US refiners grab unloved Russian fuel oil on back of new shipping rules

MOSCOW (MRC) -- US refiners are scooping up cheap high-sulfur fuel oil for processing from Russia and the Baltic states as they take advantage of new shipping rules that have cut demand for the dirtier marine fuel, reported Reuters with reference to oil traders and shipping data.

US refiners Valero Corp, Chevron Corp and Phillips 66 have been buying HSFO, traders said, taking advantage of their complex operations to turn HSFO blended with crude oils into products like diesel, gasoil and gasoline.

This month, 2.2 million tonnes of fuel oil, largely from Russia and the Baltic states, will arrive in the United States, highest in at least three years, according to oil analytics firm Vortexa Ltd. Two-thirds of the total is Russian in origin, its data shows.

New maritime rules known as IMO 2020 mandate that the shipping industry has to burn cleaner, low sulfur fuels in tankers. The rules, which took effect Jan. 1, have clipped demand for marine fuels such as high-sulfur fuel oil. The surplus marine fuel is becoming a salve for refiners, according to traders, who have seen margins drop sharply due to weak global demand for refined products like diesel and gasoline.

Valero did not reply to requests for comment. Chevron and Phillips 66 declined to comment.

HSFO sold for USD39.55 per barrel on the US Gulf Coast on Wednesday, down 30% from a year ago, according to price tracker S&P Global Platts. January US imports are expected to be 54% greater than December’s, according to Vortexa.

"Fuel oil (is) going directly from Russia to the U.S., instead of Europe," said Lars van Wageningen, operations manager at Dutch consultancy Insights Global, which tracks fuel oil stocks in the Antwerp-Rotterdam-Amsterdam region.

Refiners are buying HSFO to replace the loss of crudes from Venezuela and Iran that have been barred by U.S. sanctions, and traders said they see an opportunity for big margins on products refined using HSFO, even though such a blend yields fewer barrels than processing crude oil into products.

HSFO is also is trading below Mexico’s Maya and Canadian heavy crudes. HSFO traded about USD23 per barrel below Brent crude, compared to an estimated USD10 discount to Brent for Maya and Canadian crude, said analysts at Tudor Pickering Holt & Co.

"The yields aren’t quite as good, but right now, with Maya crude at a USD10 discount to Brent, (refiners) are getting a USD13 head start," said Matthew Blair, a Tudor Pickering refining analyst. The yield, or percent of oil that can be converted to diesel or gasoline, affects a refiner’s profit.

Valero was one of the most active purchasers of HSFO in the US Gulf Coast, according to three trade sources. It has used the fuel at refineries in Louisiana and Texas, one of the traders said.

The tanker Tarbet Spirit was scheduled on Friday to discharge a cargo of about 500,000 barrels of fuel oil loaded in Antwerp at Pascagoula, Mississippi, according to Refinitiv Eikon data, where Chevron has a refinery.

As MRC wrote previously, in March 2018, Chevron Phillips Chemical Company LP successfully introduced feedstock and commenced operations of a new ethane cracker at its Cedar Bayou facility in Baytown, Texas. At peak production, the unit will produce 1.5 million metric tons/3.3 billion lbs. per year.

Besides, US-based Phillips 66 remains open to developing another ethane cracker for its Chevron Phillips Chemical (CP Chem) joint venture, the refiner's CEO said in March 2018.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,904,410 tonnes in the first eleven months of 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments increased from both domestic producers and foreign suppliers. The PP consumption in the Russian market was 1,161,830 tonnes in January-November 2019, up by 7% year on year. Deliveries of all grades of propylene polymers increased, with the homopolymer PP segment accounting for the largest increase.
MRC

Lotte Titan likely to restart No. 3 LLDPE unit

MOSCOW (MRC) -- Lotte Chemical Titan has planned to resume production at its No. 3 Linear low density polyethylene (LLDPE) unit, according to Apic-online.

A Polymerupdate source in Indonesia informed that the company is expected to restart the unit early this week. The unit was shut on December 20, 2020 owing to economic fundamentals.

