mideastpresentation

Information about mideastpresentation

Published on January 24, 2008

Author: Manlio

Source: authorstream.com

Content

Ihsan Rahim, Senior Editor, Petrochemicals:  Ihsan Rahim, Senior Editor, Petrochemicals PRICING CHALLENGES FOR MIDDLE EASTERN PETROCHEMICALS Slide2:  M.E. = world’s largest, cheapest petchem exporter; gas feedstock Advantage Mid East = biggest Incremental Supplier (1,000 mt/year) 2000 2006 2010 (Mideast Ethylene Capacity Expansions) (Source: METI, April 2006) Slide3:  Mideast Capacity still not that Big ... (Unit: 1,000 t/y) ...but Mideast has the biggest Surplus:  ...but Mideast has the biggest Surplus ...and Asia is the main Buyer Mideast N Amer Asia NW Eur (Source: METI, April 2006) 2000 2006 2010 (1,000 mt/yr) Ethylene Derivatives S-D Balance Prices Impacted by Multiple Factors:  Prices Impacted by Multiple Factors Price Demand Supply Plant Explosion Unexpected Weather Downstream Markets Upstream Markets Related Markets The Economy Supply-demand imbalance by…:  Supply-demand imbalance by… Accelerated growth path Aggressive financial policy Substantial increase in ethane prices Significant drop in growth expectations in China Cyclical nature, competition, and strong regional focus. Why Middle Eastern Pricing is Tough:  Why Middle Eastern Pricing is Tough Lack of transparency Dubai is the gateway, the rest is murky Lowest cost price takers Feedstock arrangements – Due to change (Aramco) The Need to Raise Assessment Standards Opacity vs Transparency:  The Need to Raise Assessment Standards Opacity vs Transparency Volatility in crude markets has increased massively in the last year Crude volatility has been transferred to all downstream markets Naphtha pricing effects felt down the petrochemical derivative chain Need for time sensitive assessments Need for full transparency Three Recent Changes in the Global Petchem Markets:  Three Recent Changes in the Global Petchem Markets greater sensitivity to oil Cost Push more Volatility increased Liquidity Petchem Prices have been 4 to 10 Times more Volatile than Crude:  Petchem Prices have been 4 to 10 Times more Volatile than Crude Benzene to Crude Volatility Ratio* (* Inter-week absolute-value percentage change in average US, Asia, & Europe benzene prices divided by percentage change in WTI) 2000 2005 Sensitivity to Oil Cost Push:  ($/mt) 2000 2005 Sensitivity to Oil Cost Push Platts Global Benzene Index WTI Crude Current Hot Topics:  Current Hot Topics Major doubts over startup timings Shortages of trained engineering manpower Shortages of metal (container ships) Higher oil and construction costs Iran sanctions Petchems even more Volatile than Oil:  Petchems even more Volatile than Oil Slide15:  Petchems even more Volatile than Oil Major Initiative to Increase Transparency:  Major Initiative to Increase Transparency Engage in major drive to increase transparency standards across commodities and across regions Recent major initiatives in the European oil products, oil derivatives, and MTBE markets Global petrochemical markets The effects of transparency on PCA window liquidity:  The effects of transparency on PCA window liquidity Transparency Drive:  Transparency Drive Transparency initiatives lead to better corporate governance Transparency and compliance are coming of age Sense of disquiet but stricter requirements are in Corporations are now openly welcoming more transparent systems Companies putting in place policies that support higher assessment standards. Middle Eastern Drives:  Middle Eastern Drives Abu Dhabi Upper Zakum crude introduced as substitute for Dubai Potential liquidity of Dubai/Oman output at least 1.35 mil Previously 800,000 b/d Higher quality Upper Zakum acts as a cap for Dubai NYMEX Dubai contract Platts Mission: Market Transparency:  Platts Mission: Market Transparency “To serve the commodities markets by providing critical market intelligence in real-time” Industry’s Concerns:  Industry’s Concerns Possibility that rogue market participants would supply or release inaccurate data to game published prices or distort market perceptions Fear that markets may become more opaque due to regulatory concerns Average daily market heards published in Asia on PCA 5:  Average daily market heards published in Asia on PCA 5 The Window Process:  The Window Process 2. From 4:00 to 4:25 PM No new bids or offers Volume, terms & conditions cannot change Only prices can change Market Makers, Market Watchers can hit bids/offers 3. From 4:25 to 4:30 PM All bids & offers Frozen Bids & offers can be hit Deals made one-to-one Before 4:00 PM London Only firm bids and offers accepted Platts Petchem “Heards” Page:  07/06/2006 Heard 311: MTBE: Ruhr offers $1,095/mt FOB ARA, Jul 11-20, 07/06/2006 Heard 310: MTBE: Neste Oil offers $1,105/mt FOB AR, Jul 11- 07/05/2006 Heard 195: GPPS: BASF Jul GMP at Eur1,375/mt FD NWE 07/06/2006 Heard 303: SM: July bid reported at $1270/mt FOB Rdam 07/05/2006 Heard 210: PP homo inj: July CP settled at Eur1140/mt FD NW 07/06/2006 Heard 298: BZ: Aug bid at $1055/mt CIF ARA 07/06/2006 Heard 229: Tol: Raystar keen on BP Any Aug offer $945/mt FO 07/06/2006 Heard 228: Tol: S5) BP offers down any Aug $945/mt FOBK 2kt 07/06/2006 Heard 227: PX: B1) Noble hikes bid H1 Aug $1280/mt CFR Taiw 07/06/2006 Heard 226: Iso-MX: B2) Integra hikes bid any Aug $1035/mt F 07/06/2006 Heard 222: SM: S2) Daelim withdraws offer any Aug $1290/mt 07/06/2006 Heard 223: PX paper: Noble bid bal-Jul swap $1270/mt CFR Ta 07/06/2006 Heard 31: PROPYLENE: July RGP offered 43.5 cents/lb FD USG 07/06/2006 Heard 30: ETHYLENE: July offered 47.5 cents/lb FD USG 07/06/2006 Heard 108: TOL: Jul n-grade offer 330 cents/gal FOB USG 07/06/2006 Heard 107: BZ: Sep deal heard 335 cents/gal DDP USG 07/06/2006 Heard 106: BZ: July deal heard 385 cents/gal DDP USG 07/06/2006 Heard 303: Mt Belvieu E/P mix purchased at 79 cents/gal Platts Petchem “Heards” Page US Asia Europe Published market heards & company participation:  Published market heards & company participation SABIC Credit Rating:  SABIC Credit Rating A/Stable/A-1 “SABIC’s competitive advantage derives mainly from its access to natural gas at a fixed price significantly below market levels outside the Middle East, its favorable geographic location” But….:  But…. “The cyclicalty and high capital intensity in SABIC’s petrochemicals and steel production business units, lower diversification in terms of sales and regional operation compared with its large international competitors.” Thank You!:  Thank You! [email protected]

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