LDPE prices decreased significantly in Russia in the beginning of June

MOSCOW (MRC) - Quarantine restrictions have led to a reduction in demand for low density polyethylene (LDPE) due to the coronavirus pandemic. The scheduled maintenance works of one of the producer did not allow balancing the market, and, as a result LDPE prices had decreased by more than Rb8,500/tonne by the beginning of June, according to the ICIS-MRC Price Report.

LDPE prices reached their highest level in the late of March on the back of high demand and supply disruptions from some producers. The situation began to change dramatically in the second half of April due to the coronavirus pandemic. Demand for LDPE began to decline, and prices fell.

The prices of polyethylene continued to go down during May, and Russian producers announced a significant reduction in prices for June deliveries. Kazanorgsintez shut part of its facilities for scheduled maintenances in the end of April. But the shutdown of the second-largest producer of LDPE in Russia did not affect the market balance; a drop in demand due to quarantine restrictions levelled this factor.

The demand for LDPE began to gradually increase in the late May, although still quite far from last year's figures.
Angarsk Polymers Plant plans to shut its capacities for 30 day's turnaround from 22 April.

Gazprom neftekhim Salavat will shut down its HDPE production from 1 July. The 108th LDPE was the most scarce in March; prices reached Rb76,000/tonne CPT Moscow, including VAT by the end of March.

But in the second half of April, the situation changed significantly, and prices of this polyethylene began to go down more rapidly than others. Prices of 108 LDPE from some sellers decreased to the level of Rb59,000/tonne CPT Moscow, including VAT by 1 June.

The situation was similar in the market of the 158 LDPE, which by the end of March has risen in price to Rb84,000/tonne CPT Moscow, including VAT and above. Sellers announced prices for June delivery at the level of Rb74,000/tonne CPT Moscow, including VAT.

MRC

Enterprise reports earnings gain, lowers capex plans

MOSCOW (MRC) -- Enterprise Products Partners (Houston, Texas) reports first-quarter net income of USD1.375 billion, up 7% year-over-year (YOY) from USD1.280 billion, according to Chemweek.

Sales totaled USD7.482 billion, down 12% YOY from USD8.544 billion. Adjusted earnings per share of USD0.53 were in line with the average analyst estimate of USD0.52 as compiled by Refinitiv (New York). The company also says it has increased its credit access and lowered capital spending plans in response to the coronavirus disease 2019 (COVID-19) pandemic.

“The first quarter began with good momentum, and this translated into our solid operational and financial results for the first quarter of 2020,” says A. J. Teague, co-CEO of Enterprise’s general partner. However, conditions have deteriorated rapidly since early March owing to economic disruption related to the pandemic, says Teague, and the situation has been exacerbated by the OPEC+ price war. The recent OPEC+ agreement to reduce production “is too little, too late,” he adds.

“The speed and intensity of this economic sudden stop for developed countries has been breathtaking,” says Teague. “We expect natural gas, NGL (natural gas liquids), and crude oil production to decline more rapidly than in previous supply shock cycles. We have not yet seen a material change to volumes across our system; however, we will not be immune. In past cycles, our integrated system and storage assets have provided our customers valuable flexibility as well as being a reliable hedge by allowing us to use uncontracted capacity to capture regional price spreads and contango opportunities to partially offset headwinds in some of our fee-based businesses due to declining production. We continue to see good demand pull from our petrochemical customers and in LPG exports.”

In response, Enterprise has reduced its planned 2020 growth capital investments by approximately USD1 billion and a reduced sustaining capital spending by postponing USD100 million in discretionary, non-integrity related projects. The company also acquired an additional USD1.0 billion 364-day bank credit facility in early April, increasing its liquidity to about USD8.0 billion on a pro forma basis.

Enterprise reported total gross operating margin of USD2.0 billion for the first quarter of 2020 compared to USD2.1 billion for the first quarter of 2019.

The NGL pipelines & services segment reported gross operating margin of USD1.0 billion, up YOY from USD959 million. Total fee-based processing volumes declined 2%; equity NGL production decreased 9%; and NGL pipeline transportation volumes increased 9%. NGL marine terminal volumes increased 37%. Total NGL fractionation volumes increased 17% to a record 1,133 MMb/d.

The crude oil pipelines & services segment turned in gross operating margin of USD453 million, down YOY from USD662 million. Crude oil pipeline volumes increased 7% to a record 2.4 million BPD; crude oil marine terminal volumes increased 11%.

The natural gas pipelines & services segment reported gross operating margin of USD284 million, up YOY from USD264 million. Natural gas transportation volumes declined 2%.

