China June crude stocks to soar to new high as cheap inflow outpaces throughput

MOSCOW (MRC) -- China's crude oil stockpiles will likely extend the uptrend to hit a new record high in June as refinery feedstock imports outpace the rise in throughput levels, while storage availability encourages refiners to actively procure barrels to take advantage of low crude prices, reported S&P Global.

The slide in crude prices and recovery in economic activity late March had encouraged Chinese buyers to pile their shopping carts with all kinds of cheap crude, which were scheduled for delivery from late May through June.

As a result, trade flow and inventory tracker Kpler forecast on June 22 that China's seaborne crude arrivals will hit 14.16 million b/d in June, a new record high following 10.21 million b/d in May even though some of the June arrivals are more likely to be discharged in July due to port congestion.

The country last month imported 11.34 million b/d of crude -- a historical high, General Administration of Customs data showed. China imports crude through both shipping and pipelines.

Combined with stable domestic crude output at around 3.9 million b/d over the first-half of 2020, China's crude supplies are set to be over 14.3 million b/d in June, S&P Global Platts estimates.

Crude throughput in June is also set to see a month-on-month increase with state-owned refiners Sinopec, PetroChina, CNOOC and Sinochem ramping up run rates to average 80% of capacity from 76% in May, as profit margins strengthen, a Platts survey showed.

China's crude throughput in June is more likely to be around 13.8 million-14 million b/d as the state-owned refiners' average run rate is slightly lower than 83% recorded in December, when the country's crude throughput was at a record high of 13.84 million b/d, Platts estimates. The state-owned refiners account for about 65% of China's total capacity.

Meanwhile, Sinopec's greenfield 200,000 b/d Zhongke Petrochemical will not contribute notable throughput until July, although it officially came on stream on June 16, industry sources said.

Kpler's data showed that China's crude inventory hit 842 million barrels in the week starting June 15 - a record high since January 2017, when Kpler began to provide the data.

The rise in inventories started from the week of May 11, when the stock level reached a bottom of 797 million barrels after it hit a peak of 808 million barrels in the week of April 13.

As cheap crudes intensively arrive during June, the barrier to rising stocks emerged from port capacity rather than storage capacity, port sources and analysts said.

In Shandong's Qingdao port area - China's busiest crude handling port by turnover - there were almost 40 crude-laden vessels waiting for discharge as of June 22, a source with the port said, adding that normally there would be a queue with only around 10 crude carriers.

"It is impossible to discharge all these cargoes until July," the port source said.

As a result of the bottleneck, about 18 cargoes totaling 23.9 million barrels of crude have been floating around the Qingdao port area for more than a week, Kpler data showed on June 22.

On the contrary, China still has around 330 million barrels of crude storage capacity available, including all capacity from underground SPR storage caverns to tanks in the refining system, Kpler said.

The largest individual locations with capacity yet to be filled are two underground SPR caverns - 31.6 million barrels in Zhanjiang and 31 million barrels in Huizhou, Kpler said in the report.

"Huizhou is operational but has not yet received any cargoes, as the situation surrounding Zhanjiang (data) is uncertain," Kpler added.

In addition, China is set to expand its commercial crude storage capacity by at least 15.11 million cu m, or 95.04 million barrels, by the end of 2020, Platts reported on June 10. Among these new tanks, 74.85 million barrels of capacity is expected to come on stream in the second-half of the year.

As MRC wrote before, the Sinopec venture, situated in coastal city of Zhanjiang, comprises a 200,000 barrel per day (bpd) crude oil refinery and an 800,000 tonne-per-year ethylene facility, built at a cost of 44 billion yuan (USD6.2 billion). The cracker is expected to start production in August, 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 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

MOSCOW (MRC) -- Sasol expects full year earnings to dip by as much as 20% amid a volatile oil price and the impact of Covid-19, which hit the petrochemicals giant in recent months, reported fin24.

Sasol's shares dived as much as 6% in morning trade following the announcement.

The news of anticipated lower earnings top a turbulent year for the company, in which it has battled several operational crises including the effects of the pandemic on markets where it operates. As part of its response to the crisis, Sasol has drawn up a cash conservation strategy which included a disposal of assets and a potential rights issue of up to USD2 billion.

"Sasol shareholders are advised that implementation of the response strategy is underway, the outcome of which may have a material effect on the price of the company’s securities," the company said in a statement.

The firm's debt burden of R121 billion, which was compounded by the financing of the Lake Charles chemicals project in the US, has also been a source of concern for investors, and there are plans to offload a stake in the project to a partner.

According to Barry Dumas, trading specialist at Purple Group, the slide in earning shows the extent of the Covid-19 pandemic and the impact of the "dramatic downturn in the oil market" on the company.

He added that Sasol shareholders might "come under more pressure if its strategy to mitigate risk, which includes a cash conservation programme, an accelerated and expanded asset disposal and partnering programme fails".

It is not clear which assets might be disposed of, but one investment analyst suggested that non-core assets may be considered. The Johannesburg-headquartered firm had previously put its available liquidity at approximately USD2.5 billion.

Dumas said there was a possibility of a rights issue of up to USD2 billion, which he said remained subject to the progress of other initiatives that might give the company a much-needed boost. Sasol is expected to release annual financial statements on August 17.

As MRC informed earlier, cash-strapped Sasol (Johannesburg) has recently received offers from companies including CP Chem, LyondellBasell, and Ineos for a large stake in Sasol’s Lake Charles, Louisiana, petrochemical complex. The companies are among those moving into a second round of bidding for a stake in the nearly completed complex, which could raise more than 29 billion South African rand (USD1.68 billion) for Sasol.

