Solvay to close composite plants amid deepening aerospace crisis

MOSCOW (MRC) -- Solvay SA said it will close two plants making composites for Airbus SE and Boeing Co. in a sign the deepening aerospace crisis is hitting suppliers of even the latest aircraft materials, reported Bloomberg.

The Belgian chemical maker is adding to savings achieved in the past year following the grounding of Boeing’s 737 Max. The latest measures from Solvay Chief Executive Officer Ilham Kadri will lead to about 570 job cuts, or 20% of the workforce in Solvay’s composites unit, the Brussels-based company said Friday.

The closure of sites in Manchester, England, and Tulsa, Oklahoma, mark the latest example of a permanent downsizing now taking place across in the aircraft industry.

Before the coronavirus crisis, composites had been a bright spot. With each new jet, Airbus and Boeing strove to replace metal parts with advanced materials to save on weight and boost fuel efficiency. Now, both major planemakers are preparing to slash jobs, with the impact being felt by their suppliers.

Solvay said it will book a 30 million-euro (USD32 million) charge to cover expenses related to the restructuring plan. The savings generated are expected to be double that amount by the year-end.

"The steps we are taking are necessary to adapt to the dynamic environment," said the CEO, a former Dow Chemical Co. executive.

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 557,060 tonnes in the first three month of 2020, up by 7% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments rose because of the increased capacity utilisation at ZapSibNeftekhim. Demand for LDPE subsided. At the same time, PP shipments to the Russian market was 267,630 tonnes in January-March 2020, down 20% year on year. Homopolymer PP and PP block copolymers accounted for the main decrease in imports.
MRC

MOSCOW (MRC) -- US lawmakers introduced a relief bill that would include aid to biofuel producers after demand for the fuel plummeted because of the coronavirus pandemic, causing mass shutdowns in the industry, reported Reuters.

The bill, introduced by House Democrats, would reimburse producers that suffered unexpected market losses because of the pandemic from January 1 through May 1. It is not clear whether the bill as proposed will be passed into law.

Eligible producers would receive 45 cents a gallon for fuel produced during the January-May period, according to the bill. If a facility was unable to make fuel during one or more months during the period, the producer would receive 45 cents multiplied by 50% of the number of gallons produced from year-ago levels.

The proposed assistance to the biofuels industry follows pleas by trade associations and lawmakers. As governments ordered residents to stay at home to curb the virus’ spread, demand for gasoline fell, dragging biofuels along with it.

US laws require that refiners blend biofuels into the nation’s fuel pool or buy credits from those that do.

Around half of the industry’s capacity is offline, and about 150 ethanol facilities have idled or cut rates, according to the Renewable Fuels Association.

"The Renewable Fuel Reimbursement Program represents a potential lifeline for the 350,000 men and women whose jobs depend on a healthy and vibrant ethanol industry," said RFA President Geoff Cooper.

As MRC wrote previously, 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.

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 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 557,060 tonnes in the first three month of 2020, up by 7% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments rose because of the increased capacity utilisation at ZapSibNeftekhim. Demand for LDPE subsided. At the same time, PP shipments to the Russian market was 267,630 tonnes in January-March 2020, down 20% year on year. Homopolymer PP and PP block copolymers accounted for the main decrease in imports.
MRC

MOSCOW (MRC) -- Saudi Aramco, the world’s largest oil exporter, has cut the volume of crude it will supply to at least three buyers in Asia by 10%-30% for June, sources said, said Hydrocarbonprocessing.

The cuts were made against volumes that the buyers had nominated for June-loading supplies, the refining sources told Reuters. Saudi Aramco declined to comment.

The move came after Saudi Arabia announced it would voluntarily deepen oil output cuts by additional 1 million barrels per day (bpd) from June to an output level of 7.492 million bpd, the lowest in almost two decades.

The announcement followed a deal struck by the Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russia to cut output by an unprecedented 9.7 million bpd in May and June to reduce excess supply and support prices.

Market sentiment regarding the tightening of Aramco’s crude supplies propped up Asia’s spot market for Middle East sour crude on Thursday as some sellers doubled or even quadrupled their offers from the last trade levels. Several buyers were looking for Middle East crude cargoes, but sellers were either holding out or offering their cargoes at high premiums, trade sources said.

Last month, the market had been flooded with cheap oil in deep discounts. “Market sentiment is different now,” said one of the refinery sources.

On Thursday, Exxon Mobil Corp hiked its offer price for Abu Dhabi’s medium sour grade Upper Zakum crude, for July loading, to a spot premium USD1.40 a barrel to the grade’s official selling price (OSP), traders said. This was up from a premium of 30 cents a barrel to the OSP when Exxon sold a cargo to a Chinese buyer on Tuesday, they added.

The oil major does not typically comment on commercial matters. There is a sense of “panic buying” among some refiners amid the supply tightness, said a fourth refinery source. But no trades have been done at high price levels, as refiners held back amid poor refining margins, the sources said.

