Sinopec poised to benefit from rising China marine fuels output

MOSCOW (MRC) -- Sinopec is expected to capitalize its position as a leading supplier of marine fuels in China, as the government paves way for domestic refiners to ramp up production of IMO-compliant marine fuels, reported S&P Global with reference to markets participants' statement.

The state-owned refining conglomerate is estimated to meet around 40% of 1 million mt/month or so of bunker fuel sold to ships calling at Chinese ports, said traders.

China issued a 10 million mt export quota to five oil companies to limit the volume of domestically produced tax-free low sulfur fuel oil for bonded bunkering at Chinese ports, S&P Global Platts reported April 28 quoting market sources.

Under the export quota, Sinopec was awarded 4.29 million mt, PetroChina and Sinochem were allocated 2.95 million mt and 900,000 mt, respectively, while the remaining 860,000 mt went to CNOOC.

Chimbusco, equally owned by PetroChina and China COSCO Shipping Corp., is China's leading bunker fuel supplier holding nearly 50% of the market share.

Prior to the International Maritime Organization's 2020 sulfur cap, China imported all of its fuel oil to meet its bunker fuel demand.

But since Beijing on February 1 approved a tax rebate for domestically produced fuel oil supplied to bonded storage, refiners have ramped up low sulfur fuel oil output, thereby reducing China's dependency on imported bunker fuel.

China's top four state-owned refiners - Sinopec, PetroChina, CNOOC and Sinochem - plan to boost their combined low sulfur fuel oil production capacity to 18.15 million mt/year in 2020, Platts reported previously, quoting company sources with knowledge of the matter.

Of this, Sinopec plans to ramp up LSFO production capacity to 10 million mt/year, while PetroChina would have the capacity to produce up to 4 million mt of IMO-compliant fuel by end-2020.

"Sinopec, as the world's biggest refiner by capacity coupled with its trading profile, has (more) opportunity to grow," a source close to the company said.

Sinopec could not immediately be reached for comment.

The majority of Sinopec's 10 LSFO producing refineries are located along the eastern and southern coast. As such, the company would be in a position to enjoy a relatively lower transportation cost to supply product to China's busiest bunkering ports of Shanghai and Zhoushan.

To capitalize on the growth opportunity, Sinopec plans to increase this year the number of barges it operates to 100 from about 20 currently, another source close to the company said.

China's bunker market receives demand largely from the eastern and southern bunkering ports like Shanghai, Guangzhou, Zhoushan, Ningbo and Shenzhen as compared to that from the northern ports.

Demand for bunker fuel in northern China comprises about 30% of the market, compared to 60% in the eastern coast and 10% in the south, market sources estimated.

Still, for Sinopec to capitalize on the growth opportunity, it would have to competitively price its product vis-a-vis international prices, especially Singapore, the world's largest bunkering hub, said traders.

"With sufficient domestic supplies, we expect bunker price in China to become more competitive than Singapore in future," a Beijing-based source said.

We remind that, as MRC wrote before, Sinopec Qilu Petrochemical, a subsidiary of Sinopec Corporation, plans to shut the cracker unit in Tianjin in northeast China for scheduled repairs on 15 June, 2020. This cracking unit with a capacity of 900,000 tonnes of ethylene per year and 480,000 tonnes of propylene tons per year will be closed for scheduled repairs until 24 June, 2020.

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.

Sinopec corp. is one of the world's largest integrated energy and chemical companies. Business Sinopec Corp. includes oil and gas exploration, production and transportation of oil and gas, oil refining, petrochemical production, production of mineral fertilizers and other chemical products. In terms of refining capacity, Sinopec Corp. ranks second in the world, in terms of ethylene capacity - fourth.
MRC

MOSCOW (MRC) -- Celanese, a global chemical and specialty materials company, is currently operating its vinyl acetate monomer (VAM) unit at curtailed capacity levels owing to bearish market conditions, according to Apic-online.

A Polymerupdate source in Singapore informed that, the company reduced run rates at the plant to around 60% levels in late April, 2020.

Located in Jurong Island, Singapore, the unit has a production capacity of 210,000 mt/year.

As MRC reported earlier, Celanese Corporation restarted its VAM unit in Singaporet on March 16, 2020. The unit was shut since February 4, 2020 following a fire at the site.

