Indian Oil predicts recovery to pre-Covid levels only by year-end

MOSCOW (MRC) -- The chairman of Indian Oil Corporation, the country’s biggest refiner, predicted demand would begin to rebound only by year-end as the coronavirus pandemic hits one of the world’s largest energy markets, said the Financial Times.

Shrikant Madhav Vaidya said new lockdowns in India had knocked capacity utilisation down from 93 per cent in early July to 75 per cent by the end of the month but predicted it would stabilise in the coming months. "There is demand destruction but then the country is recovering,” Mr Vaidya told the Financial Times after reporting a sharp fall in year-on-year net profit in the quarter ended June 30. “By the end of the year, I expect that things will be nearly back to pre-Covid times."

New lockdowns in India are hitting the country’s economic recovery as coronavirus rips through the population of 1.4bn people. India is adding more than 50,000 infections daily, bringing its tally of Covid-19 cases to more than 1.6m, the third-largest in the world, with no sign of the infection rate slowing. Recovery looks difficult, we don’t know whether there will be multiple lockdowns imposed

IOC reported a 47 per cent drop in net profit to Rs19bn (USD253m) in the quarter ended June 30 compared with a year earlier. This followed a sharp loss in the three months ended March 31. The economy was hit by a tough initial lockdown imposed by Prime Minister Narendra Modi while dreams of a V-shaped recovery have been obliterated by a surge in cases and new lockdowns. The country’s crude imports fell 19 per cent year on year to a five-year low in June, according to oil ministry data released on Friday.

Mr Vaidya said that once the turmoil had settled, he expected appetite for fossil fuels in India, the world’s third-largest oil importer, to recover more strongly than in other markets. Unlike other refiners, Mr Vaidya said IOC had no plans to cut capital expenditure. "The energy demand for the country is going up, unlike the US or Europe, where it is either stagnant or there is negative growth," said Mr Vaidya.

"No single one form of energy will be able to satisfy it all. The Indian bouquet will [consist] of traditional fossil fuels with an increasing amount of gas."

India is seeking to increase the share of gas in its energy mix from 6.2 per cent to 15 per cent by 2030 but progress on meeting the target and deregulating the sector has been slow. Mr Vaidya, who took over as IOC chairman in July, said the refiner was also seeking to expand capacity in petrochemicals and catch up with peers Reliance Industries — the flagship company of billionaire Mukesh Ambani — and Gail.

Probal Sen, oil and gas analyst at Centrum Broking in Mumbai, said IOC was “sounding the alarm” by underlining the impact of new lockdowns. Other companies were predicting a faster return to relative normality. Mr Sen pointed to a flood of new cases hitting Andhra Pradesh, Karnataka and Kerala. “Recovery looks difficult, we don’t know whether there will be multiple lockdowns imposed,” he said.

As MRC wrote before, Indian Oil Corporation Ltd (IOCL) was in plans to undertake a planned shutdown at its polypropylene (PP) plant in Paradip last weekend. The plant is expected to remain under maintenance for about two weeks. Located at Paradip in the India state of Odisha, the PP plant comprises of two lines with a production capacity of 340,000 mt/year each.

We remind that Indian Oil Corp restarted operation at its naphtha cracker in India in early-October, 2019, after completing maintenance works. The cracker was shut in early-September, 2019 for a maintenance turnaround. Located in Panipat, in the northern Indian state of Haryana, the cracker has an ethylene production capacity of 857,000 mt/year and propylene capacity of 425,000 mt/year.

According to MRC's DataScope report, 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.

Indian Oil Corporation Limited, or IndianOil, is an Indian state-owned oil and gas corporation with its headquarters in New Delhi, India.

MRC

Umicore profits shrink on automotive crisis impact; revenue, earnings beat estimates

MOSCOW (MRC) -- Umicore (Brussels, Belgium) says its net profits for the first half of 2020 fell by 38%, to EUR91 million (USD107 million) from EUR148 million in the same period of the previous year, said Chemweek.

Sales declined by approximately 4% year on year (YOY), to EUR1.57 billion, beating analysts' consensus estimate by 8.1%. Adjusted EBIT and adjusted EBITDA increased slightly compared with the first half of 2019, to EUR243 million—beating analysts' estimates by 8.5%—and €376 million, respectively, it says. The company's performance was hurt by the impact of COVID-19, especially on the automotive industry, which affected mostly its catalysis, and energy and surface technologies businesses, the company says. The strong performance posted by Umicore’s recycling business was not able to offset the overall impact of COVID-19. Second-quarter figures have not been disclosed.

