U.S. Chemical Outlook from the American Chemistry Council (June 2020)

U.S. CHEMICAL OUTLOOK The Future of South Louisiana Industry 2020 Business Report Power Breakfast 9 June 2020 Dr. Thomas Kevin Swift Chief Economist & Managing Director

U.S. Petrochemicals Competitiveness Trends • Naphtha is a petroleum product whose price is closely tied to oil.

• Ethane is a natural gas liquid (NGL) co-produced with natural gas production. Its price is correlated with natural gas prices.

• Because competing producers in Europe and Asia generally use naphtha feedstocks and North American producers generally use ethane and other NGL feedstocks, we look to the relative price of oil to natural gas as a proxy measure for U.S.-based petrochemicals competitiveness.

• As a rough rule-of-thumb, when the oil-tonatural gas price ratio is above 7, U.S. petrochemicals are relatively advantaged.

• When the ratio is below 7, U.S. petrochemicals are less advantaged.

Oil-to-Natural Gas Price Ratio 45 40 35 30

More competitive

25 20 15

Less competitive

10 5 0 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24

Sources: EIA, NYMEX, Oxford Economics

Cumulative Announced U.S. Chemical Industry Investments from Shale Gas Number of Projects 375 350 325 300 275 250 225 200 175 150 125 100 75 50 25 0

Billions

Some facts: 344 projects valued at $204.4 billion 62% is FDI 80% is petrochemicals, plastic resins & other derivatives 87 projects valued at $57.7 billion is in Louisiana‌of which $36.6 billion (63%) is completed or under construction

$250 $200 $150 $100 $50 $0

D-10 J-11 D-11 J-12 D-12 J-13 D-13 J-14 D-14 J-15 D-15 J-16 D-16 J-17 D-17 J-18 D-18 J-19 D-19 J-20 Total Investment Source: ACC analysis

Number of Announced Projects

Geography of Shale-Advantaged Chemical Industry Investment

Chemical Industry Investment Shale Play Sources: ACC

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Annual Change in U.S. Basic Chemical and Synthetic Materials Capacity Capacity Change (000 MT) 25,000 20,000 15,000 10,000 5,000 0 -5,000 -10,000 -15,000 -20,000 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Sources: ACC, AFPM, AMFA, CI, USGS and ACC analysis

U.S. Basic Chemical and Synthetic Materials Producer Inventories Days Supply 22 20 18 16 14 12 10 8 6 4 2 0 05

06

07

08

09

10

Sources: ACC, AFPM, USGS and ACC analysis

11

12

13

14

15

16

17

18

19

20

U.S. Basic Chemical and Synthetic Materials Production Outlook Quarterly Production (000 MT) 130,000 120,000 110,000 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Inorganics

Organics

Sources: ACC, AFPM, AMFA, CI, USGS and ACC analysis

Resins

Rubber

Fibers

U.S. Basic Chemical and Synthetic Materials Production – Domestic vs. Exports Quarterly Production (000 MT) 130,000 120,000 110,000 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 For Export Sources: ACC, AFPM, AMFA, CI, USGS and ACC analysis

For Domestic Markets

U.S. Basic Chemical and Synthetic Materials Production and Capacity Quarterly Production (000 MT) 160,000 150,000 140,000 130,000 120,000 110,000 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Production Sources: ACC, AFPM, AMFA, CI, USGS and ACC analysis

Capacity

U.S. Basic Chemical and Synthetic Materials Capacity Utilization Outlook Operating Rate (%) 100% 95% 90% 85% 80% 75% 70% 65% 60% 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Sources: ACC, AFPM, AMFA, CI, USGS and ACC analysis

Comparison with December 2019 Outlook U.S. Chemicals - 2020 % Change Y/Y 10 5 0.4 0 -5 -10 -15 -12.8 -20 -19.0 -25 -30 -35 Chemical Production Volumes

4.8 0.7 -0.4

-13.0

-13.5 -19.3

Basic Chemical Volumes Dec-19

Baseline

-20.3

Specialty Volumes Pessimistic

-17.5

-32.8

Capital Spending

For Further Information

Please feel free to address questions to: Dr. Thomas Kevin Swift, CBE Chief Economist & Managing Director American Chemistry Council Email: kevin_swift@americanchemistry.com Follow me on Twitter @DrTKSwift

U.S. Inorganic Chemical Production Outlook Quarterly Production (000 MT) 35,000 30,000 25,000 2014 2015 2016 2017 2018 2019 2020 2021 2022

20,000 15,000 10,000 5,000 0

105.2 mm tons 105.8 mm tons 106.0 mm tons 103.7 mm tons 107.0 mm tons 110.8 mm tons 94.8 mm tons 112.1 mm tons 117.3 mm tons

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Sources: Chlorine Institute, USGS, ACC, author’s analysis

U.S. Bulk Petrochemicals & Other Organic Chemicals Production Outlook Quarterly Production (000 MT) 90,000 80,000 70,000 60,000

2014 2015 2016 2017 2018 2019 2020 2021 2022

50,000 40,000 30,000 20,000 10,000 0

242.8 mm tons 250.9 mm tons 255.1 mm tons 262.0 mm tons 272.1 mm tons 270.1 mm tons 234.8 mm tons 281.9 mm tons 300.8 mm tons

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Sources: AFPM, author’s analysis

U.S. Plastic Resins Production Outlook Quarterly Production (000 MT) 20,000 18,000 16,000 14,000

2014 2015 2016 2017 2018 2019 2020 2021 2022

12,000 10,000 8,000 6,000 4,000 2,000

52.4 mm tons 53.7 mm tons 54.4 mm tons 55.0 mm tons 58.4 mm tons 58.6 mm tons 52.5 mm tons 63.5 mm tons 68.1 mm tons

0 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Sources: ACC, author’s analysis

U.S. Synthetic Rubber Production Outlook Quarterly Production (000 MT) 1,600 1,400 1,200 1,000

2014 2015 2016 2017 2018 2019 2020 2021 2022

800 600 400 200 0

5.10 mm tons 5.27 mm tons 5.17 mm tons 5.24 mm tons 5.30 mm tons 4.99 mm tons 4.22 mm tons 4.68 mm tons 4.85 mm tons

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Sources: IRSG, author’s analysis

U.S. Manufactured Fibers Production Outlook Quarterly Production (000 MT) 1,200 1,000 800 2014 2015 2016 2017 2018 2019 2020 2021 2022

600 400 200 0

3.19 mm tons 3.21 mm tons 3.19 mm tons 3.24 mm tons 3.28 mm tons 3.14 mm tons 2.68 mm tons 2.89 mm tons 2.88 mm tons

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Sources: AFMA, author’s analysis

U.S. Specialty Chemical Market Outlook Quarterly Market Volumes (000 MT) 12,000 11,000 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Other Rubber Processing Chemicals Industrial & Institutional Cleaners Coatings Sources: ACC, author’s analysis

Water Management Chemicals Plastic Additives Food Additives Catalysts

Textile Specialties Oilfield Chemicals Cosmetic Chemicals Adhesives & Sealants