Crude futures pare back overnight gains amid fresh COVID-19 outbreaks

MOSCOW (MRC) -- Crude oil futures were trading lower in mid-morning trade in Asia June 17, after settling higher overnight, as reports of fresh COVID-19 outbreaks continued to weigh on hopes of economic recovery, reported S&P Global.

At 10 am Singapore time (0200 GMT), ICE Brent August crude futures were down 64 cents/b (1.56%) from the June 16 settle at USD40.32/b, while the NYMEX July light sweet crude contract was 78 cents/b (2.03%) lower at USD37.60/b.

Both benchmarks had settled more than USD1.20/b higher June 16 after the release of bullish demand projections by the International Energy Agency and stronger-than-expected US retail sales data for May.

"However, the rally was capped by concerns about a second wave of COVID-19 cases. Beijing shut its schools and lifted its emergency response to level two to contain a new outbreak," ANZ analysts said in a June 17 note.

China reported 44 new coronavirus cases nationwide on June 16, comprising 11 imported and 33 local acquired cases, increasing concerns over a resurgence of infections, according to media reports.

"This comes amid rising cases in the US. The market was reminded of the damage the pandemic has caused the oil market, with the IEA calling it the biggest shock to world energy markets since WWII (World War Two)," ANZ analysts added.

While US markets remained buoyed by recent Federal Reserve announcements of efforts to stimulate the economy, the number of new COVID-19 cases continued to trend higher in the US, hitting record highs in six US states on June 16 and posing further concerns over oil demand recovery.

The outlook is expected to remain volatile as investors weighed new COVID-19 headlines versus the optimistic US market data seen earlier in the week.

US retail sales jumped by a record 17.7% month on month in May, even as May sales remained 6.1% lower from the same month a year earlier, latest data showed.

As MRC informed before, global oil consumption cut by up to a third in Q1 2020. 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 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

Yisheng starts up new PET plant in Hainan

MOSCOW (MRC) -- Hainan Yisheng Petrochemical Co Ltd has started up one of its polyethylene terephthalate (PET) new line since last weekend, reported CommoPlast with reference to market sources.

Based in Hainan, the new PET bottle plant consists of two lines with production capacity of 250,000 tons/year each.

Market players informed that the plant has started up one line last weekend and pending to achieve prime grade, meanwhile another line is expected to start-up in the near term, which resulting expectation that additional supply might pressured sentiment in domestic market.

As MRC wrote before, in early November 2019, Dalian Yisheng Co Ltd started up its new PET bottle plant. Based in Dalian, China, the new plant has a production capacity of 350,000 tons/year.

As per MRC's ScanPlast report, April total estimated PET consumption in Russia virtually did not change year on year, totalling 60,840 tonnes (in April 2019 - 60,980 tonnes). 235,160 tonnes of PET chips were processed in Russia in January-April 2020.

Yisheng Petrochemical is jointly owned by polyester giants Zhejiang Hengyi Group and Zhejiang RongSheng Group.
MRC

Kuraray to expand production of melt-blown nonwoven fabric

MOSCOW (MRC) -- Kuraray Co., Ltd. announces its decision to modify the production item lineup of its meltblown nonwoven fabric production facility, which is located on the premises of the Okayama Factory, a facility run by nonwoven fabric production and sales subsidiary Kuraray Kuraflex Co., Ltd. that is currently undergoing expansion, said the company.

This move will result in the production of face mask filters at said facility and is aimed at meeting surging demand for nonwoven fabrics for use as mask filters.

?The Kuraray Group’s meltblown nonwoven fabrics are currently being used as a filter material in various applications, including face masks, thanks to their fine structure consisting solely of extremely thin polymer fibers that are firmly intertwined without the use of binders.

?Currently, there is a lingering shortage of face mask filters due to a rapid increase in domestic demand amid the widespread implementation of novel coronavirus countermeasures. In particular, high-performance filters for use in surgical masks have been seriously depleted.

?Although the Kuraray Group has been marketing its meltblown nonwoven fabrics for a variety of applications, such as face masks, filtering materials for food and beverage production and air filters, the Group’s existing facilities for producing mask filters have been in constant full-capacity operation due to tight demand-supply status reflecting the recent spread of the novel coronavirus.

"Against this backdrop, the Group decided to modify the production item lineup of this meltblown nonwoven fabric production facility currently undergoing expansion to enable to produce face mask filters. This move is expected to empower the Group to produce enough sheets of meltblown nonwoven fabric for approximately 300 million face masks per year. In this way, the Kuraray Group will contribute to nationwide efforts aimed at preventing the spread of the novel coronavirus.

In line with Kuraray’s mission “For people and the planet—to achieve what no one else can,"the Kuraray Group will continue to deliver products backed by unique technologies, with the aim of contributing to the betterment of society.

