Russia cut to Baa3 by Moodys on oil as junk rating looms

MOSCOW (MRC) -- Russia’s credit rating was cut to the lowest investment grade by Moody’s Investors Service as plunging oil prices and the worst currency crisis since 1998 drag on growth, reported Bloomberg.

Moody’s lowered the country to Baa3, one step above junk, from Baa2. The credit grade matches those of Standard & Poor’s and Fitch Ratings. The rating, on par with India and Turkey, is on review for a further reduction, Moody’s said in a statement.

ЄJunk status would have a very significant impact on Russian corporate debt,Є Ian Hague, a founding partner at New York-based Firebird Management LLC, which oversees about USD1.1 billion, including Russian stocks, said by phone from New York on Jan. 16. "The ironic part is that many of the state-owned companies are under sanctions and are already cut out of the foreign markets, so they couldn’t refinance their debt anyway."

Russia is on the brink of a recession after oil, the country’s largest export, slumped more than 50% since June. The ruble has tumbled 47% over the past six months as financing restrictions and export bans imposed by the US and its allies after President Vladimir Putin annexed Crimea prompted investors to flee the currency. The Bank of Russia has raised its key rate six times since March and spent USD88 billion in interventions last year to support the currency.

"The severe - and likely to be sustained - oil price shock, alongside Russian borrowers’ highly restricted international market access due to ongoing sanctions, is undermining economic fundamentals and increasing financial stresses on both the public and private sectors," Moody’s said in a Jan. 16 statement. "The substantial oil price and exchange rate shock will further undermine the country’s already subdued growth prospects over the medium term."

A cut to below investment grade could force ratings-sensitive investors to sell their remaining debt holdings. Fitch has a negative outlook on the country while S&P said Jan. 16 that it plans to decide whether to lower Russia’s credit grade to junk by the end of the month.

As MRC wrote before, in late December 2014, Moody's Investors Service placed the ratings of 45 Russian non-financial corporates on review for downgrade. The decision to place 45 Russian non-financial corporates and their supported subsidiaries on review for downgrade reflects the ongoing severe and rapid deterioration in the operating environment in Russia and the heightened risk of a more prolonged and more acute economic downturn than originally anticipated. Among the companies, which ratings were placed on review for downgrade are Bashneft, Gazprom Neft, Lukoil, Sibur Holding, Novatek, Rosneft International Holdings Limited and Severstal.
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MOSCOW (MRC) -- Spot prices of bottle grade polyethylene terephthalate (PET) in Kazakhstan have fallen by 14,5-16,6% since early 2015. Traders reduced prices because of weaker demand and cheaper imports that arrived into the market in January, according to ICIS-MRC Price report.

This week's prices of bottle grade PET were heard at Tenge 250,000-265,000/tonne CPT Almaty, including VAT. Back in late December, spot prices were at Tenge 300,000-310,000/tonne CPT Almaty, including VAT. Converters' activity remained seasonally low in January. In addition, spot prices were affected by the overall downward price trend in the world. Importers reported reduced costs for purchasing of material because the national currency (tenge) remained stable against the US dollar.

Traders said domestic prices might go down further by mid-February.

As reported before, PET imports to Kazakhstan remained stable from January to November 2014 compared to the same period of 2013. The Kazakh market imported 48,600 tonnes of PET chips from January to November.
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MOSCOW (MRC) -- China boosted crude processing to an all-time high in December as refineries resumed operations after seasonal maintenance and a plant in the country’s east started a new distillation unit, said Bloomberg.

Refiners processed 44.58 million metric tons of crude last month, or about 10.54 million barrels a day, both record levels, data from the National Bureau of Statistics in Beijing show. The world’s second-largest oil consumer refined a total of 502.77 million tons in 2014, up 5.3 percent from a year ago.

"Sinopec and CNOOC contributed most to the increase in crude throughput as they brought refineries back online from maintenance in the last two months," Amy Sun, an analyst at ICIS-C1 Energy, a Shanghai-based consultant, said by phone from Guangzhou. "Also, Sinopec started a new crude distillation unit at its Yangzi refinery."

China is processing more crude amid the slump in global oil prices, bolstering speculation that its consumption may help eliminate a global supply glut. The nation’s refiners will raise operating rates in the coming months amid low diesel stockpiles and "healthy" margins, the Paris-based International Energy Agency predicted last week.

