TuesdayMar 15, 2016
WednesdayMar 16, 2016
ThursdayMar 17, 2016
FridayMar 18, 2016
Tuesday, Mar 15, 2016
Wednesday, Mar 16, 2016
- 8:45 amGlobal Energy Outlook
Jamie Webster, Vice President, Crude Oil Markets, IHS Energy
The decline in crude oil prices at the end of 2015 below $40/bbl (Brent), has raised many questions regarding the near term impact in global chemical markets. How future price trends evolve in the coming 12 to 24 months will have a significant impact on regional competitiveness and future decisions regarding new capital investments in the chemical value chain. The decline in crude oil prices over the past year provided welcome competitive relief for the European, Latin American and Asian petrochemical industries, although it also brings with it a number of challenges. Falling crude oil prices reduce feedstock costs for the predominantly naphtha fed industry, however, while lower inputs costs were welcomed, savvy buyers of products and intermediates see the direction of crude and delay buying decisions causing volatility in pricing in many markets. Renewed competitiveness versus gas based rivals has led to improved financial performance, providing an opportunity for renewed efforts to consider reinvestment and repositioning of assets. From one perspective, low crude oil prices have "bought some time" to enable naphtha based industries around the world to take a more strategic look at the future of assets, versus the pressure to take action under the weight of unacceptable profitability resulting from crude oil prices sustained near $100 per barrel. In North America and the Middle East, lower crude oil prices have had a varied impact on overall company profitability depending on the market value-chain in question. For a vast majority of ethane-to-ethylene based chemical businesses, lower crude has meant lower prices and lower profitability as well as shifting profits to downstream businesses within this value chain.
- 9:15 amThe Implications of a Global Economy Stuck in Low Gear
Nariman Behravesh, Chief Economist, IHS
Since 2012, world GDP growth has been range-bound between 2.5% and 2.7%. During that time, the growth in the advanced economies has accelerated gradually, while economic activity in emerging markets has decelerated dramatically. IHS expects a slightly better overall performance for the world economy in 2016, with an expected growth rate of around 2.9%. Solid growth in the United States and a slight pickup in the pace of Eurozone and Japanese economic activity, along with an expected easing of recessionary pressures in Brazil and Russia, are among the reasons for this moderately upbeat assessment. In the same vein, low oil prices and more monetary stimulus—in particular, from the European Central Bank (ECB), the People’s Bank of China, and (possibly) the Bank of Japan—will not only support growth, but could also provide the basis for some upside surprises. Unfortunately, there is no shortage of downside risks, including high public- and private-sector debt levels, corporate risk aversion, further weakness in China and other emerging markets, and daunting geopolitical risks. This means that the probability of the global economy being stuck in low gear for another year is still uncomfortably high. A steady and growing global economy means continued growth in the consumption of durable and non-durable goods, many of which are derived from commodity chemicals and plastics. The end result is an expectation of steady demand growth for basic chemicals and plastics and when combined with a pause in new capacity investment decisions (due to energy market uncertainty), could result in very tight market conditions in the next 2-3 years.
- 9:40 amState of the Global Chemical Industry
Dave Witte, Senior Vice President and General Manager, IHS Chemical
The global chemical industry is in a state of transformation that is underpinned by a need for integration, scale and focus and a complete reversal of the conglomerate strategies of the past. And while this shift has been taking place, other changes have evolved such as the impact of dislocation of supply chains to growing low-cost markets such as China or other countries in South Asia, and the rise of hydrocarbon monetization strategies via chemicals such as those seen in Saudi Arabia, and the shale-enabled resurgence of North America. In addition, Board rooms are being pressured to forego longer term strategies in lieu of (at least perceived) short-term value by activist shareholders while private equity stands at the ready to leverage capital for chemical asset "orphans" as those opportunities present themselves. Chemical companies have long realized that sustainable competitive advantage is the key to thrive long-term in the ultra-competitive world of chemicals. Competitive advantage is broadly driven by some combination of feedstock advantage, operational efficiencies and product/service differentiation. To achieve these ends, companies have been focused on tightening relationships with customers to focus on value maximization, improving manufacturing efficiency and reliability, and leveraging their own asset position (market, technology or feedstock position). Today’s chemical strategies and tactical implementation of those strategies focus on these areas.
