Pandemic brought new customers and opportunities for plastics companies

MOSCOW (MRC) -- Plastics companies operating in the Klaipeda Free Economic Zone (FEZ) have been fortunate. The impact of the COVID-19 outbreak has so far been limited. In fact, they report increasing demand, the opening up of new product and sales segments, and a renewed sense of worth in the eyes of society, said Sustainableplastics.

The flip side, to date, has been the impact on turnover of falling raw materials and oil prices. Klaipeda. FEZ is the largest plastics hub in the Baltics. It is home to 5 companies active in the plastics industry, who together generated a total turnover of €890m in 2018, or nearly half of Lithuania's total for this industry.

The preliminary data moreover indicate that the 2019 figures are at around the same level: while production output was higher, the 2019 fall in oil prices impacted both other raw materials and, consequently, the pricing of end products.

For these reasons, Klaipeda's plastics companies are reluctant to forecast their 2020 results at this point: while the demand for some current and new segments has increased over the past few weeks, it is still unclear how oil prices and the state of the global economy will develop.

Pack Klaipeda, a manufacturer of egg trays and disposable polystyrene foam dishes, probably has the most positive outlook in today's situation. Curiously, only a year ago the company was uncertain about its future, as the European Parliament approved the single-use plastics (SUP) directive. Today, Pack Klaipeda already has a new polypropylene packaging production line in place that doesn't fall under limitations set by the EP.

The company also has a record number of employees and estimates that it has achieved a 30% annual revenue increase in the first quarter of this year. Last year, according to preliminary data, Pack Klaipeda posted a 3.4% revenue increase, up to €9.2m. The company expects 17% growth this year.

"I believe the COVID-19 outbreak, lockdowns, and quarantines have brought the consumers back to reality when it comes to safety and hygiene that disposable packaging brings to the food industry,” says Vytautas Butvilas, the CEO of Pack Klaipeda.

“At the same time, the restrictions for the restaurant segment and full hospitals have led to a major jump in demand for PS packaging for takeaway food. We are also seeing some of the customers from the catering industry, who were previously exploring paper laminate packaging and other alternatives, massively returning back to the safe and proved PS solutions. All these factors have contributed to at least a 30% increase in demand in our main markets - Lithuania, Scandinavia, Germany, and Poland.”

He believes that this may even impact the sentiments towards the plastics industry by both the society and European institutions. "I think it's naive to believe that we will all return to using ceramic cups and dishes as before the outbreak,” said Butvilas. “Even today, some European associations believe that the new priorities will be hygiene, safety, circular economy, recycling and only then bans or restrictions.”

He does not wish to speculate on whether the EU will review its SUP directive or implementation timelines, instead preferring to prepare for the future. In addition to the new production line that manufactures environmentally friendly and easily recyclable PP packaging, the company has also developed products for new segments such as molten packaging for fresh meat, salads, pastries, food assortments, and healthy takeaway foods.

The company also plans to deliver other hygiene-oriented, environmentally-friendly, and recyclable novelties. Currently, takeaway food packaging (both hot and cold) amounts to around 80% of Pack Klaipeda's portfolio, 10% are egg trays and 10% - other categories. Among the latter, packaging with caps for liquid foods has been growing the most.

As per MRC's ScanPlast report, Russia's estimated PET consumption decreased to about 53,890 tonnes in February 2020, down by 3% year on year. 100,830 tonnes of PET chips were processed in Russia in the first two months of 2020. February PET production in Russia dropped to 45,800 tonnes, down by 5% year on year. Russia's overall PET production fell in January-February 2020 by 13% year on year.

MRC

MOSCOW (MRC) -- Turkish refiner Tupras has cut runs at its Izmir refinery by 50% due to weak fuel demand because of the coronavirus outbreak, four trading sources familiar with the matter told Reuters.

Tupras has also cut runs at its Izmit refinery by 20% and its Kirikkale refinery by 50%, the sources said.

Tupras started to cut refinery runs around the middle of March, two of the sources said, but it was not clear when exactly the runs were reduced at each refinery.