China National Offshore Oil Corp. restarted its Huizhou refinery, which has a crude-processing capacity of 241,000 barrels a day, at the end of November, according to SCI International, a Shandong-based industry website. China Petroleum & Chemical Corp., known as Sinopec, also resumed operations at its 131,000 barrel-a-day Jiujiang plant on Dec. 15, it said.

Domestic crude production rose by 2.1 percent from a year earlier to 18.32 million tons in December, the statistics bureau’s data show. Natural gas output climbed 8.9 percent to 12.2 billion cubic meters, while power generation gained 1.3 percent to 490.2 billion kilowatt-hours.

As MRC wrote before, Sinopec is at the forefront of a China government push to restructure state-controlled companies and allow markets a bigger role in the allocation of resources. The company is seeking to raise 100 billion yuan selling about a third of its retail unit.
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MOSCOW (MRC) -- Last year's overall production of low density polyethylene (LDPE) in Belarus dropped by 1.1% and totalled 136,000 tonnes, reported MRC analysts.

According to the National Statistics Committee of Belarus, Polymir, the local polyethylene (PE) producer, maintained in December its November PE output - about 12,000 tonnes. Thus, the overall LDPE production in Belarus was about 136,000 tonnes from January to December 2014 versus 137,500 tonnes a year earlier.

Polymir was founded in 1968. Technologies of the largest foreign firms of England, Japan, Germany, Italy (Courtaulds, Asahi Chemical Co. Ltd, Kanematsu Gosho, SNIA BPD, etc.), as well as developments of the CIS" scientific research institutes, were used in the process of creating the plant"s technological base. The plant"s annual production capacity is 130,000 tonnes of LDPE.
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MOSCOW (MRC) -- An increasingly competitive polyester films market is prompting Teijin DuPont Films Japan Ltd. to close its Gifu, Japan, manufacturing facility, Tokyo-based Teijin announced Jan. 15, said Plasticsnews.

In a filing to Tokyo Stock Exchange, the company said Gifu would stop commercial production in September 2016 and its business would shift to the company’s Utsunomiya, Japan, factory or overseas locations. It’s the latest of a series of restructuring plans first unveiled by Teijin in November.

"To date, TDFJ has implemented numerous measures to reduce costs, including discontinuing production at its Ibaraki factory, to make its polyester films business more competitive," it said in a statement.

"Despite these efforts, increasingly intense rivalry in global markets persuaded the company of the need to further integrate its production facilities to enhance production efficiency and ensure profitability going forward," Teijin said.
Gifu, which has annual production capacity of 30,000 metric tons, will continue as a research and development center.

Teijin said 240 employees work in the manufacturing department there and that "as much as possible" it will try to find other jobs for them within Teijin.

In its November announcement, the company said it would scale back some operations in more commodity plastics, such as closing its polycarbonate manufacturing plant in Singapore later this year because the plant has high feedstock costs.

At the same time, it said it would increase investment in other materials, including carbon-fiber reinforced thermoplastics and blends of PC and polyphenylene sulfide plastic, and study establishing a CFRP production facility in the United States.

Teijin, which has 16,000 employees, posted sales of USD7.7 billion in its fiscal year end March 31.

As MRC wrote before, Teijin Ltd. has disclosed "dramatic restructuring" initiatives that reflect changes in the business environment and are intended to move the company toward a solutions-oriented business model. Among the planned actions, Teijin said it will with-draw by the end of December 2015 from its Teijin Polycarbonate Singapore subsidiary which lacks competitiveness in terms of energy costs. According to a recent notice to the Tokyo Stock Exchange, the Singapore plant has 225,000 t/y of polycarbonate (PC) capacity. The company explained that the plastics business has been impacted by a supply-demand balance that remains persistently adverse, and an inability to pass on price increases for raw materials by raising sales prices.

Teijin is a technology-driven global group offering advanced solutions in the areas of sustainable transportation, information and electronics, safety and protection, environment and energy, and healthcare. Its main fields of operation are high-performance fibers such as aramid, carbon fibers & composites, healthcare, films, resin & plastic processing, polyester fibers, products converting and IT. The group has some 150 companies and around 17,000 employees spread out over 20 countries worldwide. It posted consolidated sales of JPY745.7 billion (USD 7.4 billion) and total assets of JPY 762.4 billion (USD7.6 billion) in the fiscal year ending March 31, 2013.

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