Located at Cilegon, Indonesia, the No. 3 unit has a production capacity of 200,000 mt/year.

As MRC informed before, PT Lotte Titan Nusantara, Indonesia shut its LLDPE units at Cilegon from 4 to 12 August, 2019, owing to power failure. Located in Cilegon, Indonesia, the No. 1, 2 and 3 units have a production capacity of 125,000 mt/year, 125,000 mt/year and 200,000 mt/year respectively.

Besides, PT Lotte Titan Nusantara Indonesia restarted its No. 1 LLDPE unit at Cilegon in early December, 2019. The unit was shut owing to shortage of feedstock in early-November, 2019.

According to MRC's ScanPlast report, LLDPE shipments to the Russian market grew in the first eleven months of 2019 by 14% year on year to 362,740 tonnes. Domestic producers increased their output by 34%, thereby reducing dependence on imports by 6%.

Lotte Chemical Titan produces Malaysia's most comprehensive portfolio of olefins and polyolefins which contribute to the enhancement of everyday life. Lotte Chemical Titan's production site in Malaysia consists of eleven process facilities, two co-generation plants and three tank farms. They are located on 2 sites in Pasir Gudang and Tanjung Langsat in the state of Johor. In 2006, Lotte Chemical Titan acquired PT Lotte Chemical Titan Nusantara, Indonesia’s first and largest polyethylene plant in the country. This acquisition boosted the polyolefins capacity by approximately 50%, thus making the company one of the largest producers in South East Asia. Lotte Chemical Titan was acquired by Lotte Chemical Corp., forming part of the Lotte conglomerate of Korea, in 2010. The company thus became one of Lotte Chemical Corp.’s largest overseas subsidiaries.
MRC

Showa Denko decides to streamline domestic production of unsaturated polyester resin and vinyl ester resin

MOSCOW (MRC) -- Showa Denko K.K. (SDK) decided to terminate operation of its production lines to synthesize unsaturated polyester resin (UP) and vinyl ester resin (VE) at Isesaki Plant by the end of June 2021, and concentrate domestic production of UP and VE at Tatsuno Plant in order to improve profitability of its UP and VE businesses, said the producer.

SDK’s functional polymer business has production lines at two bases in Japan, two bases in China and one base in Thailand. UP is marketed mainly as molding material for automotive parts, housing and construction materials. VE is marketed mainly as corrosion resistant material and electronic material. The demand for UP and VE is increasing in overseas markets, especially in China and ASEAN countries, due to increases in house building and infrastructure construction, and the growth of automotive industry.

However, in the domestic market, the demand for UP and VE is decreasing due to a decrease in new house building, because the use as housing material is the main use for UP and VE in Japan. Therefore, SDK decided this time to concentrate its operation to produce UP and VE at Tatsuno Plant, aiming to streamline production of UP and VE in Japan. In addition, SDK decided to concentrate its marketing effort for UP and VE on market segments which are expected to be highly profitable and grow, aiming to strengthen earning power of the UP and VE businesses. In Japan, SDK will focus its marketing effort on infrastructural use.

Outside Japan, SDK will focus its sales effort on promising markets including China and ASEAN. Furthermore, Isesaki Plant will commit itself to development and production of highly functional resins for electronics, whose market continues growing.

The Showa Denko Group’s Vision is to make itself a “KOSEIHA Company” (a group of KOSEIHA Businesses that can maintain profitability and stability at high levels over a long period), and the Group aims to make more than half of its businesses KOSEIHA Businesses by 2025. With regard to its functional polymer business, SDK aims to make it a KOSEIHA Business by selecting appropriate market segments and improving its profitability.

As MRC informed earlier, Showa Denko K.K. (SDK) decided to establish its subsidiary’s second factory in Shanghai to produce high-purity gases for electronics.

