US Market Update & Focus on Scrap Exports to Asia

1. US Market Update & Focus on Scrap Exports to Asia Kathy Hall & Xavier Cronin PetroChem Wire June 20, 2014

2. About PetroChem Wire • Formed in 2007 in response to growing liquidity in the spot ethylene monomer market. • PCW publishes daily spot prices for NGLs, monomers and polymers, connecting the supply chain from energy down to manufacturing. • In 2010, PCW began publishing the Repro-Regrind Report at the request of companies in those markets. • PCW prices are used by the NYMEX and ICE as benchmark for monomer & polymer futures contracts. www.petrochemwire.com

3. Polyethylene Snapshot The US and Asia continue to be able to ship to South America. www.petrochemwire.com

4. Polypropylene Snapshot North America is still not a competitive PP market. www.petrochemwire.com

5. Polystyrene Snapshot Asia is still clearly the bargain market. www.petrochemwire.com

6. Prime vs Repro PE When PE supply was tight, less repro was available www.petrochemwire.com

7. Prime vs Repro PP Price declines in Prime have not increased Repro supply www.petrochemwire.com

8. Prime vs Repro PS Prices in Prime have largely led Repro trends www.petrochemwire.com

9. Recycled Resins Have Complex Fundamentals Prime grade markets = simple fundamentals • Supply/Demand • Cost • Global arbitrage Recycled grade markets also depend on • Post-Consumer supply (and legislation) • Retail demand for increased recycled content • Scrap market supply & pricing trends www.petrochemwire.com

10. Recycled Resins and Scrap Exports • For decades, US scrap resins sellers have relied upon China as a destination to send excess scrap supply. • In 2012, China began changing its attitude about receiving the world’s trash. www.petrochemwire.com

11. China’s Green Fence Policy • October 2012: China’s Ministry of Environmental Protection, the National Development & Reform Commission and the Ministry of Commerce charged with “regulation of scrap plastics recycling pollution prevention.” China’s Response: Reject the World’s Trash • China’s Department of the Environment, the General Administration of Customs, and the State Quality Inspection Administration started working together to cut down on illegal solid waste --including scrap plastics--coming into the country. Source: China Scrap Plastics Association, Plastics Recycling Update, February 2013. www.petrochemwire.com

12. 2011: A Common Sight in China Laborer takes a nap, at a recycling center in Jiaxing, Zhejiang province, China, November 6, 2011. (Reuters) www.petrochemwire.com

13. Comingled Bale Common Makeup PET 30% HDPE 30% HIPS 10% PS 10% LDPE 5% Other 15% www.petrochemwire.com

14. Five Plastic-Scrap Categories for U.S. Export:PE, PS, PVC, PET, ‘Other’ = MRP/Co-Mingled Bales US exports of ‘other’ scrap plastic to China is #1 volume of the categories: 2012: 526,898 tons 2013: 396,385 tons (down 24.8 %) January-April 2014: 110,941 tons (down 18.8% Y-o-Y) US export of PE scrap to China is a close #2: 2012: 400,171 tons 2013: 362,210 tons (down 9.5%) January-April 2014: 119,865 tons (down 5.3% Y-o-Y) Source: USA Trade Online (Foreign Trade Division of U.S.Census Bureau), US Commerce Department www.petrochemwire.com

15. US Polystyrene Scrap Exports to China 2012-2014 2012: 13,079 tons 2013: 13,418 tons up 2.5% January-April 2013: 4,489 tons January-April 2014: 4,358 tons down 2.9% Source: USA Trade Online (Foreign Trade Division of U.S.Census Bureau), US Commerce Department www.petrochemwire.com

16. US PVC Scrap Exports to China 2012-2014 2012: 151,717 tons 2013: 157,057 tons up 3.4% January-April 2013: 34,118 tons January-April 2014: 63,557 tons up 86% Source: USA Trade Online (Foreign Trade Division of U.S.Census Bureau), US Commerce Department www.petrochemwire.com

17. US PET Scrap Exports to China 2012-2014 2012: 228,437 tons 2013: 196,295 tons down 14% January-April 2013: 60,001 tons January-April 2014: 91,767 tons up 53% Virgin PET from China is commonly exported to the US West Coast www.petrochemwire.com

18. Thailand Malaysia VIETNAM Finding Alternative Markets for US Scrap Bales www.petrochemwire.com

19. ‘Other’ US Plastic Scrap Exports to Thailand • 2012: 101 tons • 2013: 743 tons, up 634% • January-April 2013: 2 kg (0 tons) • January-April 2014: 1,124 tons THAILAND Source: USA Trade Online (Foreign Trade Division of U.S.Census Bureau), US Commerce Department www.petrochemwire.com

20. ‘Other’ US Plastic Scrap Exports to Malaysia 2012: 9,183 tons 2013: 15,066 tons, up 64% January-April 2013: 4,566 tons January-April 2014: 4,364 tons, down 4.4% MALAYSIA Source: USA Trade Online (Foreign Trade Division of U.S.Census Bureau), US Commerce Department www.petrochemwire.com

21. ‘Other’ US Plastic Scrap Plastic to Vietnam 2012: 7,853 tons 2013: 7,561 tons, down 3.7% January-April 2013: 1,512 tons January-April 2014: 3,089 tons, up 104% VIETNAM Source: USA Trade Online (Foreign Trade Division of U.S.Census Bureau), US Commerce Department www.petrochemwire.com

22. Will days of cash for bales return? Inspections of bales now a way of life—before shipment from the US and on arrival in China. Every bale has its price— are US sellers willing to take at a few cents per pound for export rather than pay for incineration or landfilling? The Fence’s Future www.petrochemwire.com

23. Commingled Bales Mixed Rigid Plastic (MRP), several grades E-Scrap—computers, cell phones, etc. ABS PP Super Sacks Scrap PET is now the world’s most widely recycled plastic Other Options: Pay to dispose or sell to Waste-to-Energy plants US Plastic Scrap Supply is Rising www.petrochemwire.com

24. MARCH 2014: China declares 'war' on smog and pollution. The central government plans to implement a clean water action plan, strengthen the protection of drinking water sources, prevent and control water pollution in key river basins and carry out land restoration. CHINA EXPANDS EFFORTS TO AIR, WATER www.petrochemwire.com

25. What Does This Mean for US Markets? STAY TUNED! www.petrochemwire.com

26. Questions? Thank you! www.petrochemwire.com