We remind that in mid December 2019, Sasol announced that the LCCP Ethane Cracker was increasing production rates following the successful replacement of the acetylene reactor catalyst. Sasol’s Ethane Cracker with a nameplate capacity of 1.54 million tons per year achieved beneficial operation in August 2019 but has run approximately 50-60% of nameplate capacity due to under performance of the plant’s acetylene removal system. The company stated that the issue had been resolved then.

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.

Sasol is an international integrated chemicals and energy company that leverages technologies and the expertise of our 31 270 people working in 32 countries. The company develops and commercialises technologies, and builds and operates world-scale facilities to produce a range of high-value product stream, including liquid fuels, petrochemicals and low-carbon electricity.
MRC

MOSCOW (MRC) -- The UK auto industry has called for a dedicated restart package to help protect jobs, citing a survey showing that up to one in six jobs in the sector are at risk of redundancy, said S&P Global.

Stay up to date with the latest commodity content. Sign up for our free daily Commodities Bulletin.
"More than 6,000 UK automotive job cuts have been announced in June, a result of global lockdowns, closed markets and shuttered plants," the Society of Motor Manufacturer and Traders said June 23.

SMMT carried out a member survey this month which garnered 290 responses delivering 239 individual company responses, representing a combined GBP77 billion ($96 billion) turnover and 148,917 permanent employees.

While showrooms in England and Wales are now reopening and production lines restarting, reduced demand and social distancing are slowing productivity, the group said. "With a third of automotive workers still furloughed, the end of the government's job retention lifeline in November highlights the critical need for a dedicated restart support package to safeguard these jobs," SMMT said.

SMMT is calling on the government to launch a support package for the automotive sector, citing potential measures such as unfettered access to emergency funding, permanent short-time working, business rate holidays, VAT cuts and policies that boost consumer confidence.

"The prolonged shutdown has squeezed liquidity and the pressures are becoming more acute as expenditure resumes before invoices are paid," said Mike Hawes, SMMT's chief executive, in a statement. "Government's intervention has been unprecedented. But the job isn't done yet. Just as we have seen in other countries, we need a package of support to restart; to build demand, volumes and growth," he added.

The threat to jobs is exacerbated by the prospect of a "no-deal" Brexit, SMMT warned. The UK government confirmed earlier this month it would not seek an extension to the Brexit transition period, which ends in December opening up the prospect of the UK leaving the EU without a trade deal in place if negotiations in the interim are unsuccessful.

The impact of the coronavirus pandemic on manufacturing is expected to cut annual UK car and light commercial vehicle production volumes by a third to 920,000 units this year, SMMT said. "With an ambitious, tariff-free FTA [free trade agreement] in place, full recovery is expected to take up to five years, with output reaching pre-crisis levels of 1.35 million units by 2025," the group said.

But, it added, "a 'no-deal' scenario would severely damage these prospects and could see volumes falling below 850,000 by 2025 -- the lowest level since 1953." This would mean a GBP40 billion cut in revenues, on top of the GBP33.5 billion cost of COVID-19 production losses over the period, SMMT said.

"COVID has consumed every inch of capability and capacity and the industry has not the resource, the time nor the clarity to prepare for a further shock of a hard Brexit," Hawes said. "That's why we do need to 'turbo charge' the negotiations to secure a comprehensive free trade agreement with the EU that maintains tariff- and quota-free trade," he added.

As MRC imformed earlier, Russia's output of chemical products rose by 4.4% year on year in May 2020 . Thus, production of basic chemicals increased year on year by 5.4% in the first five months of 2020. According to the Federal State Statistics Service of the Russian Federation, polymers in primary form accounted for the greatest increase in the output in January-May.

Production of benzene was 110,000 tonnes in May 2020, which equalled the figure a month earlier. Overall output of this product reached 615,000 tonnes over the stated period, up by 1.7% year on year.

MRC

MOSCOW (MRC) -- Saudi Aramco’s acquisition of petrochemical maker SABIC will accelerate the company’s downstream strategy and transform it into a global petrochemical player, reported Reuters with reference to an official of the state oil giant's statement to al-Arabiya TV.

"We expect long-term demand for petrochemicals to grow, with the sector expected to record the fastest growth in oil demand to 2040," said Abdulaziz al-Gudaimi, a senior vice president at Aramco.

As MRC informed earlier, 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. An upfront cash payment of 36% of the deal value has also been eliminated from the deal.

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

MOSCOW (MRC) -- Celanese Corporation, a global chemical and specialty materials company, announced that its subsidiary, Celanese (Nanjing) Chemical Co. Ltd., has recently extended its long-term contract with Nanjing Chengzhi Clean Energy Co., Ltd for the supply of carbon monoxide to its chemical facility in the Nanjing Chemical Industrial Park, Nanjing City, in eastern China (Jiangsu Province), said the company.

Fiinancial details of the contract were not disclosed. Carbon monoxide is a key feedstock in the production of acetic acid. The extended contract will provide Celanese’s Nanjing facility with an ongoing and reliable supply of carbon monoxide for its 1,200 kiloton acetic acid plant.

"Chengzhi has been a valued partner of Celanese for many years, and this extension will continue to provide Celanese with a flexible and reliable supply of carbon monoxide supporting the acetyl chain in the region,” said John Fotheringham, Celanese Senior Vice President, Acetyls. “I am delighted that our close cooperation with Chengzhi has enabled Celanese to lower its manufacturing cost in China while enhancing our operational flexibility in support of our long-term growth strategy."

With manufacturing and distribution in all regions, Celanese is a leading producer of acetic acid, which is a basic chemical used in paints and coatings, adhesives, plastic bottles, food packaging and construction materials.

As MRC reported earlier, the company last raised its VAM prices for China on 22 May, 2020, by RMB350/mt.

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).

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