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0 Shaping of the European polyolefin industry 16 February 2004 Mark Vester SABIC EuroPetrochemicals Shaping Success.

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Presentation on theme: "0 Shaping of the European polyolefin industry 16 February 2004 Mark Vester SABIC EuroPetrochemicals Shaping Success."— Presentation transcript:

1 0 Shaping of the European polyolefin industry 16 February 2004 Mark Vester SABIC EuroPetrochemicals Shaping Success

2 1 Business Outlook Major factors affecting Europe How will Europe shape for success? Contents

3 2 Gap between WE and ME at historical peak! Oil and naphtha pricing has shifted upward European cost increase, impact on pricing levels structural delta in cost LOW HIGH LOW HIGH Gas price ($/mmBTU)Oil price ($/bbl) ME producer WE producer Delivered cost to WE customer (Eur/t) Circles represent typical ranges

4 3 Oil and Naphtha determine WE integrated cost position OPEC seems determined to keep prices at today ’ s level At recent historical margin levels (below re-investment level) Historical rangePresent range Oil ($/bll) average PE (Eur/t) WE marginal cost producers supply most of the market Cost levels today require Eur/t PE for integrated business to survive Price levels will fluctuate between 700 and 1200 Euro/t New price range will break psychological barrier

5 4 Prices set records, will margins follow? Until 2001capacity addition in WE was significant Coming years demand looks healthy, capacity additions are limited Annual increase (kt)

6 5 ME capacity build-up in HD/LL continues For LDPE build-up is now taking off Technology portfolio in ME is broadening, e.g. LDPE, bimodal HDPE Gap in cost between ME and WE is at historical peak ME share of global capacity increases Share of global capacity (%)

7 6 Imports increase in coming years: ME and CEE capacity PE imports into WE claim 20% market share by 2008 (13% today) ME share of imports raise towards 75% (50% today) Exports remain at today ’ s level Imports take lion share of market growth Volume (Kt)

8 7 ME and Asia determine the global game Americas and Europe increasingly local for local ME can supply to Asia and Europe (and lands at lowest cost) ME balances structural positions over Asia and Europe ME Europe Asia S. Am. N. Am.

9 8 Growth will come from ME Cost curve changes shape Price levels dictated by European cost level and ME/Asia global balancing

10 9 What do we need to do ? Converters Anticipate increased price levels Reshuffle supplier base Team up with leading suppliers Producers WE scrap and selectively build Focus on key competences and markets Grow from ME Globally 91 producers < 500 kt (25% of capacity) 94 sites < 200 kt (42% of capacity) Source Maack Business Services

11 10 More than 20 out of 50 sites in WE have no grid connection 30% of WE ethylene capacity 75% of ethylene is used captive Average WE PE producer is active from 6 sites Average WE PE capacity per site is only 270 kt ARG well positioned to supply Europe ARG supplies 40% of WE ethylene and PE demand ARG area exports 2,5 mln ton PE to non ARG countries 80% ARG capacity is captive Average ARG PE capacity per site is 450 kt 7 out of WE European top 10 sites (scale and integration) are at ARG Integration and logistics are important

12 11 Scrap rigorously and build selectively in Europe tremendous amount of scrap potential cost leaders annually beat inflation Growth from lowest cost platform (import) Price levels will shift Producers focus on key competences select markets / products Converters anticipate team up with leading suppliers Conclusions

13 12 M.E. W.E. … and have fun !! Shaping success


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