As MRC informed earlier, Kuraray in October 2019 closed the production of vinyl acetate (VAM) in Okayama (Okayama, Japan) for scheduled repairs. This production with a capacity of 160 thousand tons of YOU per year was closed for about one month.

According to MRC's DataScope report, April EVA imports to Russia dropped by 5,85% year on year to 3,050 tonnes from 3,250 tonnes a year earlier, and overall imports of this grade of ethylene copolymer into the Russian Federation increased in January-April 2020 by 1,55% year on year to 12,540 tonnes (12,350 tonnes a year earlier).
MRC

Saudi Aramco changed payment terms after closing SABIC acquisition

MOSCOW (MRC) -- Saudi Aramco on June 17 said it completed the share acquisition of a 70% stake in petrochemicals company Saudi Basic Industries Corporation, or SABIC, from the Public Investment Fund, the sovereign wealth fund of Saudi Arabia, for a total purchase price of Riyal 259.125 billion (USD69.1 billion). However, the transaction terms have been changed to increase the timeline over which Aramco makes the payments by almost three years, reported S&P Global.

An upfront cash payment of 36% of the deal value has also been eliminated from the deal.

When the deal was first announced in March 2019, the full payment for the acquisition was to be made by the close of the first half of 2020. Then, in November 2019, Aramco said it would delay fully paying for the acquisition by four years - until September 2025 - under terms of a new deal agreed. At the time, Aramco said that 36% of the purchase price would be paid in cash up front, while 64% would be paid in the form of a seller loan. The seller loan is to be secured by four separate bonds, issued by the oil company to the PIF.

Now, the whole transaction will be funded via a seller loan, and there will be no up-front payment. Moreover, the series of payments are now scheduled to end in April 2028, as opposed to the previous September 2025 deadline.

Aramco could not be reached for comment on why the payment terms have changed.

Aramco, like all oil and gas companies, has been hit by the economic downturn caused by the COVID-19 pandemic and the resulting oil price crash.

The state-run oil giant, in its Q1 2020 quarterly earnings report, said its net income declined 25% on the year to USD16.7 billion in the quarter.

SABIC's value has dropped 29% since the original deal was brokered. On June 17, Sabic had a valuation of USD71.3 billion making Aramco's 70% stake now worth just USD49.9 billion, far below what Aramco will pay.

The acquisition of the SABIC stake is part of Aramco's strategy to build its downstream footprint by growing its integrated refining and petrochemicals capacity to add value across the hydrocarbon chain.

It specifically enhances Aramco's chemicals strategy by transforming Aramco into one of the major global petrochemicals players.

Combined, in 2019 Aramco and SABIC recorded petrochemicals production volume of nearly 90 million mt, including agri-nutrient and specialty products.

"It is a significant leap forward which accelerates Aramco's downstream strategy and transforms our company into one of the major global petrochemicals players," Aramco President and CEO Amin Nasser said in a statement June 17. "The strategic integration of our upstream production and downstream chemicals feedstock production with SABIC's chemicals platform is expected to create opportunities for selective integration synergies that support growth."

Following the deal announcement June 17, Saudi Aramco shares were trading at Riyal 32.70/share (USD8.72) on Tadawul. That compares to its IPO price in December of Riyals 32/share (USD8.53), which gave the company a valuation of USD1.7 trillion at the time.

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.

Saudi Basic Industries Corporation (Sabic) ranks among the world"s top petrochemical companies. The company is among the world"s market leaders in the production of polyethylene, polypropylene and other advanced thermoplastics, glycols, methanol and fertilizers.

Saudi Aramco, officially the Saudi Arabian Oil Company, is a Saudi Arabian national oil and natural gas company based in Dhahran, Saudi Arabia. Saudi Aramco"s value has been estimated at up to USD10 trillion in the Financial Times, making it the world"s most valuable company. Saudi Aramco has both the largest proven crude oil reserves, at more than 260 billion barrels, and largest daily oil production.
MRC

Emergency shutdown reported at Chinese Jiutai PE plant

MOSCOW (MRC) -- Inner Mongolia Jiutai Energy Co Ltd has unexpectedly shut its new polyethylene (PE) plant on 17 June, 2020, due to technical glitches, reported CommoPlast with reference to market sources.

Based in Inner Mongolia, China, its high density polyethylene (HDPE)/linear low density polyethylene (LLDPE) swing plant has a production capacity of 280,000 tons/year.

The restart schedule could not be ascertained. However, a source closed to the company informed that it shall be short maintenance.

The company already operates another PE plant at the same site with the production capacity of 300,000 mt/year.

As MRC informed before, Jiutai Energy started commercial production at its this coal-to-polyethylene plant in September 2015. The plant began to operate at normal rates from December 2015.

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.
MRC