COVID-19 - News digest as of 10.07.2020

1. 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.



MRC

Crude oil futures slip as COVID-19 cases rise

MOSCOW (MRC) -- Crude oil futures were trading lower mid-morning July 7 in Asia as the rising number of new infections in the US continued to dampen market sentiment, overturning overnight gains. However, the decline was limited by Saudi Aramco's announcement of a hike to its official selling prices for August crude cargoes to Asia, reported S&P Global.

At 11:13 am Singapore time (0313 GMT), ICE Brent September crude futures were down 20 cents/b (0.46%) from the July 6 settle at $42.90/b, while the NYMEX August light sweet crude contract was down by 17 cents/b (0.42%) at USD40.46/b.

"Crude is trading up modestly after the US holiday weekend benefiting from a robust Asian opening in equity markets and seemingly shrugging off the possible demand implications of the spike in COVID-19 cases across the US and other countries such as Australia," Stephen Innes, chief global markets analyst at AxiCorp, said in a note July 7.

Saudi Aramco's announcement of a hike in official selling price differentials for its August crude oil exports to Asia by USD1/b for all grades on July 6 had also helped to lift market sentiment. In a survey by S&P Global Platts last week, market participants had expect the producer to raise its August OSP differential of its Arab Light crude by between 80 cents/b and USD3/b.

Meanwhile, the climb in the number of coronavirus cases in the US continued to weigh on market sentiment. California, the most populous US state, saw hospitalizations jump 50% over the past two weeks, just as the number of new infections soared and registered a record increase of more than 11, 000 cases on July 6, according to media reports.

"The lower fatality rates suggest that the re-imposing of more extensive statewide or countrywide lockdown measures will be unlikely, so the economic cost from the second wave will be far less than the beat down in March," Innes added.

Meanwhile, the US' domestic gasoline consumption was also down by more than 20% year on year during the long Independence Day weekend, when increased travel is usually the norm. This could signal that demand for gasoline might be lackluster during the summer months ahead and expectations of a quick recovery unlikely.

"The refining profit margin for gasoline and diesel remains unattractive, and elevated inventories and weaker product demand are not leaving any hope for a material rebound," the ANZ analysts said in a note July 7.

Market participants will look for fresh cues from the inventory report by the American Petroleum Institute and the US Energy Information Administration, due later July 7 and July 8, respectively.

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

Tubi commissioned HDPE pipe plants in Bartow, Florida

MOSCOW (MRC) -- Tubi USA, Inc. (the "Company" or "Tubi") is pleased to announce the first commercial production run at the Company’s newly commissioned plants in Bartow, Florida. Production at the site in Florida is currently classified as essential service under COVID-19 restrictions, said the company.

Tubi has established a new mobile manufacturing site in Bartow, Florida with two plants that are now both fully commissioned and operational. The two new plants have significant technological upgrades with production lines capable of the highest production rates and the most advanced quality control monitoring in the world. Customers in Florida are already taking advantage of Tubi’s unique ability to produce 500-foot pipe lengths at the jobsite. Previously, the Florida HDPE pressure pipe markets were geographically isolated from HDPE pipe manufacturing plants. Having direct access to the new Tubi plants in central Florida reduces freight and installation costs, improves safety, reduces carbon emissions, and creates local jobs.

Tubi currently operates a mobile extrusion plant in Odessa, TX with plans to move a fourth new mobile extrusion plant to Tucson, AZ in September.

Tubi’s Chief Executive Officer, Marcello Russo, said: "The health and welfare of our employees, customers and local communities is our highest priority at this difficult time during the COVID-19 pandemic. We have adapted to work within the restrictions applied to our movement and activities as required by authorities. "Establishing a base site in Bartow, Florida, consistent with the strategy announced in March, is creating new opportunities for innovation and differentiation."

According to MRC' ScanPlast, Russia's April estimated consumption of HDPE fell to 69,130 tonnes compared to 78,220 tonnes a month earlier. ZapSibNeftekhim significantly increased export sales to China. In the first four months of the year, the total supply of HDPE to the Russian market amounted to 377,450 tonnes, which corresponds to the figure a year earlier. Production volumes have grown significantly, and exports have also grown almost five times.

