Global Fibres Overview

Synthetic Fibres Raw Materials Committee Meeting at APIC 2014

Pattaya, 16 May 2014

(Michelle) Yang Qin

APIC 2014
AGENDA

• Historical and Forecast Man Made Fibre Production

• Cotton Market Trends

• Impact of Polyester Over-Capacity

• Expected Fibre Market Trends

• Conclusions

Source: Tecnon OrbiChem

APIC 2014
WORLD FIBRE DEMAND vs GDP

Demand (Million Tons)

75
2
R = 0.977
65 2
R = 0.974

55

45

35

25

15
5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000

GDP (Billion 2000 $)

Source: Tecnon OrbiChem
APIC 2014
WORLD FIBRE PRODUCTION 1980-2025

Million Metric Tons

160
Wool
140
Cotton
120
Cellulosic Fibres
100 Polypropylene
Fibre
80 Acrylic Fibre

60
Polyamide Fibre

Polyester Fibre
40

20

0
1980 1985 1990 1995 2000 2005 2010 2015 2020 2025

Source: Tecnon OrbiChem

APIC 2014
WORLD FIBRE PRODUCTION TRENDS

• World fibre production has excellent correlation with GDP which

we use as basis for projections to 2025

• Total fibre production expected to grow 3.7% per annum to 2025

• Global 2013 fibre production estimated at 85.5 million tons

• Global 2013 synthetic fibre production estimated at 55.8 million

tons (i.e. excluding cotton, cellulosics and wool)

• Global synthetic fibre volume growth is 98%+ of future total fibre

production increases

• Polyester (filament and staple) makes up 95%+ of future global

synthetic fibre production growth

Source: Tecnon OrbiChem

APIC 2014
WORLD POLYESTER FILAMENT PRODUCTION

Million Metric Tons

64
China
56
Northeast Asia
48 S & SE Asia

40 ME & Africa
East Europe
32
West Europe
24
South America

16 North America

0
1980 1985 1990 1995 2000 2005 2010 2015 2020 2025

Source: Tecnon OrbiChem

APIC 2014
WORLD POLYESTER FILAMENT PRODUCTION TRENDS

• Polyester filament growth nearly three times the average of all

fibres during the last five years (7.9% vs. 3.1%)

• Global 2013 filament production just under 29 million tons (7%

growth over 2012)

• Major production increases forecast for China, India and the US

• Production increase in US due to share gains in carpet industry

by polyester BCF

• Production decreased in essentially all other developed countries

• Future production growth (through 2025) expected to moderate

to 6% per annum (still almost twice all other fibre growth)

Source: Tecnon OrbiChem

APIC 2014
WORLD POLYESTER STAPLE PRODUCTION

Million Metric Tons

40

36 China

32
Northeast Asia
S & SE Asia
28
ME & Africa
24
East Europe
20
West Europe
16
South America
12
North America
8

0
1980 1985 1990 1995 2000 2005 2010 2015 2020 2025

Source: Tecnon OrbiChem

APIC 2014
WORLD POLYESTER STAPLE PRODUCTION TRENDS

• Global polyester staple production growth during last five

years 6.4%

• Production increases in 2012/13 for polyester staple

production slowed significantly after above trend growth in
2010/11 due to cotton substitution

• As with polyester filament, China dominates with 65% of

global production

• Future production growth 4-5% through 2025 with China and

India dominating

• Limited cotton production growth through 2025 will be

primary driver for polyester staple

Source: Tecnon OrbiChem

APIC 2014
WORLD POLYAMIDE FILAMENT PRODUCTION

Million Metric Tons

5.0
China

4.0
Northeast Asia
S & SE Asia
ME & Africa
3.0
East Europe
West Europe
2.0
South America
North America
1.0

0.0
1980 1985 1990 1995 2000 2005 2010 2015 2020 2025

Source: Tecnon OrbiChem

APIC 2014
WORLD POLYAMIDE FILAMENT PRODUCTION TRENDS

• Although production growth for polyamide fibre from 2007 to

2012 was flat, sharply higher volumes (~10%) were
experienced in 2013, due to textile and industrial growth in
China and improved carpet and automotive markets in the US

