Moodys upgrades Wanhua Chemical to Baa2; stable outlook

MOSCOW (MRC) -- Moody's Investors Service has upgraded the issuer rating of Wanhua Chemical Group Co., Ltd. to Baa2 from Baa3, said the agency.

At the same time Moody's has changed the outlook on the rating to stable from positive. "The upgrade reflects the improvement in Wanhua Chemical's market position, competitiveness and diversification followings its acquisition in August 2018 of its major shareholder -- which held 47.92% of Wanhua Chemical and 100% of BorsodChem Zrt. (BorsodChem) -- for RMB52 billion through the issuance of new shares," says Danny Chan, a Moody's Analyst.

Based on the combined annual capacity of 2.1 million tonnes, Wanhua Chemical is the largest producer of methylene diphenyl diisocyanata (MDI) globally, with an approximate 25% market share. Its revenue, EBITDA and assets for 2017 -- pro-forma for the acquisition -- would increase by 22%, 26% and 19% compared with the standalone figures, to RMB64.8 billion, RMB25.8 billion and RMB78.4 billion. This scale make it comparable with most peers in the Baa category.

"Wanhua Chemical's improved business fundamentals, diversification and strong financial profile will help it better weather cyclicality of its chemical products," adds Chan.

Specifically, BorsodChem's production capacity for toluene diisocyanate (TDI)/polyvinyl chloride of 250k/400 kilo-tonnes per annum (ktpa) will help reduce Wanhua Chemical's exposure to MDI prices. Although the company is a major MDI producer in central Europe, BorsodChem generates the majority of its income thought the manufacture of TDI, which accounted for 36.9% of its total gross profit in the first six months of 2018.

Over the past 18 months, BordsodChem has benefited from tight supply conditions in global TDI markets owing to capacity outages and project delays. As a results, its revenue and gross profit rose by 52% and 112% year-on-year to RMB13.1 billion and RMB6.0 billion in 2017.

"The upgrade also reflects our expectation that Wanhua Chemical will maintain its strong operating performance and continue to deleverage amid tight supply-demand conditions over the next 2-3 years," says Chan.

Wanhua Chemical's leverage and interest coverage remained largely unchanged following the restructuring, as the acquisition was effected through share issuance and thus did not result in any cash outlay.

Moody's expects Wanhua Chemical's leverage will decline to 0.8x-0.9x over the next 12-18 months from 1.3x in 2017 (or to 0.9x from 1.2x on a standalone basis), supported by sustained positive free cash flow and double-digit percentage growth in EBITDA. This level of leverage is appropriate for its rating level.
MRC

MOSCOW (MRC) -- Russia's overall production of unmixed polyvinyl chloride (PVC) rose in the first eight months of 2018 by 8% year on year to 622,500 tonnes. All producers increased their output, according to MRC's ScanPlast report.
August production of unmixed PVC grew to 70,600 tonnes from 67,200 tonnes a month earlier, Bashkir Soda Company and RusVinyl increased their output. Overall PVC production reached 622,500 tonnes in January-August 2018, compared to 577,400 tonnes a year earlier. All plants raised their production, with Bashkir Soda Company accounting for the greatest increase in the output.

The structure of PVC production by plants looked the following way over the stated period.
RusVinyl produced about 30,000 tonnes of PVC in August, compared to 27,800 tonnes a month earlier. RusVinyl's overall output of resin reached 213,500 tonnes in the first eight months of 2018, up 5% year on year.

SayanskKhimPlast shut down its production capacities for a 30-day scheduled maintenance on 15 July, thus, last month's total output of suspension polyvinyl chloride (SPVC) was only 10,300 tonnes, wheres this figure reached 13,100 tonnes in July. The Sayansk plant managed to produce over 173,100 tonnes of resin in the first eight months of 2018, compared to 159,400 tonnes a year earlier.

Baskhir Soda Company produced 22,500 tonnes of SPVC in August versus 18,400 tonnes a month earlier. The Bashkir plant's overall production of resin exceeded 173,500 tonnes in January-August 2018, up by 14% year on year. Such a great increase in the output was largely caused by the absence of a scheduled shutdown this year, whereas last year, the plant took off-stream its production capacities in mid-July.

Kaustik (Volgograd) reduced its production last month, the plant's output was 7,800 tonnes, compared to 8,000 tonnes in July. The plant's overall production of resin exceeded 62,300 tonnes over the stated period versus 61,300 tonnes a year earlier.

MRC

MOSCOW (MRC) -- KBC, a wholly-owned subsidiary of Yokogawa Electric Corporation, has announced the availability of Chevron’s PETRO LP (linear programming) technology for all refining and petrochemical customers, according to Hydrocarbonprocessing.

PETRO is made available under the terms of a reseller agreement between Yokogawa and Chevron.

Through this agreement with Chevron U.S.A. Inc., KBC licenses PETRO software and provides implementation services, including change management and capability development services through the application of world-class best practices and organizational alignment.

"Effective economic optimization of hydrocarbon supply chains can boost profitability by more than USD40 million per year for a typical oil refinery," stated Walt Szopiak, Vice President Downstream Technology and Services at Chevron Energy Technology Company. "At Chevron we have quantified over USD10 billion of savings from the use of PETRO since the first version was created about 30 years ago, he added.

KBC offers PETRO as an integrated component of its Petro-SIM simulation and Visual MESA Supply Chain Scheduling (VM-SCS) portfolio.

