MRC news digest over the past week

MOSCOW (MRC) -- MRC news digest over the past week.

1. LDPE production in Russia rose by 19% in July.

Scheduled shutdowns of three Russian producers of low-density polyethylene (LDPE) in July resulted in a serious drop in the output. LDPE production in July decreased by 19%. Three Russian producers stopped their LDPE capacities on scheduled turnaround: Tomskneftekhim (Sibur group), "Gazprom neftekhim Salavat" (Gazprom) and Angarsk Zavod Polymerov (Rosneft), with total annual capacity of 362,000 tonnes. Russia's imports of LDPE in July fell to 46,700 tonnes, from the level of 57,700 in June. Tomskneftekhim (SIBUR group) stopped its LDPE production on scheduled maintenance works from 19 July to 8 August. The company produced 12,800 tonnes of LDPE in less than three weeks of July. "Gazprom neftekhim Salavat" (Gazprom) stopped production of LDPE on the turnaround from 17 July to 17 August; July production of LDPE of the plant was slightly more than 2,000 tonnes. Angarsk Zavod Polymerov (Rosneft) halted its capacities on 50-days prevention in the third decade of July; LDPE production of the plant in July was 2,400 tonnes. Other Russian producers of LDPE, Kazanorgsyntez and Ufaorgsintez, in July kept the June level of capacity utilisation. The output of LDPE at these plants totalled 21,200 tonnes and 8,300 tonnes, respectively. Overall, Russia's production of LDPE in the first seven months of this year totalled 374,200 tonnes, up by 4% year on year.

2. July PP output in Russia decreased by 4%.

The polypropylene (PP) output in July 2013 fell by 4% from June. The decline in production was caused by an outage for maintenance at Tomskneftekhim (SIBUR group). The PP production in July totalled 71,200 tonnes, while in June, this index reached 73,800 tonnes. Tomskneftekhim shut down its production for three weeks of scheduled maintenance works since 19 July. The Tomsk plant managed to produce about 5,800 tonnes in less than three weeks of July(10,900 tonnes in June). Last month, Nizhnekamskneftekhim and Stavrolen kept the June's level of capacity utilisation. The PP output by these plants amounted to 18,500 tonnes and 11,200 tonnes, respectively. Neftekhimia (Kapotnya) and Ufaorgsintez showed a slight reduction in their output. Polyom (Titan Group) reached 100% capacity utilisation in July. The PP output by the Omsk plant reached 15,800 tonnes. Overall, the PP output in Russia exceeded 473,000 tonnes in the first seven months of 2013, up 27% year on year.

3. The share of Chinese PET grades in Ukraine rose to a record 69%.

Ukrainian companies have been increasing actively supplies of Chinese PET grades this year. In January-July the share of Chinese PET chips in the structure of imports grew to 69% year on year. In January-July 2012, China's share was 48%. The overall imports of Chinese bottle PET totalled about 80,000 tonnes in January-July, 2013. The share of Pakistani and Korean suppliers has been falling amid increasing shipments of the Chinese material. Imports of Korean PET decreased from 8% to 0.5% in the total structure of PET chips shipments to the country. The reason for such a sharp shift towards the Chinese material is mainly the price. Prices for Chinese PET in the Ukrainian port were USD1,495-1,510/tonne CIF Odessa, excluding VAT, last week, whereas prices for Korean material were USD1,530-1,540/tonne CIF Odessa, excluding VAT. This price difference was maintained throughout the year.

4. July PET output in Russia grew by 5%.

The July production of polyethylene terephthalate (PET) chips in Russia increased by 5% from June and reached a record high in the history of the industry. The July output in Russia totalled 43,400 tonnes of PET. Three plants have raised their capacity utilisation simultaneously: SIBUR-PETF, Senezh and Alko-Naphtha. The Kaliningrad producer accounted for the largest increase in production. The total PET output is expected to drop in the country in August. The reason for the reduced production will be an unscheduled outage at Senezh. According to our estimates, the output of Russian PET chip grades will fall by 4,500-5,000 tonnes in August from July.