• Recent increases in polyamide production are expected to

moderate to 1-2% per annum growth through 2025, despite 5%
growth expected in China

• Future growth limited by additional polyester substitution

expected in carpet and some industrial applications including
side air-curtains

Source: Tecnon OrbiChem

APIC 2014
WORLD ACRYLIC FIBRE PRODUCTION

Million Metric Tons

3.0
China
2.5 Northeast Asia
S & SE Asia
2.0
ME & Africa
East Europe
1.5
West Europe

1.0 South America

North America
0.5

0.0
1980 1985 1990 1995 2000 2005 2010 2015 2020 2025

Source: Tecnon OrbiChem

APIC 2014
WORLD ACRYLIC FIBRE PRODUCTION TRENDS

• Global acrylic fibre production has fallen 30% since its high
point in 2004

• Production in 2013 (slightly under 2 million tons) was flat

compared with 2012

• Acrylic fibre costs continue to suffer from propylene

availability and high acrylonitrile conversion costs

• Despite a sharp fall in production over the past 10 years,

more modest declines of 1-2% are forecast due to weak
supplies of wool and cotton and continuing technical
advantages for acrylic fibre in certain markets

Source: Tecnon OrbiChem

APIC 2014
WORLD POLYPROPYLENE FIBRE PRODUCTION

Million Metric Tons

8.0
China
7.0
Northeast Asia
6.0
S & SE Asia

5.0 ME & Africa

East Europe
4.0
West Europe
3.0
South America
2.0 North America

1.0

0.0
1980 1985 1990 1995 2000 2005 2010 2015 2020 2025

Source: Tecnon OrbiChem

APIC 2014
WORLD POLYPROPYLENE FIBRE PRODUCTION TRENDS

• Global polypropylene fibre production has fallen 1% per

annum in the last five years due to volatile propylene costs
which has facilitated polyester substitution in some markets

• More stable propylene costs as a result of increased propane

dehydrogenation and growing nonwovens’ markets are
expected to reverse recent trends and result in a1-2% growth
in fibre production growth during forecast period

Source: Tecnon OrbiChem

APIC 2014
WORLD CELLULOSIC FIBRE PRODUCTION

Million Metric Tons

7.0
China
6.0
Northeast Asia

5.0 S & SE Asia

ME & Africa
4.0
East Europe

3.0 West Europe

South America
2.0
North America

1.0

0.0
1980 1985 1990 1995 2000 2005 2010 2015 2020 2025

Source: Tecnon OrbiChem

APIC 2014
WORLD CELLULOSIC FIBRE PRODUCTION TRENDS

• Global production of cellulosic fibre has grown 5.8% per annum

during the previous five years, driven primarily by China

• 2013 production increased to 4 million ton (5.5% above 2012)

• Projected growth of 5% per annum is expected for the forecast

period, due to strong production growth in China and Southeast
Asia as cellulosic fibre substitutes for cotton and new market
opportunities, particularly in nonwovens, are developed

Source: Tecnon OrbiChem

APIC 2014
WORLD COTTON PRODUCTION
Million Metric Tons
28
Historical
26

24
Forecast
22

20

18

16

14

12

10
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024

Source: ICAC
APIC 2014
COTTON vs POLYESTER STAPLE PRICES

Dollars per Ton

5,000
Polyester Staple
4,500 1.4 den China
4,000
Cotton Outlook
3,500 Asia ‘A’ Index
3,000

2,500

2,000

1,500

1,000

500

0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Source: Tecnon OrbiChem & Cotton Outlook