Sales of the company’s catalysis business dropped by almost 20% YOY, to EUR571 million, due to the company having to stop production at the majority of its automotive catalyst plants for several weeks, following car OEMs' assembly-line shutdowns caused by the pandemic, Umicore says. However, the company says that the reduction in catalysis revenue was less than the contraction of the worldwide car market, as Umicore continued to outperform the market in China.

The energy and surface technologies business recorded an 8% YOY decline in sales, to EUR557 million, attributed mainly to a contraction of the worldwide electric vehicle market as well as lower activity levels in other key end-markets, the company says. However, the increased activity levels, higher metal prices, and favorable trading conditions boosted revenue at its recycling business, to EUR440 million compared with EUR313 million in the first half of 2019.

"Despite the brutal effects on society and industry of the COVID-19 pandemic, Umicore showed great resilience and turned in a solid performance in the first half of 2020, demonstrating the complementarities of our businesses and showing the agility and determination of our workforce," says Marc Grynberg, CEO at Umicore.

The company’s free cash flow from operations at the end of June 2020 was EUR108 million, up from EUR50 million a year earlier, Umicore says. Capital expenditure (capex) plans were adjusted at the beginning of the pandemic and first-half capex spend amounted to EUR152 million, EUR89 million less than a year earlier, it says.

"Umicore has ensured healthy and safe working conditions for its personnel and protected the financial health of the company with cost savings, reassessment of our industrial footprint, and increased liquidity. Our long-term strategic drivers remain intact and I am confident we will return to growth in clean mobility and recycling as we emerge from the pandemic,” Grynberg says.

The company issued EUR500 million in convertible bonds due 2025 and concluded an 8-year loan agreement with the European Investment Bank for an amount of EUR125 million. Umicore says it “has ample liquidity with EUR1.2 billion of cash and equivalents on the balance sheet at 30 June 2020 and approximately EUR1 billion of additional committed undrawn credit lines from core relationship banks.” Its long-term debt profile has no material maturities prior to 2023, the company says.

As a response to the disruption caused by COVID-19 in several of its key end-markets, Umicore says that it “is reassessing its production footprint as well as the carrying value of certain assets.” As a result, Umicore consolidated its North American automotive catalyst production activities at Burlington, Ontario, Canada, and discontinued its automotive catalyst production at Tulsa, Oklahoma. Umicore has also impaired certain tangible and intangible assets, the company says.

Umicore says it is still unable to provide a detailed outlook for 2020, due to the ongoing COVID-19 uncertainty. Nevertheless, it “continues to expect its full-year adjusted EBIT to be below the levels reached in 2019, with the adjusted EBIT in catalysis, and energy and surface technologies well below the levels of 2019 and adjusted EBIT in recycling well above the levels of 2019,” the company says.

Umicore notes that worldwide car production is expected to be down by approximately 25% for the whole of 2020. In this scenario, the company’s revenue and adjusted EBIT in catalysis in the second half would be well above first-half levels, it says. Energy and surface technologies’ adjusted EBIT in the second half is likely to be below levels seen in the first half, the company says. Analysts estimate that a four-week scheduled maintenance turnaround at the company's Hoboken, Belgium, plant will lead to weaker earnings sequentially for recycling, with adjusted EBIT decreasing 5% in the second half.

As MRC informed earlier, Umicore (Brussels, Belgium) says it has launched an offering of senior unsecured bonds of EUR500 million (USD563 million), maturing in June 2025 and convertible into Umicore ordinary shares.

Besides, in December 2012, materials technology group Umicore and the Evonik Group subsidiary Evonik Litarion GmbH announced a business relationship for the supply of lithium-ion cathode materials.

We also remind that Dow and Evonik have recently entered into an exclusive technology partnership. Together, they plan to bring a unique method for directly synthesizing propylene glycol (PG) from propylene and hydrogen peroxide to market maturity.

Propylene is the main feedstock for the production of polypropylene (PP).

As per MRC's ScanPlast, Russian producers reduced their total PP production in June to 149,400 tonnes from 162,900 tonnes a month earlier, ZapSibNeftekhim reduced its capacity utilisation. Russia"s overall PP production reached 904,800 tonnes in the first six months of 2020, compared to 732,000 tonnes a year earlier. Four out of eight producers increased their capacity utilisation, with a new producer -ZapSibNeftekhim - accounting for the main increase in the output.


MRC

Air Liquide completes sale of Schülke to EQT for up to USD1.17 billion

MOSCOW (MRC) -- Air Liquide says it has closed the sale of its subsidiary Schulke & Mayr (Norderstedt, Germany) to private equity firm EQT (Stockholm, Sweden) for up to EUR1 billion (USD1.17 billion). The two companies entered into exclusive negotiations in April, said Chemweek.