- 11:00 amExecutive Panel
Foundation for Petrochemical Success in a Changing Energy Environment
Neil Chapman, President, ExxonMobil Chemical Company
Today’s abundant hydrocarbon feed and energy have created plenty of opportunities for producers looking to capture petrochemical growth. But how robust are the investments in an ever changing energy environment? Long-term success will require intense focus on capital efficiency, innovative products that add value and enhance sustainability, and market access through a nimble and effective supply chain.
Trends in the Automotive Industry and Impact on Chemicals
James (Jim) R. Fitterling, President and Chief Operating Officer, The Dow Chemical Company
Even as the global auto industry continues to grow, it also continues to change. New regulatory standards, shifting consumer preferences, and new technologies are combining to create a dynamic landscape for OEMs and their suppliers. The chemical industry will need to be equally as dynamic and flexible as the auto industry seeks reliable, innovative and global partners to fuel its future.
Logistics Cooperation in the Chemical Industry in Keeping Up with Global Trade Flows
Eelco Hoekstra, Chairman Executive Board and CEO, Royal Vopak
As the U.S. prepares for major capacity additions, rethinking how chemicals can be shipped out efficiently to overseas markets is critical. Producers will need to increase cooperation with logistics to reduce costs and increase flexibility. This requires scale, and industrial terminals are an excellent solution.
A Wall Street View of the Chemical Industry
Paul A. Smith, Managing Director, Citigroup Global Markets Inc
This presentation will offer an overview of recent trading multiples for chemical companies, the performance of the chemical sector compared to other sectors, as well as drivers of chemical company valuation in the public market. What is the impact of low oil and a slowing global economy (including that of China) on the petrochemical sector and valuation? The paper will also discuss recent trends in chemical M&A as well as the volume of chemical M&A in recent years. It will explore LBOs in the sector, and the impact of activist investors on chemicals. It will also cover the pace of organic growth in the sector and contrast it with M&A growth, as well as companies and regions that have been most active in chemical M&A.
- 1:00 pmLuncheon Keynote Address
New U.S. Chemical Regulation Could be a Win for Domestic Manufacturers
Cal Dooley, President and CEO, American Chemistry Council
Sound environmental regulation is essential to the United States’ ability to fully realize the competitive advantage created by domestic shale gas. The U.S. is preparing for a major overhaul of chemical regulations that if done wisely, could enhance our appeal as a preferred destination for chemical manufacturing investment even further.
- 2:00 pmAfternoon Executive Panel: Outlooks for India, Latin America, and China -- And a Perspective from the Financial Sector
Moderator: John Page, Vice President Global Consulting, IHS ChemicalIn this session, our speakers will review in detail the opportunity and outlook for three of the primary new markets for chemicals: China, India, Latin America. They are all in different stages of development, with highly variable challenges around regulation, production costs and market drivers.
While US demand for chemicals is likely to be around 4% for the rest of the decade thanks to low-cost production and new capacity, China's chemical growth is expected to slow further to around 6% for the coming 5 years. Ethylene production margins will remain stable in Asia, even with new coal and methanol based capacity coming on stream. For petrochemicals overall, the established trio of Japan, South Korea and Taiwan will remain dependent on demand from China. The other regional demand driver is India which is expected to outpace China with 7.6% growth in 2016 but chemical industry development is help back by lack of reforms enabling investments by local as well as foreign producers.
In Latin America, countries are showing a mixed growth pattern with Brazil contracting further in 2016 but Mexico showing strong growth and pent up demand linked to the US economy. The political and economic framework is showing significant dynamic change and uncertainty with commensurate impact on chemical markets both in terms of feedstock supply and product demand.
This session will also share the perspective of the financial community: how the chemical industry is viewed as an opportunity for investment and how private equity may play a role in chemical industry development and restructuring.
- 2:05 pmIndia Chemical Outlook
Kamal Nanavaty, President - Strategy Development, Reliance Industries
India is emerging as the global growth epicentre for chemical industry. This presentation will cover the Indian chemical industry’s current and projected production, consumption, gaps and trade, mega trends fuelling growth and the policy initiatives having implications for the chemical industry and investment opportunities in India. This presentation will also give a brief about Reliance and its philosophy of growth.
- 2:55 pmA Private Equity Perspective on Chemical M&A: Review of 2015 and Outlook for 2016
Scott M. Kleinman, Lead Partner, Private Equity, Apollo Management, L.P.
Consolidation was the theme of 2015. Across the value-chain, companies merged to ensure they are sizeable enough to compete for increasingly larger growth opportunities. For 2016, further portfolio optimization through both acquisitions and non-core divestitures is expected, and private equity will continue to play a role.