APIC 2014
COTTON TRENDS

• Cotton production has limited upside due to competition for land

and water resources and limited potential for yield improvement
• Cotton production in 2012/13 season was 26 million tons and is
expected to remain in the 25-27 million ton range for forecast
period
• Cotton price volatility pushed retailers and brand houses to
polyester substitution in the past 2-3 years
• Limited production growth and higher costs are expected to put
upwards on pressure cotton prices in the longer term
• China’s state policy of stockpiling cotton has changed and is
being replaced by direct subsidiaries to farmers
• Management of Chinese state reserves of cotton will play a
significant role in prices over the next year or two

Source: Tecnon OrbiChem

APIC 2014
NEW CHINESE POLYESTER FIBRE CAPACITY 2011-2014
Producer Capacity Start-Up Product
Effective Capacity Increment, (1,000 2014
Million Metric Tons ktpa)

Zhejiang Guxiandao 500 Mar PIY

4.5
Tongkun 400 Q2 PFY
4
Zhejiang Xinfengming 400 Q2 PFY
3.5 Jiangsu Shenghong 250 Q2 PFY

3 Sanfangxiang 200 Q2 PFY

Zhejiang Hongjian 200 H2 PFY
2.5
Fujian Jinxing 200 H2 PFY
2
Jiangsu Zhangjiagang Xinxin 180 H2 PFY
1.5 Zhejiang Huaxin 400 H2 PFY
Jiangsu Haixin 500 H2 PFY
1
Hebei Baoyi 200 Q4 PFY
0.5
Fujian Changle Shanli 200 Q3 PSF
0 Fujian Jinxing 200 Q3 PSF
2011 2012 2013 2014

Nameplate Capacity Total 3,830

Source: Tecnon OrbiChem

APIC 2014
WORLD POLYESTER OVERCAPACITY (Virgin Only)

Million Metric Tons Utilisation %

50 78
Polyester Filament
45 76
Capacity
40 Utilisation
74
Capacity
35
72
30 Production
70
25
68 Polyester Staple
20 Capacity
66 Utilisation
15
64 Capacity
10
62 Production
5

0 60
2012 2013 2014 2015 2016

Source: Tecnon OrbiChem

APIC 2014
CHINESE POLYESTER OVERCAPACITY (Virgin Only)

Million Metric Tons Utilisation %

50 80
Polyester Filament
45 78
Capacity
40 Utilisation
76
Capacity
35
74
30 Production
72
25
70 Polyester Staple
20 Capacity
68 Utilisation
15
Capacity
66
10
Production
5 64

0 62
2012 2013 2014 2015 2016

Source: Tecnon OrbiChem

APIC 2014
THE IMPACT OF POLYESTER OVERCAPACITY

• Polyester overcapacity (fibre and intermediates) for the next five

years indicates limited opportunity for margin improvement in
the polyester chain, regardless of end-use demand

• Decreasing margins with limited upside will continue to improve

polyester’s competitive position compared to other fibres

• Despite slower overall fibre growth, continuing gains in market

share for polyester translate to steady or only modestly slower
growth for polyester fibre during the forecast period

Source: Tecnon OrbiChem

APIC 2014
EXPECTED FIBRE MARKET TRENDS

Market Trending To… Share Reduction

Carpets Polyester Filament Polyamide and
Polypropylene
Filament
Nonwovens Cellulosic and Cotton
Polypropylene Staple
Apparel Polyester and Cotton
Cellulosic Filament
and Staple
Air Bags (Side Polyester Filament Polyamide Filament
Curtains)
Tailored Clothing Polyester Wool

Source: Tecnon OrbiChem

APIC 2014
CONCLUSIONS

• Overall fibre production growth slows in forecast period

• Limited cotton growth has dramatic impact on synthetic

fibre markets

• Polyester domination in fibre markets accelerates as

overcapacity limits margin expansion throughout the chain

• Despite growing cost advantages, polyester is technically

limited in some markets allowing more modest growth in
polyamide, polypropylene and cellulosic fibre, coupled
with modest declines in acrylic and cotton production

Source: Tecnon OrbiChem

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