Eastman misses estimates on lower volumes, capacity utilization

MOSCOW (MRC) -- Eastman Chemical has reported second-quarter net earnings down 89.5% year-on-year (YOY), to USD27 million, on sales down 18.6%, to USD1.92 billion, reported Chemweek.

Adjusted earnings fell 57.2% YOY, to 85 cents/share, short of analysts’ consensus estimate of USD1.05/share, as reported by Refinitiv (New York, New York). Lower volumes, lower selling prices, and reduced capacity utilization hit both sales and profits, as the COVID-19 pandemic cut into demand in key end markets, including transportation, construction, and consumer durable goods.

“Our sales revenue in the first half of the year was relatively solid, demonstrating the value of a diverse set of end markets and the benefit of our innovation-driven growth model,” says Eastman board chair and CEO Mark Costa. “And, we moved swiftly to aggressively manage costs to offset meaningfully lower capacity utilization.”

Additives and functional products segment sales declined 16.8% YOY, to $685 million, while segment adjusted EBIT fell 51.0%, to USD72 million. The declines were driven by lower sales volumes and capacity utilization, as well as a less-favorable product mix.

Advanced materials segment sales were down 18.5% YOY, to USD567 million, while segment adjusted EBIT declined 55.9%, to USD64 million. The pandemic resulted in volume declines and reduced capacity utilization, with the consumer durable goods and transportation end markets showing particularly sluggish demand.

Chemical intermediates segment sales declined 26.9% YOY, to USD461 million, while segment adjusted EBIT fell 65.1%, to USD22 million. The COVID-19 pandemic cut into demand, reducing sales volumes and selling prices, and lower crude oil prices made U.S. olefins production less globally competitive.

Fibers segment sales were down 0.9% YOY, to USD211 million, while segment adjusted EBIT decreased 9.8%, to $46 million. Sales were flat as higher acetate tow volumes nearly offset lower demand for textile products.

Eastman is “seeing demand for products serving the auto, tires, building and construction, and consumer durables end markets begin to recover sequentially from the low levels of the second quarter leading to increased capacity utilization, particularly in advanced materials,” Costa says.

As MRC reported earlier, in 2016, Eastman Chemical's chief executive Mark Costa announced that the company wanted to reduce its surplus ethylene and commodity intermediates, but did not intend to sell its cracker in Longview, Texas.

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.

Eastman is a global specialty chemical company that produces a broad range of products found in items people use every day. With a portfolio of specialty businesses, Eastman works with customers to deliver innovative products and solutions while maintaining a commitment to safety and sustainability. Its market-driven approaches take advantage of world-class technology platforms and leading positions in attractive end-markets such as transportation, building and construction and consumables. Eastman focuses on creating consistent, superior value for all stakeholders. As a globally diverse company, Eastman serves customers in more than 100 countries. The company is headquartered in Kingsport, Tennessee, USA and employs approximately 14,500 people around the world.
MRC

Russiian Lukoil agrees to take 40% stake in RSSD project offshore Senegal

MOSCOW (MRC) -- Russia's Lukoil said July 27 that it has reached an agreement with Cairn Energy to take a 40% stake in the Rufisque, Sangomar and Sangomar Deep (RSSD) project offshore Senegal for USD300 million, reported S&P Global.

Lukoil is expanding its presence in Africa at a time when the Russian government has identified the continent as a priority for expanding overseas energy cooperation. Lukoil is playing a key role in this strategy. Late last year it won a license for a gas-rich exploration block off Equatorial Guinea that contains the stalled Fortuna LNG project. It also has stakes in projects in Egypt, Ghana, Nigeria and Cameroon.

The RSSD project includes blocks covering an area of 2,212 square kilometers, located 80 kilometers offshore, at a sea depth of 800-2,175 meters. It includes two discovered fields – Sangomar and FAN.

A final investment decision on the Sangomar field was taken in early 2020 and field development has begun. Recoverable hydrocarbon reserves at the field are estimated at 500 million barrels of oil equivalent. Launch of production is scheduled for 2023, with a designed production volume of 5 million mt of crude oil per year. This is equivalent to around 100,410 b/d.

Development of the RSSD project is being carried out under a production sharing agreement, with Woodside holding a 35% stake and acting as project operator. Other participants are FAR with a 15% stake, and state-owned Petrosen with a 10% stake.

"Entering a project with already explored reserves at an early stage of development is fully in line with our strategy and allows us to reinforce our presence in West Africa. Joining the project with qualified international partners will allow us to gain additional experience in development of offshore fields in the region," Lukoil CEO Vagit Alekperov said in a statement.

The deal is subject to approval by the Senegalese government. It also provides for a potential bonus payment to Cairn Energy of up to USD100 million when production begins.

As MRC wrote before, the European refineries of Russia’s No.2 oil producer Lukoil were only processing Russian oil in H2 April-early May, 2020.

We remind that Stavrolen (part of Lukoil), Russia's major polyolefins producer, resumed its polypropylene (PP) production in Budennovsk after a long scheduled turnaround. The plant's customers said Stavrolen had fully resumed its PP production after the long scheduled maintenance by 15 October 2019. The outage began on 6 September. The start-up of the plant"s high density polyethylene (HDPE) production took place with a week delay.

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.

