Dynamics of LDPE price growth in Russia intensified last week

MOSCOW (MRC) - Demand for low density polyethylene (LDPE) in the Russian market has grown significantly, a gradual increase in prices has begun. Last week, a limited supply from a number of sellers led to the most tangible price increase in the last few weeks, according to the ICIS-MRC Price Report.

After a long period of surplus, which was seen in October - January, Russian manufacturers managed to balance the domestic LDPE market by February of this year, including due to the growth in export sales. Since the middle of last month, excess polyethylene in the market has disappeared, and prices have begun to rise slowly.

Demand rose significantly in March due to early spring in several regions, and in the second week of the month, some sellers reported that they had already sold all their LDPE volumes. As a result, prices have risen over the week for some positions of polyethylene by Rb2,000-4,000/tonne.

The 108th LDPE was in greatest demand in the last few weeks, and its supply in the market is declining every day.
Some sellers of polyethylene produced by the Angarsk ZP and Ufaorgsintez reported last week that they had already sold all of their March quotas. A similar situation with the 158th LDPE.

Most of the sellers of polyethylene produced by Kazanorgsintez also sold all their volumes. The Kazan manufacturer intends to shut down production of the 158 and 153 LDPE for almost a month scheduled maintenances from 11 April.

Also, traditional spring restrictions on road transport of goods on secondary routes in certain regions will put pressure on LDPE prices in the near future. Such restrictions were introduced in Bashkortostan from 23 March; from 1 April in Tatarstan.

Some producers; prices of 108 LDPE grew in the spot market to the level of Rb69 500-70 000/tonne CPT Moscow, including VAT by mid March; showing an increase in value at the level of Rb4,000/tonne. Prices of 158 LDPE continued to rise. Kazanorgsintez and Tomskneftekhim announced a price increase of Rb2,000/tonne last week.
MRC

MOSCOW (MRC) -- Repsol's refinery at Puertollano in central Spain will carry out an upgrade of its olefins unit, reported S&P Global.

The modernization will be a part of planned maintenance of the cracker and chemical derivative plants at the end of 2020.

As MRC wrote previously, Spain’s Repsol shut down its cracker in Tarragona (Spain) for maintenance in the fourth quarter of 2019. The turnaround at this steam cracker, which produces 702,000 mt/year of ethylene and 372,000 mt/year of propylene, was pushed back from Q3 2019. The exact dates of maintenance works were not disclosed.

We also remind that in Q1 2016, Repsol completed the construction work of its new metallocene polyethelene plant at its Tarragona site. Repsol started up the plant and began production and marketing of this new product during Q2 2016.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 215,390 tonnes in the first month of 2020, up by 23% year on year. Shipments of all grades of high density polyethylene (HDPE) and linear low density polyethylene (LLDPE) increased due to higher capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 127,240 tonnes in January 2020, up by 33% year on year. ZapSibNeftekhim's homopolymer PP accounted for the main increase in shipments.

Repsol S.A is an integrated Spanish oil and gas company with operations in 28 countries. The bulk of its assets are located in Spain.
MRC

MOSCOW (MRC) -- PKN Orlen has been notified by the European Commission of re-starting the clock on the second phase of the merger review process, which will trigger resumption of formal negotiations on PKN Orlen’s proposed acquisition of Grupa LOTOS, said the company.

‘Having supplied all documents requested by the European Commission, we hope that, according to our expectations, their final decision regarding Orlen’s acquisition of Lotos will be issued by the end of the first half of this year,’ says Daniel Obajtek, President of the PKN Orlen Management Board.

The European Commission’s decision to ‘stop the clock’ was prompted solely by the need to collect additional information. The practice is a customary one, and has been applied before for a number of proposed mergers, including EON/Innogy and Vodafone/Certain Liberty Global Assets, with conditional approvals issued by the Commission in both cases.

PKN ORLEN’s acquisition of Grupa LOTOS would be in line with a wider trend of building consolidated, multi-energy groups across Europe and worldwide. The deal’s aim is to create a strong player well-placed for international expansion, effectively competing on all markets. It would be a response of the Polish companies to global trends in the refining industry, which would reduce the risk of liquidity loss by the domestic refineries. If the process is followed through, it would also increase the combined entity’s ability to finance large, multi-billion dollar projects, which would drive forward Poland’s economy with added benefits for the environment, including investment in zero and low emission energy sources, such as the planned offshore wind farm development.

