COVID-19 - News digest as of 01.07.2020

1. Crude settles lower as coronavirus spread hampers recovery

MOSCOW (MRC) -- Crude futures settled slightly lower June 23 as expectations of higher demand stemming from improved economic activity were offset by increases in coronavirus cases, as per S&P Global. NYMEX August crude settled 36 cents lower at USD40.37/b, while ICE August Brent settled 45 cents lower at USD42.63/b. In refined products, NYMEX July RBOB settled 81 points higher at USD1.2994/gal, and July ULSD settled at $1.203/gal, down 1.56 cents.

MRC

MOSCOW (MRC) -- Italian oil major Eni is planning to create a division to focus on new energy solutions which could be headed by its CFO, as it steps up preparations for a decarbonised future, reported Reuters with reference to two sources.

Eni’s restructuring plans come as the oil and gas sector faces a collapse in global oil consumption following the coronavirus epidemic and long-term uncertainty over energy demand as governments battle climate change.

The state-controlled group is looking to create the new green division to look after renewables and other clean energy business while keeping oil and gas activity in a separate unit, the sources familiar with the matter said.

Long-time CFO Massimo Mondazzi could be moved across to head up the new division, or part of it, one of the sources said, adding that no final decision had yet been taken. “Mondazzi is going to be head of downstream, chemicals and renewables,” the second source said.

Eni declined to comment.

Eni, headed by veteran oilman Claudio Descalzi, pledged earlier this year to slash its greenhouse gas emissions by 80% in one of the most ambitious clean-up drives in an industry under pressure from investors to go green.

To reach the goal it is looking to have less oil and more gas in its portfolio, build its renewable capacity, convert refineries to bio-fuels and step up forestry and carbon capture projects.

“The restructuring underway is a move that will focus minds and give the market an idea of the actual size of Eni’s green business,” one of the sources said.

The sources said the new division was likely to include the group’s chemical business Versalis, its retail activities and probably refining, though final details had yet to be ironed out.

As MRC informed before, none of the big oil companies currently meet U.N. targets to limit global warming despite the most ambitious targets set by Royal Dutch Shell and Eni .

We also remind that the ongoing transition to low-carbon energy sources may accelerate as economies recover from the impact of the coronavirus crisis, said the head of oil and gas company Royal Dutch Shell in the May statement.

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) -- Dongguan Grand Resource Science and Technology Co Ltd (JuZhengYuan) is planning to shut its No. 2 polypropylene (PP) plant for scheduled maintenance on 10 July, 2020, according to CommoPlast with reference to market sources.

Based in Dongguan, China, the company has a propane dehydrogenation (PDH) plant with production capacity of 600,000 tons/year and two PP plants with a combined production capacity of 600,000 tons/year.

As MRC wrote before, Dongguan Grand Resource Science and Technology Co Ltd restarted its No. 2 PP plant on January 16, 2020, following a turnaround. The plant was shut for maintenance on January 6, 2019.

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.

Dongguan Grand Resource Science and Technology Co Ltd is owned by Juzhengyuan Energy (Shenzhen, Guangdong, China). On 26 October 2019, Dongguan Grand Resource’s (Dongguan, Guangdong, China) integrated complex for polypropylene production in Dongguan officially started up.
MRC

MOSCOW (MRC) -- Hengli Petrochemical Co Ltd managed to produce prime grade purified terephthalic acid (PTA) cargoes at its new No. 5 PTA line in China on 30 June, reported CommoPlast with reference to market sources.

This line was successfully launched on 28 June, 2020.

Based in Dalian, China, the company has 5 PTA plants with combined production capacity of 11.6 million tons/year, which making Hengli Group to be the world's largest PTA producer, as each PTA plant has production capacity of 2.5 million tons/year.

A source closed to the company informed that the team has working hard to ensure the plant startup progress, whereby they spent only around 14 months from ground breaking to plant startup.

As MRC reported earlier, Hengli Petrochemical (Dalian) Co. reached full rate at its No. 4 PTA line in Dalian City in mid-March, 2020. The 2.5-million-t/y PTA line, which came online in January 2020, utilizes Invista's P8 PTA technology. The line also produces benzoic acid, using Invista's RP2PR technology.

PTA is used to produce polyethylene terephthalate (PET), which is used in the manufacturing of plastic bottles, films, packaging containers, in the textile and food industries.

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.

Hengli Petrochemical Co., Ltd. manufactures chemical fibers. The Company researches, produces, and sells polyester filament and chips for consumer and industry products. Hengli Petrochemical markets it products worldwide.
MRC

MOSCOW (Market Report) -- Demand for low density polyethylene (LDPE) increased significantly in the Russian market in June partially because of seasonal factors. And already in the second half of the month, some polyethylene (PE) grades became scarce and rose in price substatially, according to ICIS-MRC Price report.

Quarantine restrictions due to the coronavirus pandemic in April - May led to a major reduction in demand for LDPE. But already in June, the situation changed dramatically, demand for PE began to recover gradually, whereas supply of some grades was dynamically reduced due to upcoming shutdowns for maintenance at several plants simultaneously. As a result, 108 grade PE had become scarce by end-June, and some sellers' prices rose by Rb13,000/tonne.

PE, namely 108 grade PE, was in high demand at its lower price range. Demand was affected by converters' desire to build up additional LDPE inventories before shutdowns for turnarounds at several plants. Demand was also pressured by the end of the quarter and the need to "spend" VAT.

Angarsk Polymers Plant shut its production capacities for a 30-day turnaround on 22 June. A similar shutdown for a scheduled maintenance is expected at Gazprom neftekhim Salavat's LDPE production capacities from 1 July. And in the second half of July, Tomskneftekhim will take off-stream its production for a two-week turnaround.

Amid stronger demand and shutdowns for maintenance at several plants, supply of 108 grade LDPE began to decrease dynamically already in the second decade of June, while some sellers had sold out all their quantities by the middle of the month. And as supply of PE subsided, prices went up.

Tight supply and stronger demand led to price records last week. Deals for July shipments of Kazanorgsintez's 108 grade LDPE exceeded Rb72,000/tonne FCA Kzan, including VAT, in the electronic trades.

The completely opposite situation was in the 158 grade and 153 grade LDPE markets in June. There was no shortage of PE in the market, despite restrictions on shipments from Kazanorgsintez and the upcoming shutdowns at the plants in Salavat and Tomsk. PE prices of some sellers, including the Belarusian producer rose, but the price increase was not as significant as in the 108 grade LDPE segment.
MRC