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THE CHEMICAL INDUSTRY IN THE NEXT
INDUSTRIAL REVOLUTION,
THE “SUSTAINABLE ONE”
7th October 2015
MR. RAFAEL CAYUELA
TWITTER @CAYUELARAFAEL
AUTHOR
“THE CHEMICAL INDUSTRY BY 2050”
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Disclaimer
•
The information in this presentation is based on information extracted from
the book on “The Future of the Chemical Industry by 2050” edited by Mr.
Rafael Cayuela and published by WILEY-VCH. WILEY does not warrant the
accuracy, reliability, completeness or timeliness of the information and undertakes no
obligation to revise or update this presentation.
•
Mr. Rafael Cayuela act as an individual and author and non as an DOW Chief
Economist or Employee. Dow Chemical (including its directors, officers, employees,
agents and subcontractors) hereby waives any and all liability for damages of whatever
kind and nature which may occur or be suffered as a result of the use of this
presentation or reliance on the information therein.
•
This presentation contains forward-looking information within the meaning of
any applicable securities laws ("Forward-Looking Information"). The purpose
of the Forward-Looking Information is to provide audience expectations and a logical
framework about future developments on the industry, trends, business prospects and
opportunities and may not be appropriate for other purposes and must not be relied
on.
•
All rights reserved (including those of translation into other languages). No
part of this presentation and book may be reproduced in any form, not transmitted or
translated into a machine language without written permission from the publisher.
Registered names, trademarks, etc.. used in this presentation even when not
specifically marked as such, are not to be considered un protected by law.
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2
Strategy vs. Tactics
TIME TO REFLECT
Q 1 : What was the world population in 1970?
A) 2, 5
B) 3,5
C) 4,5
2010 : 7 billion
Q 2 : What was the world life expectancy in 1970?
A) 35
B) 45
C)
55
2010 : 65 years
Q 3 : What was the World $US GDP in 1970?
A) 15
B) 25
C) 35
2010 : $US73 trillion
Q 4 : What was the world oil demand in 1970?
A) 28
B) 45
C) 65
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2010 : 88 million barrel
3
Strategy vs. Tactics
TIME TO REFLECT – TIME FOR STRATEGY
Q 1 : What was the world population in 1970?
A) 2, 5
B) 3,6
100%
C) 4,5
2010 : 7 billion
Q 2 : What was the world life expectancy in 1970?
A) 35
B) 45
44%
C)
55
2010 : 65 years
Q 3 : What was the World $US GDP in 1970?
A) 15
387%
B) 25
C) 35
2010 : $US73 trillion
Q 4 : What was the world oil demand in 1970?
A) 28
B) 44
100%
C) 65
2010 : 88 million barrel
GLOBAL MEGATRENDS
SOCIAL
“A WORLD WITH MORE THAN 9 BILLION PEOPLE,
HIGHER QUALITY OF LIFE AND LIFE EXPECTANCY,
MOVING INTO CITIES”
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5
Social Megatrends – Population
9 to 10 billion people by 2050, with the REST adding 1.8 billion and India
440 million. Japan, Russia, China & EU will face shrinking & older populations
World Population per Area - Base
World Population per Area in %
Million people
World Population Scenarios
Lower case
Base scenario
High scenario
Source : United Nations - World Population Prospect – 2007 Revision
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6
Social – Demographics & Life Expectancy
Life expectancy will increase to 75 years, with people living more than
100 years. Fertility will keep declining and older populations are expected.
Life Expectancy vs. Fertility Rate by 2050
World Demographic Scenarios by 2050
Above 65
8%
16%
Source : United Nations - World Population Prospect – 2007 Revision
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7
GLOBAL MEGATRENDS
ECONOMY
“THE LARGEST MIDDLE CLASS IN HUMAN HISTORY”
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8
Economic Megatrends - GDP
World GDP expected to quadruple to $US281 trillion by 2050; BRIC
will double their market share & Advanced Economies their size
Source : IMF and PWC and PriceWaterHouseCoopers for long term economic projections
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9
Economic Megatrends - GDP
China & India might become the largest economies in the world,
while China, India & USA alone could host 50% of the world GDP.
