China exports gasoline to Mexico, Nigeria amid overflowing output

MOSCOW (MRC) -- China will ramp up gasoline exports in July and August to near record levels with cargoes moving to Mexico and Nigeria as refiners seek outlets for their fuel amid a wave of new production and slowing domestic demand, reported Reuters.

The surge in Chinese shipments will fill a supply gap caused by refinery outages in the United States and the Middle East but are likely to accelerate a plunge in Asian gasoline margins, which have dropped 50% since July 12, when they clawed back to a three-month high.

China's refineries, led by PetroChina Co, the country's second-largest, will export about 1.5 million tonnes of gasoline a month in July and August, said two senior traders with knowledge of China's gasoline exports. That is up from June exports of 1 million tonnes and near the record of 1.69 million tonnes exported in March, according to Chinese customs data.

The export surge is a result of the start up of two large-scale refineries owned by Hengli Petrochemical and Zhejiang Petrochemical that will each add about 4 million tonnes per year of new gasoline output when fully operational.

The surge will reverse the trend of falling gasoline exports in 2019, for the first half of 2019 they are down 9% from the same period a year ago.

"Gasoline was overflowing (in China) as Hengli shocked the market...companies took the advantage of stronger demand in Latin America and West Africa," said one of the traders.

PetroChina was granted gasoline export quotas of 4.7 million tonnes in the second batch of quotas issued in May, more than half of the quotas given. As a result, the company is placing cargoes to Mexico, Chile and Nigeria, according to the traders.

"Gasoline surplus in China is exacerbated by slowing demand growth, given weakening consumer confidence as the trade war continues, reflected also in slumping car sales," said Michal Meidan, director of the China energy programme at Oxford Institute of Energy Studies.

Chinese refiners have loaded 1.2 million tonnes of gasoline for export as of July 23, after a record 1.6 million tonnes in June, according to data from Refinitiv.

One PetroChina-run plant, West Pacific Petrochemical Corp, sold 900,000 barrels of gasoline to Mexico in July, in three different shipments.

China's refiners have tried to lower the so-called diesel/gasoline production ratio to produce less diesel and more of the motor fuel, causing the excess of gasoline, said Wang Yanting and Shi Linlin, analysts at Shandong-based consultancy JLC.

The shift in production was aimed initially at easing the overhang of diesel as demand for the industrial and truck fuel has fallen amid a slowing economy.

Top refiner Sinopec, for example, squashed that ratio to a historic low to 1.01 in the first quarter this year, versus 1.33 in the same period in 2015, according to company reports.

As a result, China's gasoline output in the first half of 2019 rose 2.9% from a year earlier while diesel dropped 7.8%, according to the National Bureau of Statistics.

Gasoline demand growth is also sliding as Chinese automobile sales, consisting mainly of petrol-consuming passenger vehicles, fell for a 12th month in June, with 2019 annual sales set to fall for the second year in a row.

Seng-Yick Tee, senior director at consultancy SIA Energy, forecasts China's gasoline demand to rise 5.4% this year, the slowest pace since 2015, as the falling auto sales reduce consumption.

As a result of the petrol glut, plants that make mixed aromatics, petrochemicals used to raise the octane rating in gasoline, in eastern China's Shandong province have closed.

Shandong-based consultancy JLC estimates about 30 plants with annual output of 5 million tonnes have shut for months this year as demand for mixed aromatics has declined.

"Our plant was losing money in a big way...We wish we had shut down earlier," said a mixed aromatics plant manager in the city of Zibo, Shandong, which has closed its 8,000 barrels per day facility since March.
MRC

MOSCOW (MRC) -- India’s Reliance Industries talks to grant a minority stake in its refining assets to Saudi Aramco have hit a roadblock over the valuation and structure of the deal, reported Reuters with reference to two people familiar with the matter.

State-owned Aramco, the world’s biggest oil producer, plans to boost investment in refining and petrochemicals to secure new markets for its crude and sees growth in chemicals as central to its downstream strategy to reduce risk as oil demand slows.

Reliance had held talks on offering Aramco at least 20% in a special purpose vehicle covering refining, petrochemicals and marketing, and with a focus on expansion.

"Talks have stalled as Reliance is asking for a higher valuation and wants to transfer debt of the holding company to the new SPV (special purpose vehicle)," said one of the sources.

No immediate comment was available from Reliance and Saudi Aramco.

Reliance, controlled by Asia’s richest man, Mukesh Ambani, operates the world’s biggest refining complex with capacity to process 1.4 million barrels per day (bpd) of oil at Jamnagar in western India.

It plans to expand capacity to 2 million bpd by 2030, according to plans shared with the Indian government.

As of June 30, Reliance had an outstanding debt of 2,882.43 billion rupees (USD41.8 billion) compared with 2,875.05 billion rupees as of March 31, while cash and cash equivalents as of June 30 were at 1,317.10 billion rupees versus 1,330.27 billion rupees as of March 31, the company said.

Aramco and United Arab Emirates’ national oil company ADNOC teamed up with state-run Indian refiners last year in a plan to build a 1.2 million bpd refinery and petrochemical project in India’s Maharashtra state.

But the planned refinery, initially expected to cost $44 billion, faces delays, as farmers have refused to surrender land forcing the Maharashtra government to find a new location in Raigad district, about 100 km (62 miles) south of Mumbai.

As MRC wrote previously, in October 2018, Saudi Aramco signed a long-term deal with Zhejiang Rongsheng to supply crude oil to the Chinese company’s new refinery in eastern China.

Saudi Aramco is an integrated oil and chemicals company, a global leader in hydrocarbon production, refining processes and distribution, as well as one of the largest global oil exporters. It manages proven reserves of crude oil and condensate estimated at 261.1bn barrels, and produces 9.54 million bbl daily. Headquartered in Dhahran, Saudi Arabia, the company employs over 61,000 staff in 77 countries.

