COVID-19 - News digest as of 10.04.2020

1. Sasol cuts production, sales target on coronavirus impact

MOSCOW (MRC) -- South African petrochemicals giant Sasol Ltd cut its guidance for synthetic fuel production and liquid fuel sales for this financial year due to a three-week nationwide lockdown linked to coronavirus, said Hydrocarbonprocessing. Sasol is now expecting to produce approximately 7.3-7.4 million tons of synfuel against the previously guided range of 7.7–7.8 million tons, the company said in a statement to the Johannesburg Stock Exchange. It is also targeting sales of 50–51 million barrels of liquid fuel for the financial year 2020, against 57–58 million barrels previously, it said.



MRC

Two workers test positive for coronavirus at Valero Port Arthur refinery

MOSCOW (MRC) -- Two workers at Valero's Port Arthur refinery have tested positive for the coronavirus, according to Houston Chronicle.

Valero, the second largest refinery company in the United States, cut nonessential work and related contractors this week after initiating temperature checks last week -- much later than than its peers in the industry, Reuters reported Tuesday.

As part of the company's privacy policies, Valero will not publicize COVID-19 cases. But company spokeswoman Lillian Riojas said Valero has developed a pandemic response plans in the case an employee or contractor tests positive.

"The health and safety of our workers and communities is critically important to us," Riojas said.

Valero's response measures include compliance and cooperation with the Center for Disease Control and local health authorities as well as deep cleaning or sterilization of affected areas, communicating with employees in "close contact" with the affected workers. The company also has developed quarantine and communications protocols, Riojas said.

Although Valero isn't confirming or publicizing cases, British oil major BP has taken a different approach. The company confirmed that several workers aboard one of its offshore rigs in the Gulf of Mexico tested positive for the disease.

Shortly after the incident, BP enacted new protocols that include a new "team-based" shift model where contact between teams is restricted.

As MRC reported before, in late March 2020, an employee at Valero Energy Corp’s Meraux, Louisiana, refinery tested positive for the coronavirus.

We also remind that Valero Energy Corp restarted the small CDU at its Port Arthur refinery after repairing a valve on 25 September 2019. And in late October 2019, Valero Energy Corp shut the small crude distillation unit (CDU) at its Port Arthur refinery. The 75,000-bpd AVU 147 CDU was shut to repair a heat exchanger.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 383,760 tonnes in the first two month of 2020, up by 14% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments increased due to the increased capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 192,760 tonnes in January-February 2020, down by 6% year on year. Homopolymer PP accounted for the main decrease in imports.
MRC

Russian LLDPE market up by 11% in 2019

MOSCOW (MRC) -- The Russian linear low density polyethylene (LLDPE) market remained the fastest growing market, demand for this polyethylene (PE) has almost doubled for the past nine years. In 2019, the main increase in demand for LLDPE was provided by manufacturers of film products, according to MRC's Annual report.

The year of 2019 was a successful one for Russian LLDPE consumers over the past few years. Domestic producers significantly increased their output, including that on metallocene catalysts, thereby reducing dependence on foreign suppliers. And LLDPE prices fell by more than Rb15,000/tonne in the second half of last year under pressure from the situation in foreign markets. Traditionally, in recent years, the main increase in demand for LLDPE has been provided by manufacturers of film products, but in 2019, demand from producers of large-sized items and cable and wiring products also increased.

Nizhnekamskneftekhim became the key LLDPE supplier to the Russian market last year, the Tatarstan producer managed to increase its output of this PE grade by 17%, reducing the dependence of local consumers on imports from the United States and the Middle East.

Also, another Tatarstan producer - Kazanorgsintez - significantly increased its share of LLDPE in PE production, including that on metallocene catalysts, in 2019. And in November 2019, ZapSibNeftekhim launched its own LLDPE production with a capacity of 700,000 tonnes per year.

Thus, Russia's overall LLDPE production rose to 254,000 tonnes from 175,400 tonnes in 2018. At the same time, imports decreased less significantly - from 183,400 tonnes in 2018 to 180,900 tonnes last year. And overall LLDPE production capacities in Russia exceeded 1,000,000 tonnes per year as of 1 January, 2020.

Prices of butene LLDPE were in the range of Rb91,000-93,000/tonne CPT Moscow, including VAT, in the Russian market in January 2019. Prices of Middle Eastern PE reached Rb98,000/tonne CPT Moscow, including VAT, in late May. But already in June, a gradual decrease in LLDPE C4 prices began partially because of a similar situation in the global markets, which lasted until the end of the year. Some sellers' LLDPE prices had reached Rb77,000/tonne CPT Moscow, including VAT, by December.

Films producers were the main driver of last year's demand for LLDPE, demand for film grade LLDPE exceeded 362,000 tonnes last year, showing more than a double growth over the past nine years. Stretch films producers were the key LLDPE consumers.