Ethylene and propylene are feedstocks for producing PE and 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) -- China’s daily crude oil throughput rebounded in April from a 15-month low in March as refiners cranked up operations to meet renewed fuel demand after lockdowns imposed to prevent the spread of the coronavirus outbreak were eased, said Reuters.

The country processed a total of 53.85 million tonnes of crude oil last month, data from the National Bureau of Statistics (NBS) showed on Friday, equivalent to about 13.1 million barrels per day (bpd). That was some 11% higher than 11.78 million bpd in March.

The agency said on Friday it had adjusted the database of industrial enterprises it uses to help compile a range of production numbers. On that basis, Friday April’s crude oil throughput was 0.8% above the year-ago level, it said; a Reuters calculation using NBS data from last year put the rise at 3.4%.

“In terms of year-on-year percentage change, we only included the companies that existed in both years,” a spokesperson from agency’s media relations department told Reuters. “For instance, if a company existed in 2019 but does not exist in 2020, then their figure in 2019 will not be included in 2020 year-on-year percentage calculation."

Analysts said it would not be not surprising for the agency to revise its year-ago numbers. “We’ve noticed over the years that the bureau tweaks the refinery output figures often towards end of the year due to under-reporting or delays in data providing by some plants,” said Seng Yick Tee, senior director at consultancy SIA Energy.

Crude runs during the first four months of 2020 in China were 203.48 million tonnes, according to Friday’s official data, equal to 12.28 million bpd, representing a 3.4% drop from a year earlier. Based on Reuters’ calculations using numbers the bureau published last year, the January-April decline would have been 1.9%.

The country’s gasoline and diesel consumption is expected to pick up in the second quarter as factories resume operations and travel restrictions are further relaxed. Traffic congestion in big Chinese cities has exceeded levels before the coronavirus outbreak as commuters use more private cars to avoid public transport.

Amid the demand pickup, China’s independent, or ‘teapot’ refineries were motivated to ramp up production to take advantage of high profit margins of 870 yuan (USD122.63) a tonne in April after crude oil prices dropped, Wang Zhao, an analyst at oil industry information consultant Sublime said, speaking before Friday’s data release.

Ethylene and propylene are feedstocks for producing PE and 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) -- Advanced Global Investment Co. (AGIC), a subsidiary of Advanced Petrochemical Co. (APC), has let a contract to Fluor Corp. to provide project management consulting (PMC) for the operator’s proposed propane dehydrogenation (PDH) and polypropylene (PP) complex at APC’s existing operations in Jubail Industrial City, on Saudi Arabia’s eastern coast, according to Oi&Gas Journal.

As part of the contract, Fluor will deliver PMC services for front-end engineering design, detailed engineering, procurement, and construction phases of the project, including associated utilities and off sites, Fluor said on May 14.

Once completed, AGIC’s complex will produce 843,000 tonnes/year of propylene and 800,000 tpy of PP that will be used for production of specialty polymers by manufacturers in the face mask, automotive, pipes, food packaging, and textiles industries, according to the service provider.

Fluor, which booked its portion of the undisclosed contract value in first-quarter 2020, said it will execute the project from its offices in Farnborough, UK, and Al Kobar, Saudi Arabia, with support from the firm’s global network.

Award of the PMC contract follows AGIC’s Mar. 27 signing of a shareholders agreement with SK Gas Co. Ltd. subsidiary SK Gas Petrochemical Pte. Ltd. (SKGP) to establish a joint venture named Advanced Polyolefins Co. (APC JV) for construction and operation of the proposed PDH-PP complex, according to a Mar. 29 release from APC.

At a total estimated cost of about USD1.8 billion, the planned PDH-PP project will be financed 25% by equity of shareholders, while APC JV will finance the remaining 75% via borrowing from lenders, APC said. AGIC will hold 85% interest in APC JV, with SKGP to hold the remaining 15% stake.

APC also confirmed AGIC has already awarded a series of contracts for technology to be implemented at the proposed PDH-PP complex. Lummus Technology LLC will deliver licensing for its proprietary CATOFIN technology for the PDH plant, while LyondellBasell Industries NV subsidiary Basell Poliolefine Italia SRL will license its proprietary Spherizone and Spheripol technologies for the complex’s two PP plants, each of which will have a capacity of 400,000 tpy, APC said.

APC said APC JV expects to begin construction in 2021 on the new PDH-PP complex - which will receive its main feedstock of propane from Saudi Aramco under a long-term contract - for a targeted start-up of operations by second-half 2024.

APC currently produces 455,000 tpy of propylene and 450,000 tpy of PP at its existing Jubail Industrial City plants, according to the company’s website.

As MRC informed before, in September 2019, SK Advanced signed a joint venture agreement with South Korea’s Polymerae Ltd. to establish a polypropylene plant in South Korea with an annual design capacity of 400,000 metric tons. The facility is expected to launch commercial operations in 2021.

Propylene is the main feedstock for the producion of polypropylene (PP).

According to MRC's ScanPlast report, PP shipments to the Russian market was 267,630 tonnes in January-March 2020, down 20% year on year. Homopolymer PP and PP block copolymers accounted for the main decrease in imports.
MRC