Reliance Industries is one of the world's largest producers of polymers. Thus, the company produces among others polypropylene, polyethylene and polyvinyl chloride.
MRC

MOSCOW (MRC) -- Novapet is likely to shut its No.2 polyethylene terephthalate (PET) plant for a maintenance turnaround, as per Apic-online.

A Polymerupdate source in Spain informed that the plant is expected to be taken off-stream over the period of September - October 2019. The exact date and duration of the shutdown could not be ascertained.

Located in Barbastro, Spain, the plant has a production capacity of 100,000 mt/year.

NOVAPET is the primary producer of PET resins in the Iberian Peninsula. The company's strategy is aimed at innovation in products and at the integration of services to the packager. The company collaborates continuously with more than 200 clients in 30 countries and 4 continents in its two divisions. The formulation and production of different PET resins, with different applications, and their transformation into preforms, or even into different packaging, constitute for us an integrated activities, which tend to preserve for its customers, all the value of the company's technical innovations.
MRC

MOSCOW (MRC) -- German chemicals giant BASF warned profit would fall well below forecasts for the second quarter and full year, blaming a global economic slowdown and trade war between the United States and China, reported Reuters.

The maker of petrochemicals, coatings, catalytic converters and foams warned full-year earnings before interest and taxes (EBIT) excluding special items would fall up to 30% below 2018 levels, instead of showing modest growth.

Sales are now expected to fall in 2019 rather than rise, the company said.

In a statement, the company cited a hit from a sharp slowdown in the autos sector, while poor weather conditions in North America hurt sales in the agricultural sector.

The trade war has weighed on the agricultural sector and also led to a slowdown in global auto production and sales, which has weighed on BASF's coatings and catalytic converters business.

"To date, the conflicts between the United States and its trading partners, particularly China, have not eased contrary to what was assumed in the BASF Report 2018. In fact, the G20 summit at the end of June has shown that a rapid detente is not to be expected in the second half of 2019," BASF said.

BASF last month said it was still aiming for growth in 2019 operating profit at the lower end of a 1-10% range, even as analysts predicted a decline in full-year earnings.

Second-quarter sales were down 4% to 15.2 billion euros (USD17.04 billion), and earnings before interest and taxes before special items are expected to fall 47% to 1 billion euros. The company is due to report second quarter results on July 25.

Group second-quarter EBIT is expected to tumble 71% to 500 million euros, in part because of an impairment on a natural gas investment on the US Gulf coast, BASF said, without elaborating.

Last month, the company said it is planning to cut 6,000 positions by 2021 as part of a cost reduction plan.

As MRC informed before, in December 2016, AkzoNobel finalized the acquisition of BASF’s global Industrial Coatings business, which supplies a range of products for industries including construction, domestic appliances, wind energy and commercial transport, strengthening its position as the global number one supplier in coil coatings.

BASF is the leading chemical company. It produces a wide range of chemicals, for example solvents, amines, resins, glues, electronic-grade chemicals, industrial gases, basic petrochemicals and inorganic chemicals. The most important customers for this segment are the pharmaceutical, construction, textile and automotive industries.
MRC

MOSCOW (MRC) -- Russia's overall roduction of polypropylene (PP) rose in the first six months of 2019 by 4% year on year to 732,000 tonnes. Four producers out of seven increased their capacity utilisation, according to MRC's ScanPlast report.

Local producers' total PP output dropped to 122,900 tonnes in June from 135,100 tonnes a month earlier, all together, SIBUR Tobolsk, NPP Neftekhimiya and Stavrolen reduced their capacity utilisation. Russia's overall PP production reached 732,100 tonnes in January-June 2019, compared to 704,400 tonnes a year earlier. Four producers out of seven raised their capacity utilisation, with SIBUR Tobolsk and NPP Neftekhimiya accounting for the main increase in production.

The structure of PP production by plants looked the following way over the stated period.

SIBUR Tobolsk reduced its capacity utilisation in June, the plant's total PP output was 41,900 tonnes versus 50,400 tonnes a month earlier. The Tobolsk plant's total PP production reached 249,400 tonnes in January-June 2019, up by 11% year on year.

Poliom (Omsk) produced 18,500 tonnes of PP last month, compared to 18,200 tonnes in May. Overall, the Omsk plant produced 108,200 tonnes of PP over the stated period, down by 2% year on year.

Nizhnekamskneftekhim produced 18,600 tonnes of propylene polymers in June versus 18,500 tonnes a month earlier. The Nizhnekamsk plant's overall output of polymer reached 105,900 tonnes in the first six months of 2019, compared to 105,000 tonnes in 2018.

Tomskneftekhim produced 12,400 tonnes of propylene polymers last month versus 13,000 tonnes in May. The Tomsk plant's total PP output reached 74,800 tonnes over the stated period, up 1% year on year.

Ufaorgsintez's total PP production was 11,100 tonnes in June versus 10,600 tonnes a month earlier. The Ufa plant's overall output of polymer reached 66,600 tonnes in January-June 2019, which virtually corresponded to the last year's figure.

NPP Neftekhimiya (Kapotnya) produced 9,600 tonnes last month, compared to 12,800 tonnes in May. The plant's overall output exceeded 71,000 tonnes over the stated period, up by 6% year on year.

Stavrolen (LUKOIL) reduced its capacity utilisation in June, the plant's total production of propylene polymers was 10,900 tonnes versus 11,500 tonnes a month earlier. The Budenovsk plant's overall output of propylene polymers dropped in the first six months of 2019 to 56,100 tonnes from 56,900 tonnes a year earlier.

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