As per MRC, Showa Denko K.K. in March 2018, it stopped production at a cracking unit in Oita (Oita, Japan) for preventive maintenance. Maintenance at this enterprise with a capacity of 691 thousand tons of ethylene per year continued until April 19, 2018.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,904,410 tonnes in the first eleven months of 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments increased from both domestic producers and foreign suppliers. The PP consumption in the Russian market was 1,161,830 tonnes in January-November 2019, up by 7% year on year. Deliveries of all grades of propylene polymers increased, with the homopolymer PP segment accounting for the largest increase.

Showa Denko K.K. Mainly engaged in the petrochemical business. The company's petrochemical division produces and markets industrial gases, olefins, organic chemicals, and others.
MRC

Surgutneftegaz awards 200,000 tons of March ESPO Blend

MOSCOW (MRC) -- Russia’s Surgutneftegaz sold 200,000 tons of ESPO Blend crude oil ESPO-DUB loading in early March to China’s Sinopec and trading firm Mercuria in a spot tender, reported Reuters with reference to traders' statement.

Surgutneftegaz sold to Sinopec a 100,000-ton cargo loading from Kozmino Feb. 29 - March 5 at premium of about $7 a barrel to March Dubai swaps and a cargo loading March 4-9 to Mercuria at premium of USD6.90-USD7.00 a barrel, traders said.

Mercuria bought a cargo for Chinese refiner Chemchina, traders said.

Surgutneftegaz also awarded a tender for the sale of a further 200,000 tonnes of ESPO Blend loading on March 7-14 and March 11-18 on Friday, but the results were slow to emerge.

As MRC wrote previously, Sinopec Guangzhou Petrochemical, part of China's petrochemical giant - Sinopec, resumed operations at its cracker on December 5, 2019, following a turnaround. The cracker was shut for maintenance on October 12, 2019. Located in the Guangzhou province of China, the cracker has an ethylene production capacity of 260,000 mt/year and propylene production capacity of 150,000 mt/year.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,904,410 tonnes in the first eleven months of 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments increased from both domestic producers and foreign suppliers. The PP consumption in the Russian market was 1,161,830 tonnes in January-November 2019, up by 7% year on year. Deliveries of all grades of propylene polymers increased, with the homopolymer PP segment accounting for the largest increase.

China Petroleum & Chemical Corporation or Sinopec Limited is a Chinese oil and gas company based in Beijing, China. Sinopec's business includes oil and gas exploration, refining, and marketing; production and sales of petrochemicals, chemical fibers, chemical fertilizers, and other chemical products; storage and pipeline transportation of crude oil and natural gas; import, export and import/export agency business of crude oil, natural gas, refined oil products, petrochemicals, and other chemicals.
MRC

Shell produces high-end chemicals from plastic waste at US plant

MOSCOW (MRC) -- Shell announced in a press release that it has successfully produces high-end chemicals using a liquid feedstock made from plastic waste at its chemical plant in Norco, Louisiana, the US, reported NCT.

The company said that a breakthrough technique, known as pyrolysis, was used to make chemicals feedstocks or fuels.

Shell also noted that it aims to use 1 million tons of plastic waste a year in its chemicals plants in Asia, Europe and North America by 2025.

As MRC informed earlier, Shell Singapore restarted its naphtha cracker in Bukom Island in early December 2019, following a two months maintenance shutdown since the beginning of October 2019. Thus, this cracker was taken off-stream for the turnaround on 1 October 2019. The cracker is able to produce 960,000 tons/year of ethylene and 550,000 tons/year of propylene.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,904,410 tonnes in the first eleven months of 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments increased from both domestic producers and foreign suppliers. The PP consumption in the Russian market was 1,161,830 tonnes in January-November 2019, up by 7% year on year. Deliveries of all grades of propylene polymers increased, with the homopolymer PP segment accounting for the largest increase.

Royal Dutch Shell plc is an Anglo-Dutch multinational oil and gas company headquartered in The Hague, Netherlands and with its registered office in London, United Kingdom. It is the biggest company in the world in terms of revenue and one of the six oil and gas "supermajors". Shell is vertically integrated and is active in every area of the oil and gas industry, including exploration and production, refining, distribution and marketing, petrochemicals, power generation and trading.
MRC