The total value of the transaction, which is subject to an earn-out provision, is between €925 million and €1 billion, it says. The deal “illustrates Air Liquide’s strategy to review its business portfolio regularly and to focus on its core gases and healthcare businesses,” it says. The company intends to continue to develop its healthcare activities, while providing Schulke “with the best opportunity for its long-term development," it adds.

Schulke is a global leader in infection prevention and hygiene solutions, with a proposed disposal of the company by Air Liquide first revealed in November last year. The acquisition would be by EQT’s EQT VIII fund, the companies said in April when confirming they had entered into exclusive talks.

Christian Last, Schulke’s CEO, welcomed EQT as the company’s new shareholder, saying it would “continue to focus on launching new and innovative products and leveraging our customer partnerships worldwide.” Together with EQT, Schulke will shape the continuous development and growth of the company, led by Last, based on shared and sustainable values, the company states.

"Schulke is a very impressive company with a long track record of developing innovative hygiene solutions to help protect people’s health. The dedication and hard work of the entire team during the current pandemic has underlined this once again. EQT is now looking forward to supporting Schulke’s management team as the company enters the next chapter of its long growth history,” says Matthias Wittkowski, partner at EQT Partners.

Schulke, founded in 1889 in Hamburg, operates three production sites in Germany, France, and Brazil.

As MRC informed earlier, Air Liquide has entered into a long-term supply agreement with NLMK Group (Moscow) that will see it invest around EUR100 million (USD114 million) in the steel producer’s site at Lipetsk, Russia, on the construction of a new air separation unit (ASU) and the acquisition of existing hydrogen and rare gases production units.

We remind that Shell Singapore restarted its naphtha cracker in Bukom Island in early December 2019, following a two months maintenance shutdown since the beginning of October 2019. Thus, this cracker was taken off-stream for the turnaround on 1 October 2019. The cracker is able to produce 960,000 tons/year of ethylene and 550,000 tons/year of propylene.

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

Henkel acquires 75% stake in German D2C platform

MOSCOW (MRC) -- Henkel signed an agreement with Invincible Brands Holding, headquartered in Berlin, to acquire a 75 percent stake in a business comprising three fast-growing premium direct-to-consumer (D2C) brands: HelloBody, Banana Beauty and Mermaid+Me, said the company.

Through this transaction, Henkel will significantly expand its D2C go-to-market footprint in Beauty Care and add strong digital capabilities in areas such as performance marketing, analytics and fast innovation.

The transaction comprises the three attractive brands HelloBody, Banana Beauty and Mermaid+Me, which are mostly sold in Europe. The brands offer premium beauty care products and they also address the growing trend of sustainable and clean beauty. HelloBody is active in the skin, body and hair care categories, Mermaid+Me focuses on hair care products. Banana Beauty offers decorative cosmetics such as lipsticks and eyeliners.

In the last twelve months as of June 2020, the businesses generated total sales of around 100 million euros and employed around 180 people, including an experienced incubator team with a strong track record of launching new D2C brands.

The three D2C brands capture more than 1.5 million active consumers and will significantly strengthen Henkel Beauty Care’s digital footprint. The remaining 25 percent stake in the business will stay with the founders of Invincible Brands Holding – Bjoern Keune and Gennadi Tschernow – and private equity fund manager capital D. The founders and existing management team will remain onboard to further expand the existing as well as establishing new businesses.

"As part of our strategic framework for purposeful growth we pursue value-adding acquisitions to strengthen our businesses. This agreement is a proof point of how we consistently implement our strategy. It is also in line with our objective to strengthen our competitive edge in the area of digitalization by expanding our direct-to-consumer activities," said Henkel CEO Carsten Knobel.

"With this acquisition we will strengthen our portfolio with fast-growing premium brands in attractive categories. Through 1:1 interactions with consumers we will gain valuable insights that will help us to create meaningful innovations for the entire retail business,” said Jens-Martin Schwarzler, Executive Vice President and responsible for Henkel’s Beauty Care business.

"I would like to thank our entire team at Invincible Brands, together with capital D, for executing a phenomenal growth plan over the past two years. With Henkel there is now an exciting opportunity to continue building on that. The combination of our direct-to-consumer and social media marketing skills with Henkel's R&D, product knowledge and global footprint provides a winning formula. I am very much looking forward to working with the team at Henkel,” said Bjoern Keune, Co-Founder of Invincible Brands.