50%
$US 20 to 25 trillion gap
50%
Source : IMF and PWC and PriceWaterHouseCoopers for long term economic projections
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10
GLOBAL MEGATRENDS
CLIMATE CHANGE
“A WORLD IN A DIET OF 4,000 GRAMS OF CO2 PER CAPITA AND DAY,
REPRESENTS A ENORMOUS TECHNOLOGICAL / POLITICAL CHALLENGE,
BUT ALSO AN HUGE BUSINESS OPPORTUNITY
“CLIMATE CHANGE IS THE “WAR” OF THE 21ST CENTURY”
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11
Climate Change – Fundamentals
Scientific evidences correlate Greenhouse Emissions with higher
temperatures, eventually triggering “climate change”.
Historical C02 Emissions
Historical World Temperature Variations
Emissions vs. Temperature Fluctuations
May 2013
2nd
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12
Climate Change – Root causes
World Green House Emissions
World CO2 Emissions reached
33 Gigaton in 2010
 72% C02 related.




29% Power stations
20% Ind. Processes
19% Transportation
12% residential
 18% Methane
 40% Agricultural
 9% Nitrous Oxide
72% = C02
19% Methane
9% Nitrous Oxide
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 60% agricultural
13
Technological Challenge & Opportunity
4,000 grams of C02 per capita and day
A huge technological challenge BUT also the single largest business
opportunity of this generation.
World GDP vs. CO2 Emissions – 1970 / 2010 - 2050
94 281
90
80
“BAU”
70
300
250
200
60
90%
50
150
40
20
10
0
100
33
30
73
63
15
14
14
15
“Sustainable” = 450 PPM
1970
2010
BAU SCENARIO
* CO2 price at $US 10 or $US 30 per MT
SUSTAINABLE
2050
WORLD GDP
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28,000 grams of C02
per capita and day
GDP in $US
CO2 Emissions in Gigaton
(billon tons of C02)
100
*$80 Trillion to
$240 Trillion
BUSINESS
OPPORTUNITY
50
0
4,000 grams of C02
per capita and day
14
ISSUE 2 – Economic / Wealth Challenge
Living with 4,000 grams of C02 per capita & day
Sustainable Scenario 2050 - CO2 Emissions - 4,000 Grams Per Capita & Day
Daily Emissions per Capita in Grams of C02
80,000
76,000
RUSSIA, 72236
72,000
68,000
64,000
60,000
14 times
CO2 EMISSIONS - GRAMS PER CAPITA & DAY
56,000
USA, 54,475
52,000
INDIA, 49095
48,000
CANADA, 48751
44,000
USA, 43034
CHINA, 40111
40,000
36,000
RUSSIA, 32861
32,000
CANADA, 32,829
11 times
28,000
24,000
JAPAN, 28126
8 times
8 times
EU, 22,605
JAPAN, 20305
20,000
CHINA, 17058
16,000
EU, 16605
BRAZIL, 16035
5 times
3 times
12,000
8,000
4,000
8 times
BRAZIL, 6,519
INDIA, 3995
0
-4,000
$(5,000)
CHEMICAL INDUSTRY, 545
4 times
CHINA, 4,978
INDIA, 4,235
BRAZIL, 4942
RUSSIA, 4905
INDUSTRY, 982
EU, 3788
CANADA, 4,231
USA, 5,320
JAPAN, 3941
7 times
INDUSTRY, 142
$5,000
$15,000
All
rights$35,000
reserved
to WILEY
$25,000
$45,000
$55,000 - VCH
$65,000
GDP PER CAPITA IN $ US
$75,000
$85,000
$95,000
$105,000
GLOBAL LONG TERM MEGATRENDS
ENERGY MEGATRENDS
“IN A ENVIRONMENT OF MASSIVE ENERGY GROWTH, ENERGY TRANSITIONS
OCCUR EVEN WHEN THE INCUMBENT ENERGY IT IS STILL AVAILABLE, AND THE
NEW ONE IS MORE EFFICIENT, CHEAPER AND SUSTAINABLE”
“CRUDE OIL PRICES MIGHT HAVE PEAKED FOREVER IN 2011 – PRICE SHOCKS
ARE GOOD INDICATORS OF ENERGY TRANSITIONS”
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16
Energy Transitions – Price “Shocks”
Price Shocks are tremendous “source” of information.