The petrochemical & refined products services segment reported gross operating margin of USD279 million, up 15% YOY from USD243 million. Segment pipeline transportation volumes declined 12%, and refined products and petrochemical marine terminal volumes declined 20%. The contribution from octane enhancement and related plant operations, which includes the new isobutane dehydrogenation (iBDH) plant, totaled $69 million, up YOY from USD24 million on higher sales volumes and higher average sales margins; however, demand for octane enhancement products “has materially decreased” this quarter owing to pandemic-related decline in travel, says Enterprise. The propylene business’s contribution increased $6 million YOY as higher margins and volumes for the company’s propane dehydrogenation (PDH) unit were offset somewhat by maintenance downtime for a Mont Belvieu propylene splitters. Total propylene production volumes were 98 MMb/d, up YOY from 90 MMb/d.

As MRC reported earlier, Enterprise Products Partners and LyondellBasell Industries said in September 2019 they had executed long-term contracts to support construction of EPD's second propane dehydrogenation plant at the Mont Belvieu, Tex. complex. The decision to build the PDH 2 plant stems from recently executed long-term polymer grade propane (PGP) supply contracts between Enterprise and LyondellBasell Industries N.V.

Besides, we remind that Enterprise Products Partners' Mont Belvieu PDH in Texas restarted from planned maintenance in the first week of December, 2019. The PDH unit went offline for maintenance on November 13, 2019. That day, the company said in a filing with the Texas Commission on Environmental Quality that the RAC "B" turbine shut down, which resulted in flaring. The flaring was estimated to last 72 hours. The unit has a capacity of 750,000 mt/year.

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

According to MRC's ScanPlast report, PP shipments to the Russian market totalled 347,440 tonnes in January-April 2020 (calculated by the formula production minus export plus import). Supply exclusively of PP random copolymer increased.

Enterprise Products Partners L.P. is an American midstream natural gas and crude oil pipeline company with headquarters in Houston, Texas. It acquired GulfTerra in September 2004. The company ranked No. 105 in the 2018 Fortune 500 list of the largest United States corporations by total revenue
MRC

Saudi Arabia may raise July oil prices to Asia

MOSCOW (MRC) -- Top oil exporter Saudi Arabia is expected to raise its official selling price (OSP) for all grades it sells to Asia in July, to track a jump in Middle East benchmarks although overall weak refining margins could cap price gains, industry sources said, as per Hydrocarbonprocessing.

Saudi Arabia is expected to increase the July OSP for Arab Light crude by $3.80 a barrel on average, a survey of five refinery sources showed. Forecasts ranged from an increase of USD2-USD3 a barrel to as much as $5 a barrel, as refiners’ margins weakened in May while a stronger DME Oman crude price, one of two underlying benchmarks for Saudi crude in Asia, has increased refiners’ feedstock costs, they said. “Refining margins actually worsened” by close to USD1 a barrel in May, one of the respondents said.

The DME Oman crude price was on average about USD3 a barrel more expensive than cash Dubai and Oman prices set by S&P Global Platts last month, according to Reuters calculations, pushing up costs for Asian buyers of Saudi Arabian and Kuwaiti oil.

Production from the Organization of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia, fell to their lowest in two decades in May and has strengthened Middle East crude prices. OPEC and its allies including Russia are considering bringing forward a meeting to this week to discuss an extension of production cuts beyond June.

Tight Middle East crude supply has narrowed cash Dubai’s prompt contango price spread by USD6.60 a barrel in May from April. Spot prices are lower than those in future months in a contango market. In addition, light crude, such as Arab Extra Light, are expected to rise more than heavier grades as gasoline and naphtha cracks have improved, two of them said.

Saudi crude OSPs are usually released around the fifth of each month, and set the trend for Iranian, Kuwaiti and Iraqi prices, affecting more than 12 million barrels per day (bpd) of crude bound for Asia. State oil giant Saudi Aramco sets its crude prices based on recommendations from customers and after calculating the change in the value of its oil over the past month, based on yields and product prices. Saudi Aramco officials as a matter of policy do not comment on the kingdom’s monthly OSPs.

As MRC wrote earlier, in October 2019, McDermott International announced that it had been awarded a contract by Saudi Aramco and Total Raffinage Chimie (Total) for their joint venture (JV) Amiral steam cracker project at Jubail, Saudi Arabia. Amiral is a JV in which Aramco holds 62.5% and Total the rest. The plant, designed to produce 1.5 million metric tons/year (MMt/y) of ethylene, will be one of the world's largest mixed-feed crackers.

