Margin
AAPrice
MethanolPrice
Jul13
May13
Mar13
Jan13
Nov12
Sep12
Jul12
May12
500
Mar12
Jan12
CN
NYpmt,ExworksEastChina
2,500
(MMSA)
Margins to Recover to Reinvestment Levels
Asia Exports, Europe Imports Adjusting to Norm
(MMSA)
China Acetic Acid Exports

China Acetic Acid Balance
450
700
650
350
550
150
500
450
50
400
(50)
US$/MT,FOBChina
350
Production
Exports
imports
Jul13
Apr13
Jan13
Oct12
Jul12
Apr12
Jan12
Oct11
Jul11
Apr11
Jan11
Oct10
Jul10
300
Apr10
(150)
Jan10
Production,ExportsThousandMetricTons
P
600
250
Unplanned
outages
across the
world
caused
supply issue
and make
China export
viable
US$/MT,FOBChina
Conclusions
The acetic acid industry continues to be dominated by excess supply, and

associated low industry operation rates
Independent producers without integrated feedstock will continue to suffer
from negative production margins
China will continue to be the major global producer of acid. Nonintegrated producers in the country will remain the global marginal
producer
ROW will exhibit small but positive demand growth and trade will
eventually settle to more traditional patterns
CO cost is the critical for competitiveness, and will influence behavior
drastically China continues to benefit from integrated CO and/or
drastically.
methanol facilities
Capacity expansion has slowed, and the recovery of traditional
derivatives, as well as new ethanol demand will help underpin demand
growth and lift up margins
Thank you!
(MMSA)

James Xie

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16thIMPCA2013AsianMethanolConference

Global Acetic Acid Outlook

Todays Key Messages

World Acetic Acid Supply and Demand

Million Metric Tons

The global acetic

Over investment in China clear, slowly being

Other South Asia

Acetic Acid Capacity

China Supply and Demand

World Acetic Acid Capacity vs China

Global Acetic Acid Capacity Additions

China Acetic Acid Map

China Acetic Acid Industry Performance

Million Metric Tons

China Acetic Acid Consumption Slate

Acetic Acid Derivatives 2008 vs 2013

China Methanol Industry Performance

China VAM Capacity Expansion

China Ethanol Possibilities

The first ethanol

Acetic Acid Price Drivers

Global Acetic Acid Cost Curve 2013

Global Leading Producers

China Acetic Acid Production Cost &Margin

Margins to Recover to Reinvestment Levels

Asia Exports, Europe Imports Adjusting to Norm

China Acetic Acid Exports

The acetic acid industry continues to be dominated by excess supply, and

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