5. July PVC output in Russia grew by 1%.

The total output of unmixed polyvinyl chloride (PVC) in Russia increased by 1% in July, despite an emergency shutdown of production at Khimprom (Volgograd) and reduced capacity utilisation at SayanskKhimplast. The July production of unblended PVC (emulsion and suspension) in Russia rose to 53,830 tonnes from 53,200 tonnes in June. The increased capacity utilisation of the Bashkir Soda Company (formerly Kaustik (Sterlitamak) allowed to offset lower production at SayanskKhimplast and Khimprom (Volgograd). The overall output of unblended PVC in Russia totalled 381,700 tonnes in the first seven months of 2013, an increase of 3% year on year. The output of suspension PVC rose to 361,400 tonnes and, on the contrary, the production of emulsion PVC dropped to 10,000 tonnes.

6. July exports of titanium dioxide to Ukraine rose by 15%.

July exports of titanium dioxide (TiO2) to Ukraine grew by 15% from June and amounted to 11,900 tonnes. Crimean Titan's grade Crimea TiOx-220 accounted for the largest shipments (3,200 tonnes). Crimea TiOx-230 grade accounted for a slight drop in exports (exports amounted to 2,800 tonnes). There was reductions in exports of Ukrainian titanium dioxide this year. Export of TiO2 to Ukraine totalled 79,500 tonnes in January-July 2013, while it amounted to 84,900 tonnes a year earlier. Both Crimean Titan and SumyKhimprom reduced their shipments to foreign markets. The fall in exports over the said period amounted to 3% and 15%, respectively.

7. Scheduled outages for maintenance might lead to higher PP prices in Russia.

Russian producers intend to increase polypropylene (PP) prices in September. Producers explain their intentions by strong demand in the domestic market, tight supply for certain types of polypropylene, as well as higher prices for imported goods. Scheduled outages for maintenance at Nizhnekamskneftekhim (TAIF group) and Polyom (Titan group) might increase pressure on converters. Polyom intends to shut down its production for two weeks of maintenance works from 1 September. The Omsk producers has suspended its PP sales already since the end of last week. Nizhnekamskneftekhim plans to shut down its production for a turnaround for a week from 16 September. This week, some companies reported cutting back in supplies of injection propylene homopolymer (homopolymer PP) from the Nizhnekamsk producer.

8. Belarusian producers of products from polymers continued to show a positive trend in output, but the growth rates has slowed down. The July output of finished products from polymers increased by 6.3 % from June. Producers of plastic windows, doors and window sills accounted for the largest increase in production. According to the National Statistical Committee of the Republic of Belarus, the production of plastic doors and boxes rose to 4,100 square meters, up by 41.3% from June. However, the overall production of these products totalled about 20,100 square meters in January-July 2013, down by 22.8% year on year. The output of windows, window frames and window sills amounted to 47,300 square meters in July, up by 8.9 % from June. The overall production of these products reached 266,000 square meters over seven months of 2013, an increase of 19.5 % year on year.
MRC

MOSCOW (MRC) -- Nynas has received approval from the European Commission to take over production and responsibility for the base oil plant and associated production units at Shell's Harburg refinery in Hamburg, Germany, reported Hydrocarbonprocessing with reference to the company's statement.

The takeover of the first part of the refinery assets is targeted for January 1, 2014.

The new production plant will be a core site for Nynas with an annual production of specialty oils up to 350,000 tons. This represents a 40% increase in the company's supply capability of naphthenic specialty oils. With the takeover of the Harburg production facilities, Nynas will in the first phase take on approximately 90 Shell employees. This number will grow to 220 after two years.

"We signed this deal with Shell in 2011 and we are now satisfied that we have received the approval by the European Commission. The addition of Harburg to Nynas supply system is an important step forward in Nynas' growth strategy," said Staffan Lennstrom, CEO of Nynas.