Tupras is a big consumer of Mediterranean oil grades such as Russian Urals and Siberian Light as well as Kazakhstan’s CPC Blend, which it normally purchases via tenders.

"They’ve cut purchases a lot. There were no buy tenders for over a month now," a trader in the Mediterranean oil market said.

Tupras did not respond to a request for a comment.

We also remind that Petkim, part of SOCAR, operates its naphtha cracker at Aliaga in Turkey, which has an ethylene production capacity of 585,000 mt/year and propylene production capacity of 240,000 mt/year. The company shut this cracker for aproximately two weeks on 9 March, 2018, for an unplanned outage.

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

1. SIBUR sustainability committee outlines further steps in coronavirus response

MOSCOW (MRC) -- SIBUR's Sustainability Committee held a regular meeting online to review measures implemented by the Company in dealing with the COVID-19 outbreak and approve further steps in key focus areas, said the company. The safety of our employees and clients is at the centre of the CompanyпїЅs pandemic response. SIBUR works consistently and proactively to tackle COVID-19 and its consequences. The Company is placing major emphasis on protecting its employees and partners as it seeks to maintain the highest level of customer service and meet the increased demand for materials used in medical products and safe packaging.



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MOSCOW (MRC) -- Brent crude oil rebounded from two days of losses and US futures surged on Wednesday, bolstered by tentative discussions of additional supply cuts from OPEC producers and US inventory builds that were less dire than some anticipated, reported Reuters.

Oil trading has been more volatile than ever in recent days, as the market has become overwhelmed by a growing supply glut and catastrophic declines in demand as governments order people to stay at home, restricting travel and halting daily life, to stop the spread of the coronavirus.

US futures fell deep into negative territory on Monday, closing a record minus USD37.63 a barrel, while Brent touched its lowest level since June 1999 early Wednesday.

As of 1:20 p.m. EDT (1720 GMT), Brent was up USD1.54, or 8%, at USD20.87 a barrel. Earlier in the session, the global benchmark fell to USD15.98, its lowest since June 1999.

US West Texas Intermediate (WTI) crude futures for June delivery rose USD3.09, or 26.7%, to USD14.66 a barrel.

Since the start of the year, Brent has fallen more than 65%, while WTI has dropped around 75%.

The world’s major oil producers, led by the Organization of the Petroleum Exporting Countries and its allies, attempted to wrest control of spiraling inventories by announcing a collective cut of 9.7 million barrels per day in supply in early April.

But those cuts will come too slowly to offset rising inventories, which hit 518.6 million barrels in the United States last week, just 3% off an all-time record, the Energy Department said.

"If storage continues to increase at the end of the day, which seems likely considering all these Saudi barrels knocking at the door, then we are going to get to maximum storage sometime in the not so distant future," said Bob Yawger, director of futures at Mizuho in New York.

Saudi Arabia on Tuesday said it was ready to take extra measures with other producers and Iraq made similar comments. The next formal meeting by OPEC and allies, a group known as OPEC+, is in June.

Even without another formal agreement, decreasing storage capacity and falling demand could force producers to cut more. An OPEC source told Reuters it was "logical" to expect the market to force more cuts on OPEC+ producers.

US crude inventories rose 15 million barrels last week, in line with analysts’ expectations, though some even predicted a build of more than 20 million barrels.

Meanwhile, US gasoline stocks rose by just 1 million barrels, less than expected, while product supplied, a proxy for demand, increased modestly for the first time in weeks.

"It wasn’t the disaster that the market had been expecting," said Phil Flynn, an analyst at Price Futures Group. "There were rays of hope in the report that maybe we’re stabilizing on the demand destruction."

This week the front-month US contract fell below zero for the first time ever ahead of its Tuesday expiry as panicking traders paid customers to take oil off their hands so they would not have to take delivery with nowhere to store the surplus.

Inventories at the Cushing, Oklahoma, delivery hub for WTI are nearly full, at almost 60 million barrels, with much of the rest leased already.

As MRC informed earlier, global oil consumption cut by up to a third. What happens next in the oil market depends on how quickly and completely the global economy emerges from lockdown, and whether the recessionary hit lingers through the rest of this year and into 2021.

