Tight supply, steady petchems demand keeps northwest Europe naphtha firm in June

MOSCOW (MRC) -- The naphtha market in northwest Europe (NWE) maintained its upward thrust in June as reduced flows from Russia tightened availability amid buoyant petrochemical buying interest, which has offset weak demand from the gasoline blending sector, said Chemweek.

The average OPIS CIF NWE naphtha spot price in June rocketed up to USD341.70/metric ton in June, a gain of USD94/metric ton or 24.6% from May, while the Brent futures marker average of USD40.56/barrel (bbl) in June was up USD3.73/bbl or 9.2% from the previous month.

The naphtha crack flipped into positive territory in June for the first time in 18 months, reaching a high of USD1.10/bbl after starting the month at minus USD4.23/bbl, according to OPIS data. The June/July backwardation widened as the month progressed, ending at USD12.50/metric ton tipping from a contango structure in the first half of June of around minus 43 cents/metric ton.

Low refinery runs in Europe and fewer exports from Russia were attributed to tighter supply of naphtha, with reduced imports from the US seen as a further contributory factor. “The main bullish signal for naphtha which hasn’t really changed is supply,” says one source. "Supply, supply, supply."

Naphtha loadings in the European region, including northwest Europe, the Russian Baltic and Black Sea, other Baltic, Mediterranean, and North Africa, fell to 2.23 million metric tons in June from 3.12 million metric tons in May, according to data from IHS Markit’s Market Intelligence Network (MINT) vessel tracking service.

Analysis of Russian naphtha liftings from Baltic and Black Sea ports indicated that the drop was sharply more pronounced for the Black Sea. Naphtha exports from Russian Black Sea ports plunged 821,542 metric tons compared to the prior month to 355,000 metric tons in June, the equivalent of 10 long-range, 80,000-metric ton, cargoes. The reduction came namely as Tuapse, a key supply hub for arbitrage cargoes to Asia, shipped just 165,000 metric tons in June, a decline of 726,000 metric tons from May.

Russian Baltic naphtha exports decreased by 33,404 metric tons from May’s total to 768,100 metric tons in June. The Baltic terminal Ust Luga, which accounted for 59.9% of Russia’s total naphtha exports in May and is the main source of NWE naphtha imports, registered a 21,267-metric ton decline to 673,100 metric tons in June.

The naphtha market in Asia, despite the return of its traditional refiner sources in the Arabian Gulf and India over the month from turnarounds, continued to exert a strong pull on cargoes from Europe with arbitrage volumes to Asia little changed. Naphtha volumes in Europe loading for ports in Asia were tracked at 922,800 metric tons in June, compared with 969,000 metric tons for May.

Naphtha demand in Europe held firm in June with crucial support coming from petrochemicals as gasoline/blending demand was very weak to non-existent. Steam crackers have not reduced run rates as much as refineries owing to the need for plastic hygienic products amid the COVID-19 pandemic, according to IHS Markit analysts, and a strengthening ethylene and propylene market in Europe have both helped keep cracker margins sturdy.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 595,170 tonnes in the first five month of 2020, up by 10% year on year. Deliveries of all ethylene polymers, except for linear low density polyethylene (LLDPE), rose partially because of an increase in capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market was 457,930 tonnes in January-May 2020 (calculated by the formula production minus export plus import). Deliveris of exclusively PP random copolymer increased.
MRC

EU strategy places chemical industry at heart of future hydrogen economy

MOSCOW (MRC) -- The European Commission’s newly-unveiled strategy to scale up renewable hydrogen projects to help meet the EU’s 2050 net-zero emissions goal places the chemical industry at the center of Europe’s future hydrogen economy, according to Cefic director general Marco Mensink, said Chemweek.

“As one of the largest producers and consumers of hydrogen in Europe, it is a vital first step to see that these new strategies place our sector at the heart of Europe’s future hydrogen economy," Mensink says, following the publication today of the EU’s hydrogen and energy sector integration strategies. "Next to being an alternative fuel and energy carrier, hydrogen can become an important low-carbon building block for the chemical industry’s production processes; using hydrogen as a feedstock is a viable option for our industry to reduce CO2 emissions further,” he says. The chemical sector supports the envisaged energy sector integration and is ready to share its knowledge of hydrogen production and consumption to help the commission and member states to implement the strategies, he adds.

