Braskem posts quarterly loss of USD777 mln, amid forex swings, expenses

MOSCOW (MRC) -- Brazilian petrochemical firm Braskem SA reported on Wednesday a net loss of USD777 million in the first quarter compared with a profit of USD243 million a year ago, as foreign exchange oscillations led to higher financial expenses, reported Reuters.

The company said financial expenses grew to USD1.332 billion in the quarter ended March 31 from USD243 million a year ago, given the depreciation of the Brazilian real and the Mexican peso against the US dollar.

In April, Braskem revised its capital expenditure forecast in 2020 to USD721 million from around USD600 million, as part of its strategy to preserve cash.

Its operating performance measured by recurring earnings before interest, tax, depreciation and amortization (EBITDA) declined by 34% compared with the first-quarter of 2019 to USD294 million, excluding extraordinary expenses related to the geological disaster in Brazil’s Northeastern state of Alagoas.

Braskem’s quarterly net sales revenue fell 17% to USD2.846 billion, while cost of goods sold declined by 14% to USD2.581 billion.

The petrochemical company ended March 2020 with a net debt/EBITDA ratio in US dollars of 5.84 compared with 4.71 at the end of 2019 and 2.09 in March 2019.

As MRC wrote previously, the chief executive of Brazilian state-run oil firm Petroleo Brasileiro said in December 2019 he wants to sell the company's stake in petrochemical company Braskem within 12 months.

Besides, Braskem is no longer pursuing a petrochemical project, which would have included an ethane cracker, in West Virginia. And the company is seeking to sell the land that would have housed the cracker. The project, announced in 2013, had been on Braskem's back burner for several years.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 721,290 tonnes in the first four month of 2020, up by 4% year on year. Low density polyethylene (LDPE) and linear low density polyethylene (LLDPE) shipments grew partially because of the increased capacity utilisation at ZapSibNeftekhim. At the same time, 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.

Headquartered in Rio de Janeiro, Petrobras is an integrated energy firm. Petrobras' activities include exploration, exploitation and production of oil from reservoir wells, shale and other rocks as well as refining, processing, trade and transport of oil and oil products, natural gas and other fluid hydrocarbons, in addition to other energy-related activities.
MRC

Deal approved to cap bankrupt Philly refiner's biofuels obligations

MOSCOW (MRC) -- A federal judge signed off on a deal between the US Environmental Protection Agency and bankrupt Philadelphia Energy Solutions that caps the refiner’s biofuels blending obligations at USD10 million, reported Reuters.

The agreement, approved in the United States Bankruptcy Court for the District of Delaware, cuts the Philadelphia refiner’s regulatory liability by more than 70% with the aim of freeing up cash for the company to pay off creditors.

As MRC wrote previously, the closing of a USD252 million sale of the Philadelphia Energy Solutions (PES) oil refinery to a Chicago-based real estate developer has been delayed, a city official and source with knowledge of the agreement said earlier this week. Hilco Redevelopment Partners won an auction in January to purchase the 1,300-acre site along the Schuylkill River in south Philadelphia. The companies were scheduled to close on the purchase agreement by the end of this month.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 721,290 tonnes in the first four month of 2020, up by 4% year on year. Low density polyethylene (LDPE) and linear low density polyethylene (LLDPE) shipments grew partially because of the increased capacity utilisation at ZapSibNeftekhim. At the same time, 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.
MRC

Russian gas supplies to Europe steady in May

MOSCOW (MRC) -- Russian gas supplies to Europe remained steady in May with exports flat on the month at 11.1 Bcm, an analysis of S&P Global Analytics and Entsog data showed June 3.

However, Russian exports remain well down on the volumes supplied via the main corridors to Europe last year, with supplies in May down 28% year on year.

A combination of factors -- including a second consecutive mild winter, elevated gas storage stocks and weak demand driven by the coronavirus pandemic -- has seen flows to Europe via Nord Stream, Yamal-Europe, Ukraine and TurkStream fall to an average of 357 million cu m/d so far this year, the data show, down 25% year on year.

For the period January-May, Russian gas supplies into Europe -- excluding the countries of the former Soviet Union in line with Gazprom's own sales data -- total 54.2 Bcm.

State-controlled Gazprom last month said it expected its total gas sales in the Far Abroad (Europe plus Turkey and China, but minus the ex-USSR countries) to be 166.6 Bcm in 2020, which would be a 16% fall on the 199.3 Bcm sold last year.

