Petrochemical expansion to drive growth of Reliance for next few years

MOSCOW (MRC) -- Reliance Industries Ltd (RIL) has posted better-than-expected first quarter earnings. Analysts believe good quarterly results and huge capex to augment its petrochemical facilities will lead to uptick in the stock over the next two fiscals, said Plastemart.

Standalone net profit for the first quarter stood at Rs 5,649 crore, almost flat from the preceding quarter, but 5.5% higher from the corresponding period a year ago. Lower interest and depreciation costs along with slightly better refining margins were the key reasons for higher profit when compared with a year ago quarter. Its standalone revenue for the quarter was at Rs 96,351 crore, up 1.2% on sequential basis and 9.9% higher from the year-ago period.

The petrochemical major's interest costs dropped by a whooping 60% to Rs 324 crore, and depreciation cost declined to Rs 2,024 crore in the quarter from Rs 2,138 crore. RIL's refining and petrochemical margins remained weak sequentially, as per the expectations. Gross refinery margins (GRMs) fell to USD8.7 per barrel from USD9.3/bbl in the March in line with 6% sequential fall in benchmark Singapore complex margins. The company's refining segment EBIT declined 3.7% on quarter to Rs 3,814 crore. Its petrochemical EBIT contracted 13.3% sequentially to Rs 1,863 crore due to weaker polyester chain margins which offset strength in polymer margins.

Petrochem segment is currently going through a weak demand cycle. However, with the recovery in demand in the US and Europe, which likely to peak around 2016-17, new capacities will help the company take full advantage in two years. At the company's last AGM, chairman Ambani announced that the majority of RIL's Rs 180,000 crore investment lined up for next three years would go into petrochemical capacity expansion. Higher crude price and increased output from Panna-Mukta fields pushed the EBIT of exploration and production operations, by 38.4% on-year and 29% sequentially to Rs 487 crore. Improvement in shale gas and retail operations mainly pushed the company's consolidated revenues.

Its consolidated net profit in the first quarter rose 1.3% sequentially, and 13.7% from the year-ago quarter to Rs 5,957 crore and its consolidated revenue during the quarter were at Rs 107,905 crore, up 1.6% sequentially and 7.2% from a year ago. The US shale gas operations Ebitda crossed USD200 million for the first time, while retail revenue grew 14.5% from the year-ago quarter to Rs 3,999 crore in April-June. The company undertook store rationalisation during the quarter to improve margins.

As MRC wrote before, Reliance Industries (RIL) will invest up to USD700 mln in its shale gas venture in the current fiscal and also ramp up spends under the USD13 bln capex programme in the petrochemical and refining business.

Reliance Industries is one of the world's largest producers of polymers. The company's polymer production in 2010-11 (polypropylene, polyethylene and polyvinyl chloride) made 4,094 kilo tonnes.
MRC

MOSCOW (MRC) -- The overall imports of polyethylene (PE) into the Republic of Belarus decreased by 16.4% over the first five months of 2014. High density polyethylene (HDPE) accounted for the greatest reduction in imports, reported MRC analysts.

May imports of PE to Belarus increased to 10,600 tonnes because of a seasonal stronger demand versus 8,200 tonnes. The overall PE imports dropped to 39,000 tonnes from January to May 2014 versus 46,600 tonnes over the same period a year earlier. Demand fell for all PE grades, but HDPE accounted for the largest decrease.

The structure of PE imports to Belarus by grades looks the following way over the stated period.

May imports of low density polyethylene (LDPE) and linear low density polyethylene (LLDPE) totalled 4,600 tonnes (4,200 tonnes in April). The overall imports of these PE grades decreased to 18,500 tonnes from January to May 2014 versus 20,000 tonnes a year earlier. Producers from Russia and Saudi Arabia are the main PE suppliers to the local market.

May HDPE imports rose to 5,900 tonnes, whereas this figure was about 4,000 tonnes in April. The overall HDPE imports to Belarus fell to 20,400 tonnes, down by 23% year on year.
MRC

MOSCOW (MRC) -- Celanese Corporation, a global technology and specialty materials company, has declared a quarterly dividend of USD0.25 per share on its Series A common stock, payable on August 15, 2014, as per the company's press release.

The dividend is payable for the period beginning May 1, 2014 and ending on and including July 31, 2014 to stockholders of record as of August 5, 2014.