"We agree that building up a hydrogen economy in Europe requires a full supply chain approach. The success of a climate-neutral Europe by 2050 and that of renewable hydrogen will depend on the availability of reliable and affordable low-carbon electricity,” according to Mensink. Supporting investments into both hydrogen infrastructure and renewable electricity “should become an integral part of the recovery plan for Europe," he says.

Mensink last week urged the EU to get the Green Recovery package going as soon as possible to “make sure the trillions we are going to spend will benefit the EU industry, and we don’t outsource production of climate-neutral solutions to the outside world."

The European Commission’s roadmap aims to boost green hydrogen use for decarbonization, using mainly wind and solar power, including its deployment in industrial sectors such as chemicals and steel. It also recognizes the need for a phased, gradual approach with blue hydrogen to play a transitional role.

In an initial phase from 2020-2024, the commission says it will support the installation of at least six gigawatts of renewable hydrogen electrolyzers in the EU, producing up to one million metric tons of renewable hydrogen. A second phase envisages at least 40 gigawatts of renewable hydrogen electrolyzers would be installed, with up to 10 million metric tons of renewable hydrogen to be produced in the EU from 2025-2030. “From 2030 to 2050, renewable hydrogen technologies should reach maturity and be deployed at large scale across all hard-to-decarbonize sectors,” it says.

"The new hydrogen economy can be a growth engine to help overcome the economic damage caused by COVID-19," says Frans Timmerman, executive vice president for the European Commission’s Green Deal.

The European Commission also says energy efficiency will be a priority, along with a greater use of electricity and promoting clean fuels, including renewable hydrogen and sustainable biofuels and biogas.

The commission also announced the launch today of the European Clean Hydrogen Alliance, which will bring together national and regional governments, industry leaders, society, and the European Investment Bank to help scale up domestic production of green hydrogen. The alliance will “develop a pipeline of concrete projects to support the decarbonization efforts of European energy-intensive industries such as steel and chemicals,” says Thierry Breton, European commissioner for the internal market. An industry blueprint estimates hydrogen investments of up to €430 billion (USD485.5 billion) until 2030, according to the alliance.

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 595,170 tonnes in the first five month of 2020, up by 10% year on year. Deliveries of all ethylene polymers, except for linear low density polyethylene (LLDPE), rose partially because of an increase in capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market was 457,930 tonnes in January-May 2020 (calculated by the formula production minus export plus import). Deliveris of exclusively PP random copolymer increased.
MRC

Air Products, Thyssenkrupp to collaborate on green hydrogen projects

MOSCOW (MRC) -- Air Products says it has agreed to collaborate exclusively with Thyssenkrupp on the development of green hydrogen supplies for sustainable chemicals, transportation, and power generation projects, according to Chemweek.

Thyssenkrupp’s subsidiary Uhde Chlorine Engineers, a leader in large-scale electrolysis plant technologies, will supply specific engineering, equipment, and technical services for water electrolysis plants to be built, owned and operated by Air Products.

The strategic agreement “is an important element of our value chain in developing, building, owning, and operating world-scale projects and supplying green hydrogen for mobility, energy and industrial applications,” says Air Products COO Samir Serhan.

Large-scale electrolysis is a “key technology to connect renewable power to the different sectors of mobility and industry,” says Denis Krude, CEO at Thyssenkrupp Uhde Chlorine Engineers. “We are proud to cooperate with Air Products in making value chains for fuels, chemicals, and industry feedstocks sustainable.”

As MRC reported earlier, in December 2014, SIBUR-Khimprom (a subsidiary of SIBUR Holding) and Air Products entered into an agreement to build a new air separation unit in Perm and to supply the facility with locally produced gases. The unit came on-stream in 2016. After the commissioning Air Products will supply industrial gases for SIBUR-Khimprom over the next 20 years.