Alexander Ivannikov, the head of Gazprom's finance department, said the current market environment was the result of a "perfect storm" of bearish factors.

As MRC informed earlier, Gazprom neftekhim Salavat shut down its dioctyl phthalate (DOP) production for a scheduled maintenance. Market participants and a plant"s representative said Gazprom neftekhim Salavat took off-stream its DOP production for a long scheduled turnaround. The outage began on 12 May and will last for about 30 day.

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.
MRC

COVID-19 economic shock, capacity overhang to pressure petchem margins, stall investment

MOSCOW (MRC) -- The worldwide economic shock due to the coronavirus disease 2019 (COVID-19) pandemic and a major petrochemical production capacity overhang could mean weak industry margins and low plant utilization rates for several years, according to the International Energy Agency (IEA; Paris), said Chemweek.

The wide-ranging annual benchmark analysis by the IEA in its world energy investment report also includes a forecast for the largest annual decline in energy investment on record in 2020, with the total to plunge by $400 billion compared to capital spending in 2019.

The economic crisis and expectation of a worldwide recession is widening the near-term gap between capacity additions and demand growth for midstream and downstream infrastructure, raising questions about the “safe havens” of investment in petrochemicals and liquefied natural gas (LNG), the IEA says. A surge in investment in recent years in the petrochemical, refining, and LNG sectors has left each “now facing a major overhang of capacity, putting intense pressure on margins and pushing back many investment plans and timelines,” it says. Natural declines in upstream fields offer a hedge against overinvestment, but there is “no such protection further down the value chain against demand coming in below expectations,” it adds.

Investment in new petrochemical capacity driven by higher margins, rising US shale production, and optimism about future demand had already started to run ahead of near-term growth in consumption, according to the IEA. Since 2014, some $120 billion has been invested in building new petchem capacity or expanding existing plants, with over 70% of this invested in China and the US, it says. The effects on demand of the COVID-19 crisis, however, “means that this problem of overcapacity now looms very large."

Despite clear opportunities remaining, given that longer-term demand expectations for plastics and gas are relatively robust, the IEA says there are also risks, “given that these sectors involve large, capital-intensive investments that require high levels of utilization over time. Unlike the production declines in the upstream, there is no natural protection against the risk of demand coming in below expectations."

Prices for chemical products in 2019 were already falling and 2020 has put further pressure on the economics of production facilities, triggering “a reassessment of the timelines for some of the planned projects that have not yet started construction,” it notes. In both petchems and LNG, uncertainty around the trajectory of demand and prices and the shape of an eventual recovery from the economic slowdown “are going to weigh heavily on investment decisions,” it adds.

Highlighting worldwide ethylene capacity additions that were already outpacing growth in demand in 2018-19, with more new capacity scheduled to start this year, the petchems investment boom “implies lower margins and utilization in the coming years despite relatively robust long-term demand prospects,” the IEA says. The annual increase in worldwide ethylene production capacity in 2019 was 60% higher than the level of demand growth, leading to a “significant drop in ethylene prices across the board” and a sharp decline in earnings of between 60-80% for many commodity chemical companies compared with 2018, it says.

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

Coronavirus: Calls to delay single-use plastic ban until 2022

MOSCOW (MRC) -- Coronavirus safety worries have led to calls for the Welsh Government to delay its ban on single-use plastics, said BBC.

Straws and cutlery are among items set to be outlawed or subject to restrictions from 2021. The Foodservice Packaging Association (FPA) has twice written to First Minister Mark Drakeford, asking to delay the ban and "learn the lessons" of the pandemic.

The Welsh Government says it remains committed to the ban. As lockdown is gradually lifted, the FPA claimed the demand for hygienic single-use products should override concerns like environmental impact.

The organisation is calling on the Welsh Government to push the ban on to 2022. It wants more consultation so expert food safety and hygiene evidence can be presented.

Executive director Martin Kersh said people had to learn from the pandemic. "The world has moved away from plastic plates, cutlery and straws in line with EU legislation," he said.

"During the pandemic the demand from the NHS, care homes and other institutions has been incredible. "I'm not a scientist so I can't say how the virus travels, but psychologically, those who make those purchase decisions believe this is the best solution, so that when you are feeding patients and residents you are not inadvertently spreading the virus."

He said society compromised on hygiene "at our peril." The Welsh Government said it remained "committed" to banning or restricting the sale of "a range" of single use plastics. A spokesman said: "We intend to issue a consultation on these proposals later this year. "The outcome of this consultation will inform future regulations to impose the bans".

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