The merger would also give fresh economic impetus to the entire region. Benefits for LOTOS would include the ability to win new business and gain a foothold in new market segments, while developing its presence in those where it is already active, such as electric mobility and hydrocarbon exploration and production. The consolidation would involve business process optimisation, without reducing staff levels. No jobs would be made redundant – on the contrary, employees would be able to grow professionally, working for a larger and stronger organisation of international stature. The Gdansk province would continue to receive income from CIT, PIT and property taxes. The new entity would be a strong regional player, but would continue to support its local communities. Once combined, it would also be better placed to engage in initiatives spanning social outreach, culture and sports across the region. Its coordinated CSR policy would deliver stronger and more thorough support for local communities.

The acquisition of Grupa LOTOS by PKN Orlen was initiated in February 2018 by signing a Letter of Intent with the Polish State Treasury, holding 53.19% of voting rights at the General Meeting of Grupa LOTOS. In April 2018, a due diligence process was commenced at Grupa LOTOS to examine its commercial, financial, legal and tax positions ahead of the planned acquisition. In November 2018, a draft application for approval of the concentration was submitted by PKN ORLEN to the European Commission. While working on the document, PKN Orlen and Grupa LOTOS received hundreds of enquiries from the European Commission, to which they promptly replied. Effective cooperation between all the parties involved led to the successful drafting of a final application, which was submitted to the Commission in early July last year. Additionally, an agreement was signed at the end of August 2019 between PKN Orlen, the Polish State Treasury and the Grupa LOTOS, defining a framework structure for the proposed acquisition of the Gdansk-based company. In late September 2019, as a matter of customary practice, the Commission issued a standard ‘stop the clock’ decision for the second phase of the merger negotiations.

As MRC informed earlier, in H1 September 2019, Honeywell announced that PKN ORLEN had licensed the UOP MaxEne process, which can increase production of ethylene and aromatics and improve the flexibility of gasoline production. The project, for the PKN Orlen facility in Plock, Poland, currently is in the basic engineering stage. Honeywell UOP, a leading provider of technologies for the oil and gas industry, first commercialized the UOP MaxEne process in 2013. The process enables refiners and petrochemical producers to direct molecules within the naphtha feed to the processes that deliver the greatest value and improve yields of fuels and petrochemicals.

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

PKN Orlen would be the first refining and petrochemicals company in Europe to use the Honeywell UOP MaxEne technology for molecule management of a naphtha stream to produce high-quality products including olefins, aromatics and gasoline.
MRC

MOSCOW (MRC) -- Total's Feyzin is considering mothballing a visbreaker unit around 2021, according to S&P Global.

The company has made this decision as demand for heavy fuel is gradually declining and the unit currently works on average no more than three days a month.

As a result of the mothballing seven people would lose their jobs, but would be offered other jobs within the organization, the company said.

As MRC wrote before, Total has recently disclosed that it is evaluating construction of a new gas cracker at its Deasan, South Korea, joint venture (JV) with Hanwha Chemical.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 215,390 tonnes in the first month of 2020, up by 23% year on year. Shipments of all grades of high density polyethylene (HDPE) and linear low density polyethylene (LLDPE) increased due to higher capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 127,240 tonnes in January 2020, up by 33% year on year. ZapSibNeftekhim's homopolymer PP accounted for the main increase in shipments.

Total S.A. is a French multinational oil and gas company and one of the six "Supermajor" oil companies in the world with business in Europe, the United States, the Middle East and Asia. The company's petrochemical products cover two main groups: base chemicals and the consumer polymers (polyethylene, polypropylene and polystyrene) that are derived from them.
MRC

MOSCOW (MRC) -- Iran has decided to halt work on the expansion of its Abadan oil refinery until mid-April as part of measures to contain the new coronavirus outbreak, the semi-official Mehr news agency said, citing Managing Director of National Iranian Oil Engineering and Construction Company (NIOEC) Saeed Sattari Naini, said Reuters.

Iran contracted China’s Sinopec in 2017 to carry out the work over a period of four years.

As MRC informed earlier, Production volume of chemical and petrochemical products registered a 1.9 percent growth in 10 months of the current year (from March 21 to Jan. 20). Statistics showed that 45,885,000 tons of petrochemcials were produced from March 21, 2019 to Jan. 20, 2020, showing a 1.9 percent growth as compared to the same period of last year. In this period, production of polystyrene recorded a 60 percent decline while production of polycarbonate and resin epoxy registered a 48.8 and 11.9 percent slump respectively. In the meantime, production of rubber styrene butadiene, polypropylene (PP) and polyethylene (PE) recorded a 19, 9.5 and 8.7 percent increase respectively.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,093,260 tonnes in 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments rose from both domestic producers and foreign suppliers. The estimated PP consumption in the Russian market was 1,260,400 tonnes in January-December 2019, up by 4% year on year. Supply of almost all grades of propylene polymers increased, except for statistical copolymers of propylene (PP random copolymers).
MRC