HISTORICAL CRUDE OIL PRICES 1860 - 2010
2010
Nominal Crude Oil Prices
Real Crude Oil Prices
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17
Energy – “BAU” Scenario
“Doing MORE with LESS”
Under “BAU” Scenario, world energy demand could double
OIL, 198%
GROWTH 2010-2050
GROWTH 2010-2050
WORLD,
199%
REST, 324%
BRIC, 340%
ADVANCED,
1%
0%
50%
ENERGY DEMAND GROWTH 2010 -2050 - "BAU" Scenario
ENERGY DEMAND GROWTH 2010 -2050
"BAU" Scenario
ENERGY DEMAND GROWTH 2010 -2050
"BAU" Scenario
CHINA, 142%
INDIA, 1580%
GAS, 177%
RUSSIA, 128%
COAL, 243%
BRAZIL, 256%
HYDRO, 207%
GROWTH 2010-2050
RENEWABLES,
113%
CANADA, 4%
NUCLEAR,
65%
100% 150% 200% 250% 300% 350%
WORLD
REST
BRIC
0%
50%
JAPAN, -30%
100%
150%
200%
250%
EU, -1%
US, 9%
ADVANCED
-200%
0%
200% 400% 600% 800% 1000% 1200% 1400% 1600% 1800%
18
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CHINA INDIA RUSSIA BRAZIL
CANADA JAPAN EU US
Energy– “Sustainable” Scenario
4,000 grams of C02 per capita and day
4,000 grams of C02 per capita & Day
http://my2050.decc.gov.uk/
•Natural Gas (+34%),
•Nuclear, Biomass & Renewable (Up)
•Crude Oil (-27%) & Coal (-18%)
•Carbon Capture Storage units (19%).
• 60% to 80% Cars will be electric.
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19
GLOBAL LONG TERM MEGATRENDS
SINGULARITY
“INFORMATION TECHNOLOGY & COMPUTATIONAL PROGRESS
WILL ACCELERATE AND CHANGE ALL ASPECTS OF OUR
LIFE, THE WAY WE WORK, LIVE, AND COMMUNICATE”
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20
Singularity
Digital Revolution
Computational Progress and Tech. Convergence accelerate Human Progress Exponentially
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21
Exponential Growth – 6 Ds
Singularity
Digital Revolution
Digitized – more information is becoming digitized, opening the door for a layer of analytics
(e.g. machine learning) to be placed on top of it
Deceptive – early stages of exponential growth processes may be deceptively linear
Disruptive – once exponential growth reaches the inflection point, or “knee of the
curve,” they become truly disruptive
Dematerialized – no longer do you have to buy a flashlight or digital camera, you can
simply purchase an app on your phone to accomplish these tasks
Demonetized – as manufacturing techniques improve, technologies are becoming
less expensive at an alarming pace
Democratized –3 billion more people on the Internet by 2020
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22
THE CHEMICAL INDUSTRY
LONG TERM DINAMICS
BY 2050
“THE CHEMICAL INDUSTRY / SCIENCE / ENGINEERING
WOULD BE AT THE CORE OF THE NEXT INDUSTRIAL
REVOLUTION – THE SUSTAINABLE & DIGITAL ONE”
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23
1 Structure – Growth & Markets
BAU SCENARIO
China and India will become the largest chemical markets with 50% share.