As MRC reported earlier, in late July 2014, Celanese Corporation announced that it would raise prices of high-polymeric PE grades in Europe. Thus, the price increase of 20 cents per kilogram will be implemented for all GUR and GHR UHMW-PE grades sold in Europe, effective September 15, 2014, or as contracts allow.

Celanese Corporation is a global technology leader in the production of differentiated chemistry solutions and specialty materials used in most major industries and consumer applications. Based in Dallas, Texas, Celanese employs approximately 7,400 employees worldwide and had 2013 net sales of USD6.5 billion.
MRC

MOSCOW (MRC) -- Polyethylene demand is forecast to rise by approximately 3.7% pa between 2013 and 2018, at a slightly higher level than its growth during the 2003 – 2013 period, reproted Plastemart as per GlobalData.

The report states that this higher than historic increase will happen in the US and Europe, and primarily Russia. The US is forecast to witness a 2.4% growth rate pa in comparison with its 0.7% levels in the previous 10 years. Demand in Europe, including Russia, is expected to climb at 2.8%pa from 2013 – 2018, almost three times the level witnessed during the last decade. Global data believes that these demand rises in the US and Russia will be somewhat offset by a lower increase of 4.8% in Asia, compared to the 6% rate during the 2003 – 2013 period. This will be primarily due to the region’s slower economic growth.

Carmine Rositano, Managing Analyst, Downstream Oil and Gas, GlobalData, said, "Lower feedstock costs from US shale gas production are providing the country with a competitive advantage, with increasing investments in its petrochemical plants driving polyethylene demand growth in both domestic and international markets. Although below recent historical levels, demand in Asia remains fairly robust and will continue to boost expansion in the global polyethylene market. As a result, polyethylene capacity is now expected to increase to approximately 5.3% pa between 2013 and 2018, which is higher than the 3.6% experienced over the last decade. Capacity additions will be most prevalent in the US, given its advantaged cost competitive position, and also Russia, which is augmenting its petrochemical industry to reduce its reliance on imports. New capacity will also continue to come online in Asia, but at a slower than historic rate."

The report states that despite the lower estimated cost of crude oil in the forward price curve to 2018, prices for polyethylene will increase at approximately 1.3% pa up to the end of the forecast period. This is attributable to petrochemical demand increasing at approximately three times the rate of that for oil.

Rositano concluded, "The key trend emerging in the polyethylene market will be the ongoing surplus position in the US, where excess production will be directed to expanding markets in South America and Asia. Additionally, the lower feedstock and fuel costs for US plants, compared with those in Europe, will likely result in future European plant closures and further adjust global polyethylene trade flows."

We remind that, as MRC informed previously, the ongoing shale revolution will guide the US ethylene industry surge in the near future, growing by more than a third by 2017, according to a 2012-year report from business intelligence group GlobalData. US ethylene capacity dropped from 27.089 million tpy in 2000 to an estimated 26.137 million tpy in 2012. However, increased investments in the industry will see this figure jump to 35.048 million tpy by 2017 - an increase of just under 35%.
MRC

MOSCOW (MRC) -- SK Global Chemical is in plans to shut its styrene monomer (SM) plant, reported Apic-online.

A Polymerupdate source in South Korea informed that the plant is planned to be shut early next week. It is likely to remain off-stream for the entire duration of August 2014.

The intended shutdown has been attributed to weak economic fundamentals.

Located in Ulsan, South Korea, the plant has a production capacity of 350,000 mt/year.

As MRC wrote before, Styrindo Mono Indonesia (SMI) is in plans to shut its No.1 styrene monomer (SM) plant for maintenance turnaround in H2 November 2014. The plant is slated to be shut for around one month. Located in Merak, Indonesia, the plant has a production capacity of 100,000 mt/year.

Besides, Idemitsu SM (Malaysia), an affiliate of Idemitsu Kosan, one of Japan’s largest refining and petrochemical companies, is likely to shut down its SM plant for maintenance in August 2014. It is likely to remain shut for around one month. Located at Pasir Gudang in Malaysia, the SM plant has a production capacity of 600,000 mt/year.

We also remind that Taiyo Petrochemical is in plans to shut down its SM plant for maintenance in September 2014. The shutdown is expected to remain in force for around 30 days. The plant is currently operating at full production capacity levels. Located at Ube in Japan, the SM plant has a production capacity of 370,000 mt/year.
MRC