Tubi Pty Ltd manufactures plastic pipes. The Company offers mobile modular extrusion, bore reeling, stringing, and corrugated pipes. Tubi serves customers worldwide. Tubi manufactures and provides solutions for HDPE Pipe. Tubi provides seamless solutions in HDPE pipe manufacturing, logistics & pipe stringing.
MRC

July prices of European PVC grew more than by EUR50/tonne for CIS markets

MOSCOW (MRC) -- Negotiations over prices of European polyvinyl chloride (PVC) for July shipments to the CIS countries started last week. The rise in the cost of ethylene in Europe has been going on for the second month in a row, and, as a result, European producers increased export prices for PVC again , according to the ICIS-MRC Price Report.

The July contract price of ethylene was agreed up by EUR84/tonne from the previous month, which theoretically allows to talk about an increase of EUR42/tonne in net cost of PVC. However, many European producers have increased PVC export prices due to a stronger demand from the domestic and export markets.

A surge of EUR50-65/tonne in export PVC prices for July shipments to the CIS markets has been discussed.
Demand for PVC improved further in July from consumers in the CIS countries compared with June due to the seasonal factor and deferred demand from April - May.

Russian key PVC producers will shut their facilities for turnarounds in July, which affects the balance of local PVC market. A similar situation was in the European market.

Problems at some plants, scheduled shutdowns, and good demand, including from a number of export markets, significantly limited the supply opportunities for a number of European producers. Some producers intend to carry out their shipments to the markets of the CIS countries only in the second half of July.

As a result, PVC export prices rose more significantly than ethylene price increases. Overall, deals for July shipments of suspension polyvinyl chloride (SPVC) to the CIS markets were negotiated in the range of EUR660-720/tonne FCA, whereas last month's deals were done in the range of €595-670/tonne FCA. Some producers announced their prices at EUR730/tonne, FCA, and above, but consumers are not ready to accept such high levels.
MRC

EU to boost green hydrogen use for decarbonization, focus on energy efficiency

MOSCOW (MRC) -- The European Commission on Wednesday unveiled a strategy to scale up renewable hydrogen projects across polluting sectors from chemicals to steel and push for clean fuels and energy efficiency to meet the EU’s net-zero emissions goal by 2050, reported Reuters.

European industry and refineries already use around 8 million tonnes of hydrogen each year, but most of this is “grey” hydrogen, a version made from natural gas in a process that produces planet-warming emissions.

The EU’s priority is to develop “green” hydrogen and largely deploy it for sectors hard to decarbonise or where electrification is difficult or impossible from 2030 to 2050. But it recognized the need for a phased, gradual approach where a halfway house of “blue hydrogen” will play a role.

From 2020 to 2024, hydrogen electrolysers installations of at least 6 gigawatts of renewable would be set up in the EU, with the production of up to one million tonnes of renewable hydrogen.

In the second phase, at least 40 gigawatts of renewable hydrogen electrolysers would be installed and up to ten million tonnes of renewable hydrogen would be produced in the EU, from 2025 to 2030.

Cumulative investments in renewable hydrogen in Europe could reach between 180 billion and 470 billion euros by 2050, and between 3 billion and 18 billion euros for low-carbon fossil-based hydrogen, the bloc’s executive said.

“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,” said Marco Mensik, director general of of the chemical industry association Cefic.

The EU also said energy efficiency will be a priority, along with a greater use of electricity where possible and promoting clean fuels, including renewable hydrogen and sustainable biofuels and biogas. New classification and certification system for renewable and low-carbon fuels will be introduced.

The strategy did not contain any legislative proposals which the Commission said would come next year.

As MRC informed earlier, 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.

Besides, Shell has deepened its carbon emissions targets promising to become a net-zero emissions energy business by 2050 or sooner as pressure mounts on oil majors to help mitigate climate change. Under the move, Shell said it will reduce the net carbon footprint of the energy products it sells by around 65% by 2050, up from a previous goal of around 50%, and by around 30% by 2035, increased from around 20%.

We remind that 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.

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