27%
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47%
24
1 Structure – Growth & Markets
BAU SCENARIO
India will be the fastest growing chemical market in world.
2nd
GROWTH RANKING in % - 2010 - 2050
ADJUSTED "BAU" SCENARIO - 2050
LARGEST WORLD MARKETS
CHEMICALS
2,010
2050
CHINA
$
763 CHINA
$
4,048
EUROPE
$
651 INDIA
$
2,903
USA
$
524 USA
$
1,385
JAPAN
$
203 EUROPE
$
1,332
BRAZIL
$
100 BRAZIL
$
474
INDIA
$
74 JAPAN
$
281
CANADA
$
44 RUSSIA
$
211
RUSSIA
$
42 CANADA
$
93
PHARMA
2,010
2050
USA
$
320 USA
$
925
EUROPE
$
244 CHINA
$
752
JAPAN
$
71 EUROPE
$
566
CHINA
$
37 INDIA
$
456
CANADA
$
24 BRAZIL
$
128
BRAZIL
$
20 JAPAN
$
114
RUSSIA
$
14 RUSSIA
$
96
INDIA
$
13 CANADA
$
56
4th
RANK
TOP 1
TOP 2
TOP 3
TOP 4
TOP 5
TOP 6
TOP 7
TOP 8
TOP 9
TOP 10
TOP 11
TOP 12
TOP 13
TOP 14
TOP 15
TOP 16
COUNTRY
INDIA
INDIA
CHINA
CHINA
RUSSIA
BRAZIL
RUSSIA
BRAZIL
USA
USA
CANADA
EUROPE 27
CANADA
EUROPE 27
JAPAN
JAPAN
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INDUSTRY
CHEMICAL
PHARMA
PHARMA
CHEMICAL
PHARMA
PHARMA
CHEMICAL
CHEMICAL
PHARMA
CHEMICAL
PHARMA
PHARMA
CHEMICAL
CHEMICAL
PHARMA
CHEMICAL
% GROWTH
3816%
3409%
1905%
431%
609%
527%
401%
372%
189%
164%
140%
132%
111%
105%
61%
38%
25
Feedstock
Lighter, Renewable & Bio
2
BAU SCENARIO
Lighter, renewable and bio but still dependent in Naphtha.
BAU – Petrochemical Feedstock 2010
ADV
44%
38%
BRIC
REST
44%
WORLD
10%
47%
56%
0%
20%
NAPHTHA & OIL
ETHANE
60%
15%
9%
30%
40%
ADV
19%
75%
13%
80%
BAU – Petrochemical Feedstock 2050
100%
PROPANE / BUTANE / REST
31%
48%
BRIC
55%
REST
56%
WORLD
30%
20%
NAPHTHA & OIL
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15%
35%
51%
0%
20%
36%
40%
ETHANE
60%
9%
14%
80%
100%
PROPANE / BUTANE / REST
2
Feedstock
Lighter, Renewable & Bio
BAU SCENARIO
Industry need for cheaper energy, feedstock and lower emissions will
accelerate the transition into lighter feedstock
30% less CO2
emissions
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3
Industry– Climate Change
EMISSIONS vs. ABATEMENT = 1 to 2
The Chemical Industry remains a great contributor to emissions reductions.
In 2005, the industry released 3 Gigaton of C02e while “abating” 6 Gigaton
X 2 times
Abatement
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4 Regulation – Global & Stringer
4,000 grams of C02 per capita & day
More global and stringent regulation, with higher C02 prices.
