Pandemic accelerates streamlining of new Dow

MOSCOW (MRC) -- Dow's restructuring plans were prompted by the difficult market conditions created by the COVID-19 pandemic, but they align with the company's long-term focus on streamlining operations and maximizing efficiency, reported Chemweek with reference to comments by executives during the company's earnings call on 23 July.

Dow intends to shed uncompetitive assets, lay off about 2,000 employees, and hold off on new capital projects.

"I don't expect us moving CapEx up until we get back to pre-COVID[-19]-type volume levels and margin levels," CEO Jim Fitterling said during the company's second-quarter earnings call. "And so that would mean probably a couple of years before you see us ramp back up into that kind of space."

Dow announced the restructuring and other cost-cutting measures along with its quarterly earnings, citing the prospect of a gradual and uneven recovery. "(We) will upsize our 2020 operating expense reduction target from USD350 million to USD500 million through additional structural cost interventions," Fitterling said in the earnings release. "We will also initiate a restructuring program during the quarter, targeting more than USD300 million in annualized EBITDA benefit by the end of 2021. This program includes a 6% reduction in Dow’s global workforce as well as actions to exit uncompetitive assets.”

The workforce reduction will cost about 2,000 jobs, president and CFO Howard Ungerleider told CW. The layoffs will be spread fairly evenly across businesses and geographies, he said, but they will be tilted toward assets and sites serving markets most challenged by the COVID-19 shutdowns and the recovery outlook.

"Automotive and construction have been hit pretty hard," Fitterling said during the call. "We're seeing people go back to construction sites, but on existing projects, and we're watching closely to see how new construction projects get permitted. And a fair amount of product that we sell goes into products that help support the construction market. On the consumer side, those demands and volumes look much better."

The asset shutdowns will be consistent with the direction Dow has taken since spinning out of DowDuPont in April 2019.

"[W]e had done some work here to take a look at the footprint of the company and where we wanted to be in a decade," said Fitterling. "And with this pandemic, I think it challenged us to take a look at which of these assets are struggling right now and may, for the long term, struggle to be competitive in any scenario, and that's what we're focusing in on. So it isn't a wholesale business unit - it's one-off assets here and there that are at the wrong end of the cost curve."

Ungerleider estimated that the shutdowns would result in a total charge in the range of USD700 million to USD1.3 billion, about USD300 million related to severance and the remainder related to asset actions or contract termination fees, most of it paid in 2021-22.

The sale of Dow's North American rail assets to Watco, announced on 6 July, and plans to divest other non-producing assets are unrelated to the COVID-19 pandemic, Ungerleider told CW. "As we thought about the new Dow and as we spun out of DowDuPont, we really felt strongly about having the best-owner mindset in everything we do, whether it's benchmarking our cost-structure or looking at all of our businesses and asking ourselves, are we the right owner? …We've got a chunk of assets that are not product-producing that have built up over time."

Watco paid USD310 million for the assets. "It's a 14-times multiple on EBITDA, so it really does release capital, and Watco is definitely the better owner," said Ungerleider. "We can take that money and reinvest it in product-producing assets or training for our people or new innovations for our customers. And so there will be more to come in that space."

As MRC wrote before, US-based materials science specialist Dow and Malaysia-based plastic stretch cling film producer Thong Guan has introduced a new range of bio-based polyethylene (bio-PE) cling film for Asia Pacific region. According to Dow, this marks a milestone in the region’s commercialisation of a plastics offering made from renewable feedstock, enabling industry providers to produce high-performance plastics while reducing carbon footprint.

According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports.

The Dow Chemical Company is an American multinational chemical corporation headquartered in Midland, Michigan, United States. Dow is a large producer of plastics, including polystyrene (PS), polyurethane, polyethylene, polypropylene, and synthetic rubber.
MRC

MOSCOW (MRC) -- Sumitomo Bakelite Co., Ltd. announced its intention to open a new manufacturing line to produce epoxy encapsulation composite materials for automotive applications at its Belgian production subsidiary, Vyncolit NV, said the company.

The investment will provide local manufacturing capacity for specialist encapsulation materials in the automotive and new mobility fields in Europe, with the company aiming to reach sales in the encapsulation compound market of ?12 billion (approximately USD111.6 million) by its 2025 fiscal year.

Due to the recent rapid adoption of electric (EV) and hybrid (HV) vehicles, coupled with increasingly complex IT systems in new mobility solutions, Sumitomo Bakelite is expanding its production capacity to meet the increasing demand for epoxy encapsulation materials in automotive applications. According to the company, local production capacity and prototyping facilities will enhance the automotive materials offering and the development of bespoke customer solutions. The new European production line will come online for industrial supply in early 2022, with a production capacity of several thousand tons per year.

"I am delighted to confirm that we will add dedicated epoxy encapsulation material production at our Ghent facility," said general manager and director of Vyncolit NV. “This new capacity, positioned close to our leading European customers, broadens our material portfolio and will allow us to tailor encapsulation solutions specifically for each customer."