Stephan Lobmeyr, Co-Founder of capital D, added: "Two years ago we identified the disruptive nature and strength of the business model of Invincible Brands, a pioneer social media marketing and first-class brand incubator. We have supported Bjoern, Gennadi and the team to grow and conquer this nascent market and are really pleased that Henkel’s investment validates the strengths of the brands and the concept and that we will continue to be part of the business alongside Henkel." The agreement is subject to customary closing conditions, including regulatory approvals.

As MRC informed earlier, Henkel AG & Co. KGaA (Dusseldorf, Germany) announced that Henkel Adhesives Technologies has officially inaugurated its new production facility in Kurkumbh, India.

Henkel are also partnering with Borealis and plastics solutions company Borouge to develop flexible packaging solutions for detergents containing both virgin polyethylene (PE) and high amounts of post-consumer recyclate (PCR) in efforts to increase sustainability.

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

US crude stocks hit 14-week low amid rising exports, refinery demand: EIA

MOSCOW (MRC) -- US crude oil inventories moved sharply lower during the week ended July 24 as exports and refinery demand climbed to multi-month highs, US Energy Information Administration data showed July 29, reported S&P Global.

Commercial crude stocks fell 10.61 million barrels to 525.97 million barrels last week, EIA data showed. While the draw pushed stockpiles to 14-week lows, they remained more than 17% above the five-year average for this time of year.

The inventory draw was concentrated on the US Gulf Coast, where stocks fell 10.46 million barrels to 295.51 million barrels, and on the US West Coast, where stocks fell 1.7 million barrels to 52.75 million barrels, the lowest since mid-March.

Meanwhile, stockpiles at the NYMEX delivery point of Cushing, Oklahoma, climbed 1.31 million barrels to an eight-week-high 51.42 million barrels. The build helped push total Midwest stocks up 2.23 million barrels to 139.74 million barrels.

Inventories at the Strategic Petroleum Reserve were unchanged for a second week at 656.15 million barrels.

An uptick in crude exports contributed to the USGC draw. Outbound crude volumes averaged at 3.21 million b/d last week, up from 2.99 million b/d the week prior, and the strongest since mid-May.

Crude exports have steadily increased in July as arbitrage incentives have improved for moving US crude into Southeast Asia and Northwest Europe. The arbitrage incentive for WTI MEH in Singapore versus Malaysian Tapis crude climbed above $1/b last week, bringing the July-to-date average up to 15 cents/b, according to S&P Global Platts Analytics data, reopening an arbitrage that had been closed since April.

The arbitrage incentive for WTI MEH in Rotterdam versus North Sea Forties has averaged at 14 cents/b to date in July. This arbitrage was last open on a monthly basis in December 2019, Platts Analytics data shows.

As exports inched higher, imports plunged to 5.14 million b/d last week, EAI data showed, down 800,000 b/d from the week prior and the weakest since the week ended April 17.

Total net crude inputs climbed 390,000 b/d to 14.6 million b/d last week, snapping a two-week downturn. The uptick put inputs at the strongest since late March, though they were still more than 14% behind the five-year average for this time of year. Nationwide refinery utilization jumped 1.6 percentage points to 79.5% of capacity.

Notably, Midwest utilization hit 86.9% of capacity last week, less than 9% behind year-ago levels. Midwest cracking margins for Bakken ex-Clearbrook averaged USD5.33/b for the week ended July 24, up from USD3.54/b over Q2. Coking margins also rose, with benchmark Western Canada Select margins averaging USD3.30/b, up from USD2.66/b over Q2.

But on the West Coast, utilization slipped for a second week, falling 1.1 percentage points to 68.1% of capacity. USWC refinery margins have climbed in recent weeks, however, with California largely returning to lockdown status, regional refiners could see renewed pressure if product demand dips. USWC cracking margins for Alaska North Slope averaged USD9.21/b for the week ended July 24, compared with the USD8.42/b over Q2.

Major refined product inventories saw modest increases last week even as total product demand ticked higher last week.

Total gasoline stocks climbed 650,000 barrels to 247.39 million barrels, pushing inventories to 7.9% above the five-year average and halting a three-week narrowing trend. Meanwhile, nationwide distillate stocks were up 500,000 barrels at 178.39 million barrels, a fresh 38-year high.

Total product supplied, a proxy for demand, surged 1.44 million b/d to 19.1 million b/d. Product demand was the strongest since the week ended March 20, but was still more than 10% behind year-ago levels. Gasoline demand saw a 3% bump on the week, averaging at 8.81 million b/d, while distillate demand was up nearly 13% at 3.64 million b/d.

As MRC informed previously, 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.

And 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 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