Sasol new LDPE plant in Lake Charles to start beneficial operations by late September

MOSCOW (MRC) -- Sasol still has the last remaining unit to come online at its Lake Charles Chemicals Project (LCCP) - the low density polyethylene (LDPE) plant. This is on track for beneficial operations by the end of September 2020, said the producer on its site.

As MRC reported earlier, Sasol has taken its newly constructed LDPE plant in Lake Charles off-stream following an explosion and fire occurred on 13 January 2020. The unit was under trial operation at the time of the incident and has yet to reach on-spec cargoes.

The LDPE plant has an annual capacity of 420,000 tons/year.

Meanwhile, other units at the same site including the ethane cracker and the linear low density polyethylene (LLDPE) lines were not affected by the fire and continued operating at the normal rates.

We remind that Sasol's world-scale US ethane cracker with the capacity of 1.5 mln tonnes per year reached beneficial operation on 27 August 2019. Sasol’s new cracker, the heart of LCCP, is the third and most significant of the seven LCCP facilities to come online and will provide feedstock to our six new derivative units at the company's Lake Charles multi-asset site.

According to MRC's ScanPlast report, April estimated LDPE consumption in Russia decreased to 52,270 tonnes from 55,160 tonnes a month earlier. Kazanorgsintez reduced its capacity utilisation. Russia's estimated LDPE consumption rose to 191,000 tonnes in January-April 2020, up by 5% year on year. Russian producers raised their production significantly, and LDPE imports also 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

COVID-19: Solvay announces EUR1.5-billion impairment charge

MOSCOW (MRC) -- Solvay provided a trading update for the second quarter noting that the COVID-19 pandemic has had a major impact on demand from customer industries. The company has also announced a noncash impairment charge, said Chemweek.

Solvay says that businesses related to oil and gas, automotive, and aerospace were the most significantly impacted, with revenues down about 40%, whereas businesses related to construction and mining were down about 20%. Other key markets such as healthcare, agro/food, home and personal care, and electronics resisted well and helped to offset some of the challenged markets.

Solvay’s group sales were down 20% in aggregate across April and May versus 2019 levels. Similar demand trends are expected to continue during June. “Decisive actions on structural and temporary cost reduction programs and the focus on cash generation help to ease some of the effects and position the group for strong growth when markets rebound,” the company says.

An impairment review is currently under way and likely to lead to a noncash impairment charge estimated at around EUR1.5 billion (USD1.7 billion), with the final number depending on exchange and discount rates as at 30 June 2020. Approximately 80% of the impairment charge is associated with the goodwill resulting from the 2015 Cytec acquisition, and the balance is related to various tangible and intangible assets. The company says that the fundamental long-term attractiveness of the composite materials and technology solutions businesses remain unaffected, driven by demand for lightweighting, electrification, and resource efficiency. Solvay will provide additional details when it publishes its first-half results on 29 July 2020. “We continue to act decisively to mitigate the effects of COVID-19 and we remain unrelenting in our focus on free cash flow generation, cost reduction, and serving our customers," says Ilham Kadri, CEO.

On 15 May, Solvay announced a cost reduction program for its composite materials unit in light of reduced activity, particularly from the aerospace industry, due to COVID-19. The company is to cease operations at its plants in Manchester, UK, and Tulsa, Oklahoma. In addition, job reductions are being implemented across the business, and total headcount will likely decrease by approximately 570 positions, or around 20% of the unit’s workforce.

As MRC informed earlier, Solvay SA said it would close two plants making composites for Airbus SE and Boeing Co. in a sign the deepening aerospace crisis is hitting suppliers of even the latest aircraft materials. The Belgian chemical maker is adding to savings achieved in the past year following the grounding of Boeing’s 737 Max.

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.

Solvay is a science company whose technologies bring benefits to many aspects of daily life. With more than 24,100 employees in 64 countries, Solvay bonds people, ideas and elements to reinvent progress. The Group seeks to create sustainable shared value for all, notably through its Solvay One Planet plan crafted around three pillars: protecting the climate, preserving resources and fostering better life. The Group’s innovative solutions contribute to safer, cleaner, and more sustainable products found in homes, food and consumer goods, planes, cars, batteries, smart devices, health care applications, water and air purification systems. Founded in 1863, Solvay today ranks among the world’s top three companies for the vast majority of its activities and delivered net sales of €10.2 billion in 2019. Solvay is listed on Euronext Brussels (SOLB) and Paris and in the United States, where its shares (SOLVY) are traded through a Level I ADR program.

MRC

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

Sasol shares fall after warning of 20% drop in earnings

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

UK car industry calls for support package, warns on risks of no-deal Brexit

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.

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"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