We remind that earlier this year, BP said the deadly coronavirus outbreak could cut global oil demand growth by 40 per cent in 2020, putting pressure on Opec producers and Russia to curb supplies to keep prices in check.

We also remind that, in September 2019, six world's major petrochemical companies in Flanders, Belgium, North Rhine-Westphalia, Germany, and the Netherlands (Trilateral Region) announced the creation of a consortium to jointly investigate how naphtha or gas steam crackers could be operated using renewable electricity instead of fossil fuels. The Cracker of the Future consortium, which includes BASF, Borealis, BP, LyondellBasell, SABIC and Total, aims to produce base chemicals while also significantly reducing carbon emissions. The companies agreed to invest in R&D and knowledge sharing as they assess the possibility of transitioning their base chemical production to renewable electricity.

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

MOSCOW (MRC) -- To further aid in the fight against the COVID-19 pandemic, LyondellBasell (LBI) donated a key ingredient to Huntsman Corporation to produce hand sanitizer for US first responders, as per LBI's press release.

Huntsman recently delivered a 5-ton shipment of hand sanitizer to Huntsman Cancer Institute (HCI) and the associated medical facilities at the University of Utah to help protect healthcare workers treating COVID-19 patients.

Huntsman approached LyondellBasell to request a shipment of isopropyl alcohol (IPA), which is a key ingredient in hand sanitizer. Knowing that the request was to assist with first responders at HCI and the University of Utah, LyondellBasell agreed to donate enough IPA to support the cause.

"This is a critical time where industry players can work hand-in-hand to help safeguard our healthcare workers," said CEO Bob Patel. "We are proud to have played a role in the fight against this pandemic."

Many products that LyondellBasell makes are being used to fight the pandemic. From products that provide filtration in facemasks, to breathable films for protective suits, medical syringes, medical test kits, soaps, disinfectants, and many other products, TeamLYB is on the front lines against the virus.

"We are so grateful to Huntsman Corporation and LyondellBasell for making this donation," said University of Utah President Ruth V. Watkins. "This is an incredible example of how leading companies are stepping up to address vital needs of health providers who are on the front lines of battling the coronavirus pandemic."

We remind that, as MRC reported earlier, in January 2020, Indorama Ventures Public Company Limited (IVL), a global chemical producer, completed its acquisition of Huntsman’s world-class integrated oxides and derivative businesses, including a large flagship site on the US Gulf Coast (USGC) at Port Neches, as well as Chocolate Bayou and Dayton in Texas, Ankleshwar in India, and Botany in Australia, as per IVL's press release.

The acquisition is a profitable and growing end applications business along with unique products and geographical profile among the crowded olefins space. It has a well-integrated assets base with an extensive infrastructure and future expansion possibilities. The area is adjacent to many USGC feedstock suppliers. The cash value of USD2.0 billion makes it the largest acquisition by Indorama Ventures ever and now our capital employed is nicely spread over plastic, chemicals and fibers. The transaction value translates to an EV/EBITDA of ~5.7x and is expected to add substantial synergies to Indorama’s existing 450kta Ethane/Propane Cracker and our 550kta EO/EG. IVL will now be integrated from Ethane to PET as well as the high-margin EO and PO derivative businesses.

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.

Huntsman Corporation is a publicly traded global manufacturer and marketer of differentiated and specialty chemicals with 2017 revenues of more than USD8 billion. Its chemical products number in the thousands and are sold worldwide to manufacturers serving a broad and diverse range of consumer and industrial end markets. The company operate more than 75 manufacturing, R&D and operations facilities in approximately 30 countries and employ approximately 10,000 associates within its four distinct business divisions.

LyondellBasell is one of the largest plastics, chemicals and refining companies in the world. Driven by its 13,000 employees around the globe, LyondellBasell produces materials and products that are key to advancing solutions to modern challenges like enhancing food safety through lightweight and flexible packaging, protecting the purity of water supplies through stronger and more versatile pipes, and improving the safety, comfort and fuel efficiency of many of the cars and trucks on the road. LyondellBasell sells products into approximately 100 countries and is the world's largest licensor of polyolefin technologies.
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