"Over the next 24 months Harburg will be converted into a world class, stand-alone specialty oil refinery. The high safety performance and professionalism demonstrated by the Harburg organisation and the welcoming attitude from the region have been important for taking this step."

With this agreement, Nynas will not take over any customers, sales or marketing assets from Shell.

We remind that, as MRC informed earlier, Anglo-Dutch oil major Royal Dutch Shell is interested in Brazil's upcoming oil and natural gas concession auctions but has not yet decided whether to participate. Shell is also carefully watching developments in Venezuela, where the company has a small operation in the Lake Maracaibo region, Mr. Voser said. Venezuela has suffered with political unrest following President Hugo Chavez's death and the election of his handpicked successor, Nicolas Maduro.

Royal Dutch Shell, commonly known as Shell, is an Anglo-Dutch multinational oil and gas company headquartered in The Hague, Netherlands and with its registered office in London, United Kingdom. It is the biggest company in the world in terms of revenue and one of the six oil and gas "supermajors". Shell is also one of the world's most valuable companies. As of January, 2013 the largest shareholder is Capital Research Global Investors with 9.85% ahead of BlackRock in second with 6.89%. Shell topped the list of largest companies in the world.
MRC

MOSCOW (MRC) -- In AntweSaudi Hydrogen Peroxide Company, a newly created joint venture between Sadara Chemical Company (Sadara) and the Solvay Group (Solvay), has embarked on construction of one of the world's largest hydrogen peroxide (HP) plants in Saudi Arabia, as per Plastemart.

With a capacity exceeding 3,00,000 tpa and a planned start up in 2015, the mega plant is being built at Sadara's chemical complex in Jubail Industrial City II. It will be the first HP facility in the Kingdom. Sadara will use output from the plant as a raw material for the HP-to-propylene oxide (HPPO) manufacturing plant on the site, thereby supporting its propylene oxide (PO) derivative units that produce polyols and propylene glycol.

The plant will provide a key raw material to Sadara and will strengthen Solvay's global leadership position in HP technology and markets. For Solvay, this will be its third joint venture mega HP plant following the 2,30,000 tpa plant in Belgium, a JV with The Dow Chemical Company (Dow) and BASF, and the 3,30,000 tpa mega plant in Map Ta Phut, Thailand, a JV with Dow.

"We are delighted to be partnering with Solvay, a global leader in HP, to build this world scale plant to feed our PO, PO derivatives and Polyurethane business. This partnership will provide us with a stable and reliable supply of a key raw material which is critical to support our Polyurethane-based customers and downstream value chains," said Ziad Al-Labban, CEO of Sadara.

We remind that, as MRC wrote previously, in earlly Junly 2013, Sadara Chemical Company announced financial close for the funding of main financing of approximately USD10.5 billion project. This marks the completion of project financing for Sadara, which is a joint venture between the Saudi Arabian Oil Company (Saudi Aramco) and the Dow Chemical Company. The main financing supplements the USD2 billion raised through a sukuk issuance in April, bringing the total Sadara project financing raised to approximately USD12.5 billion, the "largest project financing ever in the Middle East."

Sadara Chemical Company is a joint venture between Saudi Aramco and Dow Chemical. The Sadara complex, which will have 26 manufacturing facilities, is claimed to be the world"s largest petrochemical facility ever built in a single phase and will manufacture more than three million tonnes of chemical and plastics products.

Solvay S.A. is a Belgian chemical company founded in 1863, with its head office in Neder-Over-Heembeek, Brussels, Belgium. Solvay Chemicals is a world leading producer of essential chemicals including soda ash, caustic soda, hydrogen peroxide and special chemicals such as fluorinated products, ultra-fine fillers, high purity barium and strontium.
MRC

MOSCOW (MRC) -- Hanwha Chemical is likely to shut a dioctyl phthalate (DOP) plant for maintenance turnaround, as per Apic-online.