We remind that Celanese Corporation brought capacity utilization at its VAM unit in Clear Lake (Texas, USA) to 100% in late January 2020. In October 2019, the company was progressing in restarting on-site production units after experiencing an emergency incident on Saturday, September 21, 2019, at its Clear Lake facility in Pasadena, Texas. The Fairway Methanol unit restarted in early October 2019 and approached full operating rates in mid-October. The acetic acid and VAM production units restarted at reduced rates during October, with full operating rates initially expected for all production units at Clear Lake within the fourth quarter of 2019.

According to MRC's DataScope report, February EVA imports to Russia rose by 9,83% year on year to 3,107 tonnes from 2,829 tonnes a year earlier, and overall imports of this grade of ethylene copolymer into the Russian Federation increased in January-February 2020 by 8,36% year on year to 6,194 tonnes (5,716 tonnes a year earlier).

Celanese Corporation is a global technology leader in the production of differentiated chemistry solutions and specialty materials used in most major industries and consumer applications. Based in Dallas, Celanese employs approximately 7,700 employees worldwide and had 2019 net sales of USD6.3 billion.
MRC

MOSCOW (MRC) -- Qatofin Company Limited, is in plans to restart its linear low density polyethylene (LLDPE) plant in Mesaieed, Qatar, as per Apic-online.

A Polymerupdate source in the Qatar informed that, the company is likely to resume operations at the plant by end-May, 2020. The plant was shut in end-April, 2020. Further details on duration of the force majeure (FM) could not be ascertained.

Located at Mesaieed, Qatar, the plant has production capacity of 600,000 mt/year.

As MRC wrote before, Qatar Petrochemical Company (Qapco) has failed to restart its LLDPE line and extented FV on shipments of material. Apparently, the plant failed to restart on 12 May and official notification has been sent to customers informing that the company was working to bring the LLDPE line online by 20 May 2020.

We remind that, in 2013, Qatar Chemical and Petrochemical Marketing and Distribution Company (Muntajat) took over the marketing and distribution responsibilities for Qatar’s globally recognised Lotrene brand of low density polyethylene (LDPE) and LLDPE. Muntajat has the mandate to export Qatar’s 10 million tonnes/year of chemicals and petrochemicals to markets worldwide.

In Qatar, LDPE and LLDPE are produced by Qatar Petrochemical Company (Qapco) and Qatofin, respectively, and these high-quality products are being sold to more than 4,500 customers worldwide under the brand name Lotrene.

Qatar’s chemical and petrochemical industry’s planned investments will further increase the country’s export portfolio to 23 million tonnes per year by 2020, from 10 million tonnes in 2013, according to Muntajat CEO Abdulrahman Ali Al-Abdulla's statement.

According to MRC's ScanPlast report, March LLDPE shipments to Russia grew to 36,790 tonnes from 25,690 tonnes a month earlier, production increased. Overall LLDPE shipments into the Russian market totalled 110,000 tonnes in the first three months of 2020, up by 11% year on year. SabSibNeftekhim accounted for the main increase in shipments.
MRC

1. U.S. specialty chemicals markets show record decline in April

MOSCOW (MRC) – The American Chemistry Council (ACC) reported that U.S. specialty chemicals market volumes fell 11.3 percent in April, accelerating from a 4.0 percent decline in March and a 0.5 percent decline in February, said Americanchemistry. Of the 28 specialty chemicals segments ACC monitors, none expanded in April. On a sequential basis, diffusion was 0 percent, the same as in March and down from 48 percent in February and 63 percent in January. The sharp decline in market volumes in April reflects the effects of the COVID-19 pandemic and mandated government lockdowns on the U.S. economy.



MRC

MOSCOW (MRC) -- Celanese (Dallas, Texas) has reported first quarter financial results and withdrawn previous annual earnings guidance, citing uncertainty around the coronavirus disease 2019 (COVID-19) pandemic, according to Chemweek.

The company also announced measures to address the financial impact of the pandemic, including the deferral of a new acetic acid plant at Clear Lake, Texas, by 18 months.