EMISSION TRADING SCHEMES
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•2005
•2005
Europe
Japan
Mandatory
Voluntary
•2008
•2008
Canada
N. Zealand
Voluntary
Voluntary
•2010
•2010
UK
US States*
Mandatory
Mandatory
•2012
Australia*
Mandatory
•2015
•2015
China
Korea
Mandatory
Mandatory
•Note“: WCI Western Climate Initiative
4 Regulation – Global, Stringer, Unbearable
4,000 grams of C02 per capita & day
“Under the new perspective many companies and industries will peril”
Exxon Mobile uses
$60 tonne
as internal carbon
price for C02
Expected EBITDA
annual lost of
$US 8 Billion!!
Sustainable?
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5
INNOVATION – Technology
THE 3rd INDUSTRIAL REVOLUTION
NEXT INDUSTRIAL REVOLUTION
“The Sustainable / Digital One”
4,000 grams per capita & day
2nd INDUSTRIAL REVOLUTION
Enormous Growth - Fossil Fuel
Business
COLLABORATION
INNOVATION
Level 3
INNOVATION
Level 2
Technological
CONVERGENCE
R&D in Chemical Industry in 2010
- 25% new chemistry
- 75% in incremental innovation
OPERATIONAL
EFFICIENCY
-Source: McKinsey
1850
1900
1950
1,2
1,7
2,5
2000
6.0
2050
2100
9,0
12 Billion people
31
5
INNOVATION – Technology
THE 3rd INDUSTRIAL REVOLUTION
•
Circular Economy, Technological Convergence and Collaboration will be
at the core of the next industrial revolution.
•
This require new biz models, new skills (employees/leaders), regulatory
systems (IP protection, patents, antitrust) and technological frameworks.
SHELL
Energy Chemical
DOW
EXXON DOW
GOOGLE
Bank
BMW
Pharmaceutical
Industry
Information
Consumer
Natural Natural
MICROSOFT
Health
APPLE
AIRBUS
PFIZER
Mobility
MICHELIN
UBS
APPLE
NIKE
JPMORGAN SHANGAI
• Companies will be valued by the innovation pipeline of its value chain;
not only by their own innovation, financials or R&D pipeline.
•
Innovation will become disruptive and exponential rather than incremental
(Singularity)
32
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CONCLUSION
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33
Conclusions
UNDER THE 3rd INDUSTRIAL REVOLUTION
•
We are leaving historical and strategic times. During this transition the
world is poised to witness another period of massive transformation. A
world with 9 billion people and $US 280 trillion GDP; the world will have the
potential to host “the largest, wealthiest and healthiest societies in human history”.
•
China, USA & India will become the largest world economies but also the
largest chemical and pharmaceutical markets. World avg. life expectancy will
to 75 by 2050, with millions of people living more than 100 and up to 130 years.
•
During this transition world GDP per capita will triple to US$ 30,675;
creating a massive middle class and pulling millions of people our of poverty.
•
Singularity and the Digital Revolution will accelerate and change most of
the aspects of our life, the way we work, live, and communicate.
•
However our world will not be sustainable. A world poised to live with just
4,000 grams of CO2 per capita an day it is not only a moral obligation and
technological and political challenge, but also a large business opportunity.
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34
Conclusions
UNDER THE 3rd INDUSTRIAL REVOLUTION
•
Emissions reductions, resource scarcity and digitalization will trigger the
Next Industrial Revolution – “Sustainable & Digital one” – moving the
industry from operational efficiencies into innovation and fostering “technical
convergence, business collaboration and the “circular economy”.
•
The industry will be ‘‘called into action’’. New companies and industries
will blossom, others will disappear. Massive growth and disrupting changes
(markets, feedstock, products & technologies); combined with stringent emissions
reductions , will stretch the industries to levels never seen before.
•
Addressing emissions and energy reductions is not only a huge technological
challenge and a moral obligation; but also it is a enormous business
opportunity, at least $100 trillion dollars.
•
This is an historical opportunity for the chemical industry to shine on what it
does best: technology and innovation!
•
The Chemical Industry will be at the core of the 3rd Industrial Revolution,
I hope this time we will not forget it very soon.
35
“Welcome to a much larger and sustainable world
thanks to chemistry”
THANKS
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