A Polymerupdate source in South Korea informed that the plant is planned to be taken off-stream in end-October 2013. It is expected to remain shut for around two weeks.

Located in Ulsan, South Korea, the plant has a production capacity of 80,000 mt/year.

As MRC wrote previously, Sipchem Chemicals Company (SCC), an affiliate of Saudi's Sipchem, signed on July 22, 2013 an incorporation agreement with Hanwha Chemicals Corporation to form a new company, under name of "Saudi Specialty Products Company" for establishing conversion projects in Saudi Arabia. The Joint Venture between SCC and Hanwha comprised of two manufacturing facilities; the first one located at Hail will produce 4,000 MTPA of EVA films whereas the second one located at Riyadh will manufacture plastic moulds up to 1000 tons. It is noteworthy that Sipchem Chemicals Company owns 75% of new company capital while Korean Hanwha owns 25%.

Hanwha Group is one of the largest business conglomerate in South Korea. Founded in 1952 as Korea Explosives Inc., the group has grown into a large multi-profile business conglomerate, with diversified holdings stretching from explosives, their original business, to retail to financial services.
MRC

MOSCOW (MRC) -- Fitch Ratings has raised PKN Orlen's credit rating to BBB-, with a 'stable' outlook, which means that after four years the company has won back its investment-grade standing, according to the company's press release.

This long-awaited change is a result of a consistent deleveraging effort and a policy aimed to maintain all financial ratios at safe levels, which has significantly improved the company's credit standing, despite the persistently challenging climate for the industry across Europe.

Fitch Ratings has also upgraded the company's national rating to A- (pol), with a 'stable' outlook.

As grounds for its decision, the agency pointed to the measures taken by PKN Orlen to maintain a stable financial standing, such as reduction and maintenance of leverage at a safe level, a reasonable capex policy taking account of macroeconomic conditions, as well as the successful sale of its interest in Polkomtel S.A. According to the agency, these measures support the Company's creditworthiness, especially given the challenging climate for the company's two core business segments - refining and petrochemicals.

According to the agency, the key factor underpinning the company's creditworthiness is its strategy update adopted in November last year, which reflects the focus on maintaining financial ratios at moderate levels. The agency analysts have also acknowledged the financial flexibility underlying the company's strategy. Emphasis has been placed on PKN ORLEN's sustainable investment policy, in particular the standby capex, which may be utilised depending on the implementation of key investment plans and the prevailing macroeconomic conditions, particularly in power generation and upstream.

"For the past four years, we have worked hard to regain our investment-grade rating – despite the challenging and highly volatile macroeconomic environment, we have reduced the Company's debt burden by more than PLN 7bn, reduced and have kept the financial leverage ratio at a comfortable level below 30%, and diversified our financing sources. We are a credible partner, also in the eyes of retail investors, as best evidenced by the huge success of the PKN ORLEN retail bonds issued in June, which were assigned a high "BBB+(pol)" rating by Fitch," said Slawomir Jedrzejczyk, CFO and Vice-President of the PKN ORLEN Management Board.

As MRC wrote previously, in June 2013, PKN Orlen, one of the largest oil and gas companies in Europe, offered for sale a second PLN 200m tranche of its bonds and expects the proceeds from the entire bond issue programme to reach approximately PLN 1bn. This move was done in response to the enormous interest in PKN Orlen bonds on the part of investors, who subscribed to the entire PLN 200m of the first series of bonds in just two days.

Polski Koncern Naftowy ORLEN S.A. (PKN Orlen) is a Polish oil and gas company. It has a lot of petrol stations in Poland, Germany, Czech Republic, Lithuania and Slovakia. It is the biggest company in Poland and one of the biggest oil and gas companies in Europe. Polish group PKN Orlen PKNA is a majority owner - 63% of czech polyolefins manufacturer Unipetrol.
MRC