Aramco and Total launched their USD5-billion Amiral JV project in October 2018. The steam cracker will be fed with a mixture of 50% ethane and refinery off-gases. It will supply ethylene to a downstream 1 MMt/y polyethylene manufacturing complex and other petrochemical products. The project aims to fully exploit operational synergies with the adjacent refinery, owned by Satorp, another JV between Aramco and Total. Third-party investors, including Daelim and Ineos, will locate plants at the value park adjacent to Amiral with a combined investment of USD4 billion. A final investment decision is expected in 2021.

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

European association sees cloudy future for electronic scrap plastic

MOSCOW (MRC) -- Members of the Arnhem, Netherlands-based European Electronics Recyclers Association (EERA) say they are facing difficulties arising from a Basel Convention decision of 2019 that is sometimes referred to as the “Norwegian Proposals.", said Recyclingtoday.

The proposals were made by Norway to reduce ocean plastic litter by controlling exports of mixed and contaminated plastics, says EERA. The association adds, “The logic behind these proposals was that these mixed and contaminated plastics may only be delivered to compliant recyclers so that it is certain that the non-recyclable plastics do not get dumped and ultimately become marine litter."

Currently, the Basel Conference of Parties and the EU “must now align EU law to incorporate these decisions, and the EU therefore drafted a delegated act in which only clean separated plastics may be transported as green-listed waste under a new Basel Code B3011 (the prior code B3010 will cease to exist),” says EERA.

Any mixed plastics would need notifications either as non-hazardous mixed plastics under the Basel Code Y48 (or EU 48 code) or as hazardous contaminated plastics under the new Basel code A3210, adds the association.

EERA says it is afraid that shredded mixed WEEE [waste electrical and electronic equipment] plastics carry a risk of being classified as hazardous waste at the start of 2021. “Our WEEE plastics recycling industry would face serious problems over the ones that we already face, as [recyclers] do not have permits to take in hazardous wastes; this decision risks having devastating effects on the economics of recycling WEEE plastics,” states the association.

Adds the EERA, “With the falling oil prices, virgin plastic prices have deteriorated enormously [to] as low and below the cost level of [making] post-consumer recycled plastics from WEEE. This is a serious threat to the WEEE plastic recycling industry, and EERA is calling for not only recycling targets but also for rules so that the [consumer electronics] industry is using post-consumer recycled materials."

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

Orbia puts on hold plans to divest Vestolit vinyls business

MOSCOW (MRC) -- Orbia Advance Corp., formerly Mexichem (Mexico City) says that in view of the COVID-19 pandemic and its impact on the global economy and capital markets, it has decided to pause its efforts to divest or seek an alternative strategy for its Vestolit vinyls business, reported Chemweek.

Orbia says it is "prepared to wait for the right environment to maximize shareholder value in any transaction involving its Vestolit business". The company adds that Vestolit is a "fundamentally strong business, with a unique global footprint and strong cash generation, and will continue to focus on driving sustainable, profitable growth."

Orbia announced on 10 January 2020 that it is in the process of analyzing potential divestment or strategic alliances for the vinyls business. The announcement was made in response to a report on Bloomberg, which said that Apollo Management, Ineos, and Westlake Chemical were among the bidders. The Bloomberg article estimated the price tag on Orbia’s vinyls business at up to USD4 billion.

The Vestolit vinyls business has 1.84 million metric tons/year of polyvinyl chloride (PVC) capacity divided among sites in Germany, the US, Mexico, and Columbia. The company has a single 400,000 metric tons/year unit for feedstock vinyl chloride monomer Marl, Germany. Orbia has chlor-alkali plants in Germany and Mexico, and it has a 50% share of Ingleside Ethylene, a joint venture ethane cracker at Ingleside, Texas.

As MRC wrote before, in August 2019, Mexican plastic pipe and chemicals company Mexichem changed its name to Orbia Advance Corporation under a restructuring and reorganization plan.

We also remind that in 2014, Mexichem SAB de CV agreed to buy German PVC paste producer Vestolit GmbH from investment company Strategic Value Partners LLC (SVP Global) for EUR219 million (USD293 million).

According to MRC's ScanPlast report, Russian producers of unmixed PVC decreased capacity utilisation in April. However, Russia's overall PVC output totalled 351,000 tonnes in January-April 2020, up by 2% year on year.

Oriba, of Tlalnepantla, an industrial municipality close to Mexico City, is Latin America’s largest manufacturer of PVC pipe, vinyl resins and compounds.
MRC