"We estimate the impact of COVID-19 on our first quarter adjusted EBIT across our businesses was USD25 to USD30 million," says Lori Ryerkerk, chairman and CEO. "The primary challenges encountered were a result of immediate actions in China in February and March to stem the spread of the virus. Demand activity was reduced several weeks beyond the typical Chinese New Year and further limited by logistics availability into March. The impact of COVID-19 on our businesses in the Western Hemisphere was very limited in the first quarter."

Net earnings for the quarter totaled USD220 million, up 388% sequentially from USD45 million, but down 35% year-over-year (YOY) from USD338 million. Sales totaled USD1.46 billion, up 1.9% sequentially from USD1.432 billion, but down 13% YOY from USD1.687 billion. Adjusted earnings per share came to USD2.29, up 15% sequentially from USD1.99, down 13% YOY from USD2.62, and ahead of the average analyst estimate of USD2.24 as compiled by Refinitiv (New York).

"We anticipate that we will generate USD300-400 million of incremental cash due specifically to the actions we are currently taking on productivity, working capital management, and capital expenditures prioritization which allow us to offset meaningful demand and earnings challenges and deliver exceptionally resilient cash flow in 2020," says Ryerkerk.

Celanese has achieved one-third of its 2020 productivity target, announced during the first quarter, of approximately USD200 million of gross savings, says Ryerkerk. "(W)e are also working on one-time cost savings of $30-40 million through travel reductions, manufacturing costs, and other corporate function expense. As part of these one-time savings, we are leveraging our manufacturing flexibility to temporarily reoptimize utilization of our global production network to align with expected demand softness in the second quarter and potentially beyond."

Celanese has paused production at certain facilities or units, mainly affecting the engineered materials segment but also the acetyl chain, and it has extended the duration of several second quarter turnarounds, including the Bishop, Texas, and Nanjing, China, facilities. The company will therefore "heavily utilize existing inventory" during the second quarter.

Celanese has also reduced its capital spending plans from previous guidance of USD500 million to less than USD350 million by prioritizing productivity-based projects with near-term benefits, says Ryerkerk. Construction of the new Clear Lake, Texas, acetic acid will be deferred by about 18 months, with completion now slated for the middle of 2023. The associated incremental expansion of the Clear Lake methanol unit will also be deferred by 18 months. The company has also decided that further localization of engineered materials production in China will proceed incrementally for the time being.

The engineered materials segment reported net sales of USD563 million, up 4% from the fourth quarter of 2019 on higher volume, but down 15% YOY. Robust growth in the Western Hemisphere offset declines in Asia tied to the COVID-19 pandemic and the Lunar New Year, although demand softened late in the quarter, says the company. Price levels held sequentially, while raw material costs declined. Adjusted EBIT totaled USD165 million, up sequentially from USD136 million and down YOY from USD183 million.

The acetyl chain reported net sales of USD799 million, up 3.6% sequentially as volume growth partially offset a continued decline in industry pricing resulting from weakness in Asian demand and lower raw material costs. Adjusted EBIT totaled USD139 million, down sequentially from USD144 million and down YOY from USD203 million. The pandemic reduced income by about USD15 million, largely through customer order cancellations in March.

Acetate tow sales totaled USD129 million, down 13% sequentially and down 22% YOY. Adjusted EBIT came to USD67 million, up sequentially from USD54 million and down YOY from USD72 million.

As MRC informed previously, Celanese Corporation, a global chemical and specialty materials company, has restarted its vinyl acetate monomer (VAM) unit in Singapore. The company has resumed operations at the unit on March 16, 2020. The unit was shut since February 4, 2020 following a fire at the site. Located in Jurong Island, Singapore, the unit has a production capacity of 210,000 mt/year.

VAM is the main feedstock for the production of ethylene-vinyl-acetate (EVA).

According to MRC's DataScope report, February EVA imports to Russia rose by 9,83% year on year to 3,107 tonnes from 2,829 tonnes a year earlier, and overall imports of this grade of ethylene copolymer into the Russian Federation increased in January-February 2020 by 8,36% year on year to 6,194 tonnes (5,716 tonnes a year earlier).

Celanese Corporation is a global technology leader in the production of differentiated chemistry solutions and specialty materials used in most major industries and consumer applications. Based in Dallas, Celanese employs approximately 7,700 employees worldwide and had 2019 net sales of USD6.3 billion.
MRC