Besides, we remind that in September 2019, SIBUR, the largest petrochemical comples in Russia and Eastern Europe, and BASF, Geman petrochemical major, agreed to closely cooperate on sustainable development to share their best practices.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 595,170 tonnes in the first five month of 2020, up by 10% year on year. Deliveries of all ethylene polymers, except for linear low density polyethylene (LLDPE), rose partially because of an increase in capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market was 457,930 tonnes in January-May 2020 (calculated by the formula production minus export plus import). Deliveris of exclusively PP random copolymer increased.
MRC

Irving Oil to lay off 6% of global workforce, citing coronavirus

MOSCOW (MRC) -- Refiner Irving Oil will lay off 6% of its global workforce due to economic challenges presented by the coronavirus pandemic, reported Reuters with reference to the company's statement.

The layoffs will affect 250 workers across its operations in Canada, the United States, Ireland and the UK.

“The challenges that we face in our business and our industry are unlike any we have ever experienced,” Irving Oil president Ian Whitcomb and chief brand officer Sarah Irving said in a joint statement.

As MRC wrote before, Canada-based oil refinery operator Irving Oil said in late May, 2020, it had agreed to buy North Atlantic Refining Corp, the owner of the Come-by-Chance refinery in Newfoundland. Terms of the deal were not disclosed. The Come-by-Chance refinery, which has an output of 135,000 barrels per day, was the first to close in North America as refiners worldwide began to scale back to adjust to a sudden demand slump due to the coronavirus outbreak.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 595,170 tonnes in the first five month of 2020, up by 10% year on year. Deliveries of all ethylene polymers, except for linear low density polyethylene (LLDPE), rose partially because of an increase in capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market was 457,930 tonnes in January-May 2020 (calculated by the formula production minus export plus import). Deliveris of exclusively PP random copolymer increased.
MRC

Covestro issues preliminary earnings forecast, will beat consensus

MOSCOW (MRC) -- Covestro says its forecast preliminary EBITDA for the second quarter will be above market consensus at EUR124 million (USD141 million), with an expected preliminary net loss for the period of EUR60 million also beating consensus, said Chemweek.

Ahead of the scheduled release of its second-quarter and half-year results on 23 July, Covestro says in the course of preparing its half-year report that “preliminary key financial data deviate from capital market expectations.” The market expectations are based on the latest consensus estimates of financial analysts provided by Vara Research, it says.

Covestro’s estimate of a preliminary net loss of EUR60 million for the quarter compares to a steeper estimated consensus loss of EUR107 million, while its forecast EBITDA of EUR124 million compares to a lower consensus estimate of €80 million, according to the company. Preliminary sales are forecast by Covestro to come in lower than the consensus estimate of EUR2.22 billion at EUR2.16 billion, it says.

Preliminary sales volumes were down 22% in the quarter, with consensus putting the decline at 22.5%. In April Covestro reported a fall of almost 90% year on year in its first-quarter net income to EUR20 million on sales that declined more than 12% to EUR2.8 billion, with all business segments hit hard by the COVID-19 pandemic and lower selling prices. Last month it also placed a Eurobond with a total volume of EUR1.00 billion in the capital markets, the proceeds of which would be used to strengthen the company’s liquidity in the current macroeconomic environment. In May it announced it was reducing working hours in Germany and cutting salaries of all employees for six months starting 1 June in response to the pandemic and the decline in consumer demand.

As MRC informed earlier, Covestro has closed the sale of its European polycarbonates (PC) sheets business to the Munich-based Serafin Group effective January 2, 2020. This includes key management and sales functions throughout Europe as well as production sites in Belgium and Italy.

According to MRC's ScanPlast report, Russiaэы total estimated consumption of PC granules for the four months of 2020 (excluding imports and exports to Belarus) amounted to 30.5 thousand tons, which is 20% higher than last year (25.3 thousand tons).

Covestro (formerly Bayer MaterialScience) is an independent subgroup within Bayer. It was created as part of the restructuring of Bayer AG from the former business group Bayer Polymers, with certain of its activities being spun off to Lanxess AG. Covestro manufactures and develops materials such as coatings, adhesives and sealants, polycarbonates (CDs, DVDs), polyurethanes (automotive seating, insulation for refrigerating appliances) etc. With 2018 sales of EUR 14.6 billion, Covestro has 30 production sites worldwide and employs approximately 16,800 people (calculated as full-time equivalents) at the end of 2018.
MRC