As MRC informed earlier, Russia's output of chemical products rose in June 2020 by 2.6% year on year. However, production of basic chemicals increased year on year by 4.9% in the first six 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-June. Production of benzene was 106,000 tonnes in June 2020, compared to 110,000 tonnes a month earlier. Overall output of this product reached 721,000 tonnes over the stated period, up by 3.9% year on year.

Sumitomo Bakelite’s current epoxy portfolio covers a wide range of applications used in EVs including high-speed permanent magnet rotors, stator insulation and coil impregnation, which help weigh ratio and performance. The producer has been a key supplier of semiconductor encapsulation materials, used in the production of computers, smart-phones and servers. This will enable manufacturing of electronics in the automotive industry, such as overmoulding for small actuators, engine and transmission control units and power modules which allow for tamperproof packaging.
MRC

MOSCOW (MRC) -- Huide Science & Technology started trial operation of its first phase polyurethane (PU) and thermoplastic polyurethane (TPU) project at Fuding in Fujian province, said the company.

The first phase can produce 100,000 tonnes/year of PU resin, 20,000 tonnes/year of TPU, 10,000 tonnes/year of modified PU compounds and 5,000 tonnes/year of waterborne PU.

After smooth operation of the first phase, the company will start construction of the second phase, which will have 30,000 tonnes/year of TPU, 10,000 tonnes/year of modified PU compounds and 5,000 tonnes/year of waterborne PU.

The second phase construction is expected to take one year to complete. The second phase will produce TPU, modified PU compounds, and waterborne PU at capacities of 30,000 tonnes/y, 10,000 tonnes/y, and 5000 tonnes/y, respectively.

As MRC informed earlier, China Oil HBP Science & Technology has clinched the bid for a natural gas processing plant project with an annual capacity of 1 billion cubic meters in the Kashagan Oilfield in Kazakhstan at a price of USD242 million.

Shanghai Huide Science & Technology Co.,Ltd manufactures specialty chemical products. The Company produces and sells polyurethane resins, polyester polyol, and other products. Shanghai Huide Science & Technology markets its products worldwide.
MRC

MOSCOW (MRC) -- Sinopec SABIC Tianjin Petrochemical Co. (SSTPC), a 50-50 joint venture of Sinopec and SABIC, has completed the debottlenecking of its ethylene cracker on 11 July 2020, adding another 30,000 tons/year output to its current capacity, reported CommoPlast with reference to market sources.

Followed the expansion, the Tianjin based plant become the country's largest compressor unit, producing 1.3 million tons of ethylene annually.

As MRC wrote before, the cracker was shut for maintenance and debottlenecking on May 9, 2020.

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

According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.

China Petrochemical Corporation (Sinopec Group) is a super-large petroleum and petrochemical enterprise group established in July 1998 on the basis of the former China Petrochemical Corporation. Sinopec Group"s key business activities include the exploration and production of oil and natural gas, petrochemicals and other chemical products, oil refining.

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.
MRC

MOSCOW (MRC) -- BP’s venture affiliate is investing USD5m in Satelytics, a US cloud-based geospatial analytics software company that uses advanced spectral imagery and machine learning to monitor environmental changes such as methane emissions, said the company.

Satelytics collects high resolution spectral imagery from the planet’s surface using satellites, drones, and planes. Its technology combines these images with proprietary algorithms to create unique electromagnetic signatures that can be used to detect environmental changes, including releases or leaks. Its software visualises these data sets on interactive displays that give end-users a clear and actionable picture of operations, and alert them to facility risks, like methane leaks.

Bp’s USD5 million investment will enable Satelytics to develop its technology further and scale its applications throughout the oil and gas sector. Use of the technology has the potential to be part of bp’s aim to install methane measurement at all major oil and gas processing sites by 2023, publish the data and then drive a 50% reduction in methane intensity of its operations.

Morag Watson, bp senior vice president of digital science and engineering, said: "Satelytics is modernising the energy sector by making data about physical assets more accessible and digestible, leading to better decision making. We are excited to work closely alongside their unique team of scientists and technologists to help them evolve their technology and to continue to move the needle on industry digitalisation."

Sean Donegan, chief executive of Satelytics, said: "Bp’s early use of our detection and quantification software has inspired us to expand our capabilities. bp’s investment marks an inflexion point for Satelytics, which will assist us in expanding our technological capabilities and fuel future innovation."

Through its venturing business, bp is making strategic investments in innovative, game-changing technologies and businesses that can help it reimagine the global energy system.

As MRC informed earlier, BP and Reliance Industries Limited (RIL) have announced the start of their new Indian fuels and mobility joint venture, Reliance BP Mobility Limited (RBML). Following initial agreements in 2019, BP and RIL teams have worked closely over the past few months in a challenging environment to complete the transaction as planned. BP has paid RIL USD1 billion for a 49% stake in the joint venture, with RIL holding 51%.

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

According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
MRC