Fire at Stavrolen: consequences for the Russian HDPE market

Moscow (MRC) - A fire broke out at LUKOIL's ethylene petrochemical plant Stavrolen, based in Budyonnovsk on Wednesday, 26 February, 2014. Russian market of high density polyethylene (HDPE) immediately responded to such a serious accident, stopping its sales, according to MRC analysts.

Market froze in anticipation of the accident consequences, as all remember a similar accident at Stavrolen in December 2011, which made the plant stay idle for ten months. Many market participants expected HDPE shortages and price hikes. However, weak demand in the first half of 2012 and high production rates at other producers offset the outage of Stavrolen; the shortage began to be felt only in August-October on the back of scheduled maintenances at Kazanorgsintez and Gazprom neftekhim Salavat, which led to galloping rise in prices.

We can say with high probability that situation in HDPE market will be the same if the plant be shut for long time.
Demand for injection moulding and pipe HDPE is quite weak, with more than sufficient supply. Despite oncoming high season in film HDPE market, stock inventories at converters are rather large and stronger demand will hardly lead to big prise rise.

Supply of blow moulding HDPE is tight as one of the key suppliers - Stavrolen is shut. The second key supplier - Kazanorgsintez plans to resume production of blow moulding PE in large volumes in the second half of March.

There were offers of PE from Gazprom neftekhim Salavat, but the market participants are not yet get used to this product.

Not to repeat the situation in 2012 Russian producers may change their production plans; Nizhnekamskneftekhim planned to shift to the production of linear polyethylene in March).

We can expect that LUKOIL, in the case of serious consequences in Stavrolen will quickly resume its Ukrainian PE production - Karpatneftekhim.

In general, the first reaction of the Russian HDPE market at Stavrolen's accidents will be seen on Thursday at electronic trading for March delivery of HDPE from Kazanorgsintez, the largest producer of polyethylene in Russia.
MRC

MOSCOW (MRC) -- Malaysia's state-owned Petronas faces more delay to its Refinery and Petrochemicals Integrated Development or RAPID project in the state of Johor as it is unlikely to meet its March deadline for a final investment decision, reported Apic-online with reference to The Edge Financial Daily newspaper.

"The project will be further delayed as RAPID's FID will most likely not be approved by the timeline stipulated, which is in March, and Petronas will incur a sunk cost of Ringgit 4 billion (USD1.2 billion)," the newspaper quoted a source as saying.

The reasons for the delay included unresolved community problems over land access in Pengerang and the proposed relocation of cemeteries in the area being met with resistance, the newspaper said, citing another source.

The Ringgit 60 billion RAPID project includes a 300,000 b/d refinery which will primarily supply feedstock to an integrated petrochemicals complex, including a naphtha-fed steam cracker with the capacity to produce 3 million mt/year of olefins.

As MRC informed previously, in July 2013, Petronas signed an agreement with Eni-controlled Versalis to jointly own, develop, construct and operate elastomer plants within Petronas' proposed refinery and petrochemical integrated development (RAPID) complex in Pengerang, Johor. The agreement signed with Versalis is the fourth-such arrangement secured by Petronas for RAPID. Prior to this, Petronas inked similar agreements with Germany-based BASF, ITOCHU Corp. of Japan and Thailand's PTT for various high value-added downstream chemicals.

Petronas is currently evaluating other potential partners and licensors for the various facilities to be developed within RAPID.
MRC

MOSCOW (MRC) -- Borealis, a leading provider of innovative solutions in the fields of polyolefins, base chemicals and fertilizers, announces a net profit of EUR 148 million for the fourth quarter of 2013, compared to EUR 100 million in the same quarter of 2012, according to the company's report.

For the first time in its history, Borealis recorded full year net sales in excess of EUR 8,000 million.

For the full year 2013 the company recorded a net profit of EUR 423 million, compared to EUR 480 million in 2012. The decline in net profit in 2013 was due to a softening fertilizer market while the polyolefins business improved. Borouge delivered a lower result in 2013 compared to 2012 due to the major turnaround in the first quarter of 2013 and costs incurred for the finalisation and preparation for start-up of the Borouge 3 project.

In 2013, net debt increased by EUR 225 million due to the acquisitions made. Borealis’ financial position remains strong with a gearing of 45%.

"At the beginning of 2013 we knew it was going to be a challenging year, given the transformational activity ongoing within the company and the continuing difficult market environment in Europe," states Mark Garrett, Borealis Chief Executive. "Although profits are lower in 2013, they have exceeded our expectations as the organisation was able to optimise performance across the businesses."

"In the past years, Borealis has moved from a largely European Polyolefins-based company to a company built on a foundation of Polyolefins, Fertilizers & Base Chemicals, and Borouge," says His Excellency, Khadem Al Qubaisi, Chairman of Borealis’ Supervisory Board and Managing Director of IPIC (Abu Dhabi based International Petroleum Investment Company). "Borealis has continuously been developing new approaches, technologies and products for 20 years. I am confident that the company will continue to focus on creating even more value for its customers and partners by successfully taking on today's challenges."