Large-seized items producers by rotational moulding was the second largest LLDPE consumption segment. Last year's demand for PE in this segment exceeded 18,000 tonnes.

Compounds and masterbatch producers closed the top three manufacturers.

A major increase in LLDPE production in Russia, along with a proportional rise in exports, is expected in 2020.
MRC

Solvay withdraws its full-year guidance, reduces capex in view of COVID-19 impact

MOSCOW (MRC) -- Solvay announced that it is withdrawing its full year 2020 guidance issued in February due to heightened uncertainty and prolonged duration of events caused by the COVID-19 global pandemic, according to Kemicalinfo.

The company has reduced its capital expenditure plans for the year by over EUR250 million (USD273 million).

"During these challenging times, we are mobilized and we are taking decisive action on matters that are within our control, especially protecting our people, meeting customer needs, and prioritizing cash generation and cost reduction," said Ilham Kadri, chief executive officer.

"We are deleveraging pension liabilities and are reducing our capital expenditure by over EUR250 million in 2020. Our balance sheet strength - with liquidity reserves of around EUR4 billion comprised of cash and undrawn credit facilities - and our focus on cash-flow generation gives me confidence that Solvay is able to navigate this period effectively," continued Ms. Kadri.

Further, Solvay confirmed its dividend recommendation, highlighting the strength of its cash flow generation, balance sheet, and liquidity.

The company confirms that it will maintain its total dividend recommendation of EUR3.75 gross per share, on the back of the strong 2019 results announced on 26 February 2020. This leads to a final gross dividend of EUR2.25 per share payable on May 20, 2020, which follows the interim dividend payment in January 2020 of EUR1.50 per share.

Solvay also announced plans to establish a Solvay solidarity fund to support Solvay employees and dependents who may experience hardship related to COVID-19.

As MRC reported earlier, in response to urgent needs by medical professionals for protective equipment to combat COVID-19, Solvay is supplying high-performance, medical-grade transparent film to Boeing for its production of face shields. Boeing approached Solvay due to its experience in the use of advanced composite and adhesive materials on multiple commercial and defense programs.

We remind that earlier this year, DOMO Chemicals completed its acquisition of Solvay’s Performance Polyamides Business in Europe. This Business includes Engineering Plastics operations in France and Poland; High Performance Fibers in France; Polymer and Intermediates operations in France, Spain and Poland. The Business comprises Production, Sales, Technical Support, R&D and Innovation services in France, Spain, Poland, Germany and Italy that currently have a combined headcount of approximately 1,100 employees. The agreement also involves a joint venture between BASF and DOMO in France for the production of Adipic Acid.

And on January 31, 2020, BASF, the world's petrochemical major, closed the acquisition of Solvay's polyamide (PA 6.6) business. The transaction broadens BASF's polyamide capabilities with innovative and well-known products such as Technyl. This will allow BASF to support its customers with even better engineering plastics solutions, e.g., for autonomous driving and e-mobility. The transaction also enhances the company's access to growth markets in Asia as well as in North and South America.

We also remind that BASF restarted its No. 1 steam cracker on September 30, 2019, following a maintenance turnaorund. The plant was shut for maintenance in mid-August, 2019. Located at Ludwigshafen in Germany, the No. 1 cracker has an ethylene production capacity of 235,000 mt/year and a propylene production capacity of 125,000 mt/year.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 383,760 tonnes in the first two month of 2020, up by 14% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments increased due to the increased capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 192,760 tonnes in January-February 2020, down by 6% year on year. Homopolymer PP accounted for the main decrease in imports.
MRC

North American PVC prices fell by more than USD200/tonne in April for the CIS countries

MOSCOW (MRC) - A serious decline in oil quotes and demand in key markets has forced North American producers of polyvinyl chloride (PVC) to significantly reduce export prices. Offers for April shipments to the CIS markets were reduced by more than USD200/tonne compared to early March, according to the ICIS-MRC Price Report.

The dynamic spread of coronavirus in the world made many countries to introduce emergency measures, including stopping processing plants. Because of an oversupply, oil, and with it polymers, became seriously cheaper.

Polyvinyl chloride was no exception, and because of this North American producers had to cut prices significantly for April shipments, including to the markets of the CIS countries. Market participants reported that even in early March, prices for PVC shipments from the United States exceeded the level of USD910/tonne CIF, and most sellers had a limited offer due to a stop on the turnaround of part of the facilities.

But already in the second half of March, a drop in demand in key export markets, including India, forced sellers of North American PVC to adjust their prices. By early April, price offer for the shipment of PVC from the United States reached the level of USD675/tonne, CIF, for the markets of the CIS countries, while agreement of lower prices for significant volumes is not excluded.

Most consumers were in no hurry to agree deals on April shipments of PVC from the United States. One of the reasons is quarantine in their own countries and a reduction in processing volumes.

The second reason is a similar price level for European producers, which, according to logistics indicators, are much closer to potential consumers from the CIS countries.
MRC