Petro-SIM uses rigorous chemical and physical science to accurately model refinery and petrochemical processes over a wide operating window and is used extensively for both process design and operating performance management.
VM-SCS allows plant personnel to schedule and simulate operations on an integrated supply chain topological model, easily identifying possible imbalances between interdependent operations.

PETRO uses distributed recursive LP technology to give advice to traders on optimal bids for feedstocks; processes thousands of variables to arrive at the most valuable operations parameters and the most economic mix of products to produce, buy or sell; and provides analysis used in discussions with environmental agencies to evaluate different future regulation scenarios. Compared with conventional planning tools that use standard LP technology, PETRO excels at solving problems at a global (multi-unit) level.

In combination, Petro-SIM will act as a Digital Twin of the plant, continuously connected to real-time plant data sources in order to faithfully maintain a calibrated accurate model of the plant. From time to time it will check the linear models in PETRO and automatically update them to match the linearized current operating envelope. Planning scenarios from PETRO based on up to date linear models will output to VM-SCS which will validate feasible and optimal schedule taking account of all upcoming commitments and constraints.

"We are delighted to be able to offer this technology from Chevron to our customers to bring new value in their molecular management and value chain optimization activities," said Andy Howell, CEO of KBC. "The addition of PETRO to our portfolio means our customers can really benefit from an end-to-end, integrated solution, which brings together leading technologies and deep subject matter technical and commercial expertise. This allows our customers to take the long awaited next step in their Digitalization strategies unlocking the enormous amount of trapped value in their supply chains."

PETRO is available from KBC immediately. Interested parties may contact KBC directly or channel enquiries through their local Yokogawa affiliate.

As MRC reported before, in August 2018, Chevron (China) Chemicals Co., Ltd awarded WorleyParsons the engineering, procurement and construction (EPC) contract for the China Manufacturing Plant Project in Ningbo, Zhejiang Province, China. Under the contract, WorleyParsons will provide services including engineering, procurement, construction and pre-commissioning. The services will be executed by WorleyParsons China. Chevron (China) Chemicals Co., Ltd plans to build a wholly-owned plant manufacturing Oronite additives in Ningbo, China, a seaport city in northeast Zhejiang province.
MRC

MOSOCW (MRC) - Negotiations on European polyvinyl chloride (PVC) prices for September delivery to the CIS markets have begun this week. European producers in most cases rolled over the August export prices, according to the ICIS-MRC Price Report.

September contract price of ethylene was agreed at the level of August, which did not affect the net cost of PVC production. Taking this into account, European producers announced the rollover of the August export PVC prices for supplies to the markets of the CIS countries in September, while in some cases it was reported about price cut of EUR5/tonne.

The demand for PVC from the main consumers from the CIS countries is low and mainly accounted for specific grades, in particular, with K70 and K58 PVC. Some European producers shut their capacities for turnaround in July and August, and there were equipment interruptions at some plants in August.

All these factors continue to affect the export quotas of some producers. Negotiations on August shipments of suspension polyvinyl chloride (SPVC) to the CIS markets were held in the range of EUR730-790/tonne FCA, whereas deals were done in the range of EUR740-790/tonne FCA a month earlier.

Thus, most deals were rolled over from August, only in a few cases prices were cut by EUR5/tonne for K67 PVC.
MRC

MOSCOW (MRC) -- Shin-Etsu Chemical Co., Ltd. will implement close to CNY110 billion in facility investments for its silicones business, one of its main businesses, as per Hydrocarbonprocessing.

It will expand its production capacity of silicone monomer, the intermediate product of silicones, and various types of silicone fluids, resins and rubber end products at the company’s main bases in Japan and globally.

A wide variety of requests for silicone products have been received, from many customers around the world, and in order to meet these customer requests, Shin-Etsu is implementing a sequential series of new investments. By means of these investments, the integrated production system will be further strengthened, and at the same time, ability to contribute to issue solutions for customers will be fortified.

These facility investments will be implemented in stages over about a period of two-and-a-half years, and the expansion of the production capacity of both silicone monomer and silicone end products will proceed in parallel. The breakdown of investment amounts is expected to be about ?50 billion for the expansion of production capacity of intermediate products such as monomers, about CNY50 billion for the expansion of production capacity of end products and about ?10 billion for the expansion of other secondary facilities such as infrastructure and shipping. The expansion of capacity for silicone monomer will be done at the existing bases in Japan and Thailand, and in addition to Japan, the capacity expansion for the group of end products will be carried out at existing bases in six overseas countries.

In view of the requests coming from customers and the expected demand, the demand for silicone products is expected to increase at a rate surpassing that of the average increase in the world’s GDP. In this way, the company will extensively capture the demand for silicone products for which this kind of steady growth is expected, and at the same time, flexibly meet it. For Shin-Etsu Chemical, silicones have been a strategically important business from the past up to the present and going forward as well, Shin-Etsu will work to further enhance the existence value of silicones. With these investments for strengthening silicones production capacity, The company expects to grow together with customers and will strengthen their position as a leading global silicones manufacturer.

As MRC wrote previously, in April 2018, Shin-Etsu started maintenance at its polyvinyl chloride (PVC) plant in Kashima. The company had scheduled to shut the plant for turnaround in April 2018 for a period of around six weeks. The exact date of the shutdown could not be ascertained. Located at Kashima in Japan, the plant has a production capacity of 550,000 mt/year.

Shin-Etsu is the world and US' largest PVC producer.
MRC