As MRC wrote earlier, in October 2013, Borealis began preparations for the start of Borouge 3 in Ruwais, Abu Dhabi, reported Borealis CEO Mark Garrett at the K fair international plastics and rubber fair in Dusseldorf, Germany.

"We have begun preparations for the start up of Borouge 3 like air testing and drying of units. The different units will start up in a staggered way through 2014," he said.

Borouge 3, includes an 1.5 million mt/year ethane cracker, three polyethylene (PE) units with a capacity of 1.43 million mt/year and two polypropylene (PP) with a capacity of 960,000 mt/year.

Borealis is a leading provider of innovative solutions in the fields of polyolefins, base chemicals and fertilizers. Borealis is headquartered in Vienna, Austria, and operates in over 120 countries with around 5,300 employees worldwide, generating EUR7.5 billion in sales revenue in 2012. Borouge is a joint venture between the Abu Dhabi National Oil company and Borealis.
MRC

MOSCOW (MRC) -- Russian producers of suspension polyvinylchloride (SPVC) has announced an increase in March contract prices for the domestic market by Rb2,000-3,000/tonne, according to ICIS-MRC Price report.

Negotiations over Russian contract PVC prices for March shipments began this week. As expected, local producers have announced price increases by Rb2,000-3,000/tonne from February on the weakening of the rouble and, consequently, higher prices of imported material and higher ethylene prices.

Contract prices for March shipments of Russian PVC are negotiated in the range of Rb47,000-50,500/tonne, including VAT and delivery, whereas contracts for February shipments were done in the range of Rb44,000-48,500/tonne, including VAT and delivery.

Such a major price rise was rather painful for many Russian PVC converters. Demand for finished products is very weak, cash flows from sales are insignificant. However, local converters were forced to accept the new conditions of PVC purchasing because of the absence of the alternative material, and higher feedstock prices will affect prices of finished products in the near future.
MRC

MOSCOW (MRC) -- In order to further strengthen its polystyrene (PS) business in North America, Styrolution has announced it plans to consolidate PS capacity in the region, reported the company in its statement.

In addition, Styrolution will accelerate growth in styrenic specialties through an expansion of its offering for high-performance transparent styrenics, by providing local supply in Europe, the Middle East and Africa (EMEA). Part of Styrolution's Triple Shift growth strategy, these measures will further enhance the company's position as the global leader in styrenics.

Thus, in order to strengthen the long-term economic sustainability of Styrolution's polystyrene business in North America, the company plans to mothball its PS plant located in Indian Orchard, Massachusetts by the end of the year. This comes following years of overcapacity in the North American PS market which have also impacted Styrolution, making it necessary for the company to take action to secure this business for the future. The plant accounts for 150,000 t (330 million pounds) of PS production capacity. The company will continue to serve the North American PS market from its best-in-class plants in Decatur and Channahon, USA and Altamira, Mexico with the same quality, reliability and delivery standards customers have come to expect from Styrolution.

Also, by the end of third quarter of 2014, Styrolution will commence production of high-performance transparent specialty, NAS (SMMA) at the company's plant in Ludwigshafen, Germany. Currently, NAS is supplied to the EMEA region from Indian Orchard and compounded locally into the transparent product Zylar. NAS to be produced at Decatur, Alabama site. Styrolution plans to shift NAS production from Indian Orchard, Massachusetts to its site in Decatur, Alabama where the company will convert a general purpose polystyrene line into a swing line to also produce NAS. The transfer of NAS production from Indian Orchard to Decatur is expected to be completed by the end of the third quarter, 2014.

Besides, Styrolution is committed to providing customers additional supply options for both specialty and standard products from at least two sites. Offering local supply of NAS and Zylar in EMEA and the Americas is one of several expanded supply options announced over the past 18 months. These options include availability of Luran S grades from Styrolution's Ulsan, South Korea, Altamira, Mexico and Ludwigshafen sites; AMSAN-based, high-heat (HH) products, such as Luran HH and Novodur HH grades from the company's sites in Altamira and Ludwigshafen; and a proposed joint venture with Braskem to produce ABS and SAN specialties in Brazil.

Thus, Styrolution's Triple Shift growth strategy, calls for a focus on styrenic specialties and Standard ABS, emerging markets and higher-growth industries. The initiatives announced strengthen Styrolution's global position in styrenic specialties while improving production efficiencies for polystyrene in North America.

As MRC wrote earlier, in December 2013, Styrolution announced measures to better serve customers in Europe, the Middle East and Africa (EMEA). New initiatives include the optimization of Styrolution's production network in Germany and the opening of a regional specialties logistics center. These measures enable Styrolution to offer customers greater flexibility, long-term and secure supply, and lot-to-lot consistency. They also extend Styrolution's regional reach and further strengthen its leading market position in the region's key focus industries, such as automotive, healthcare and diagnostics, and building and construction.

The Styrolution Group GmbH is a global provider of styrenics , headquartered in Frankfurt am Main. The company is a joint venture between BASF (50%) and INEOS (50%), were merged into the main styrene operations of the two partners. Its main focus is on the production of monomer, polystyrene, styrenic specialties, and ABS. The company offers styrene plastics for a variety of everyday products from different industries, such as automotive, electronics, construction, household, leisure, packaging, medicine and health.
MRC