Lukoil is one of the leading vertically integrated oil company in Russia. The main activities of the company include operations for exploration and production of oil and gas, production and sale of petroleum products. Lukoil is the second largest private oil Company worldwide by proven hydrocarbon reserves. Lukoil's structure includes one of the largest Russian petrochemical plant - Stavrolen.
MRC

Insulation foam applications drive MDI demand recovery, TDI recovery more subdued

MOSCOW (MRC) -- MDI and TDI demand have been showing signs of recovery throughout June and July, albeit to different degrees of intensity. Demand for polyurethane insulation foams (rigid and spray) in the construction industry is driving up demand for MDI in Europe and North America, says James Elliott, associate director /polyurethanes at IHS Markit.

In Asia, demand for polyurethane insulation foams in the appliance manufacturing and cold chain sector is the contributing factor to improved MDI consumption, Elliott says. However, the TDI demand recovery in flexible foams used in the furniture and bedding sectors is more protracted. The automotive end-use sector is hindering the MDI and TDI demand recovery, too Elliott adds.

According to IHS Markit Purchasing Managers Index ® (PMI), sentiment regarding new housing starts, workforce availability, and future projects have improved as construction sites are opened and work restarts. Social distancing is more easily practiced in this sector, allowing for a higher pace of demand recovery for those products linked to construction.

"When it comes to insulation, polyurethane foams (PU foam) have better properties versus expandable polystyrene (EPS) and rock wool. Selection of one over the other comes down to price,” says Elliott. “MDI prices, currently at an all-time low, and this is lending support to PU foam demand versus alternative products. While MDI prices have started to move up, short-term fundamentals will benefit PU foam demand over other options."

Longer-term, the polyurethane industry is optimistic that the sustainability agenda and continued push for more efficient solutions tips the balance in favor of PU insulation foams, boosting Demand, Elliot remarks.

Meanwhile, estimates on the side of the appliance suggest. Demand has been moving back to at least 80% of pre-lockdown levels, according to IHS Markit data. TDI demand has also begun recovering on all fronts since the second half of May, the same data shows, with recovery picking up during June. However, the comfort sector --key for TDI demand into flexible polyurethane foams-- is finding the pace of recovery slow.

"The COVID-19 pandemic’s impact on unemployment rates means consumers are more cautious with their spending," Elliott says. “Demand from the comfort sector was severely hit as lockdown measures caused bricks and mortar shops to close. Shops are reopening as lockdown measures ease, and there are signs of recovery in Europe, particularly where demand into this segment has exceeded expectations in the past month. However, TDI demand is still below pre-COVID levels.

Meanwhile, TDI demand into the automotive sector remains very weak, due to high inventories along with the automotive supply chains and lower automotive operations, Elliott adds. “There is still poor demand for vehicles. So, the automotive sector is much more of a drag on demand vs. the comfort segment."

As it was written before, Covestro announced a pause of 18-24 months on work at its planned expansion in Baytown, Texas. The company had been planning to build a new 500,000 tonnes/year MDI plant in Baytown by 2024, after which the company was planning to close an older 90,000 tonnes/year unit.

Wanhua also revised its initial plans to build a new 400,000 tonnes/year MDI plant along the US Gulf Coast to a plan to build an MDI splitter along the US Gulf Coast. The splitter would allow the company to convert lower-value crude MDI to higher-value polymeric MDI (PMDI) and monomeric MDI (MMDI).
MRC

Ferro swings to loss as COVID-19 reduces volumes

MOSCOW (MRC) -- Ferro has reported a second-quarter net loss of USD5.5 million, compared with a profit of USD10.9 million in the year-ago quarter. Net sales fell 21.5% year-on-year (YOY), to USD204.8 million, reported Chemweek.

Adjusted earnings totaled 12 cents/share, slightly ahead of analysts’ consensus estimate of 11 cents/share, as reported by Refinitiv (New York, New York). Profit margins improved during the quarter, while volumes fell by 20% YOY.

“Our second quarter performance, although down from last year, was in line with our expectations and, as we moved through the quarter, established what we see as a trend of meaningful improvement from the macro-economic low point,” says Ferro chairman and CEO Peter Thomas. “Order patterns in the later part of the quarter showed our customers beginning to have more visibility into their business needs for the second half of 2020, and we now expect the third quarter to track in the same favorable direction that we experienced coming out of the second quarter.”

Functional coatings segment net sales were down 19.6% YOY, to USD131.7 million, while segment gross profit fell 26.7%, to USD36.1 million. Color solutions segment sales declined 24.8% YOY, to USD73.1 million, while segment gross profit was down 9.1%, to $27.0 million.

As MRC informed before, on October 14, 2016, Ferro signed a definitive agreement to acquire 100% of the stock of Belgium-based Cappelle Pigments for EUR50.5 million (approximately USD56 million) on a cash-free and debt-free basis.

We remind that Braskem USA is planning to start up its new polypropylene (PP) plant in the third quarter this year. Based in La Porte, Texas, United States, the plant has a production capacity of 450,000 tons/year. The new PP plant is known as the Delta project, which costs investment of USD675 million and the construction has begun since 2017.

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.

Ferro Corporation is a leading global functional coatings and color solutions company that supplies technology-based performance materials, including glass-based coatings, pigments and colors, and polishing materials. Ferro products are sold into the building and construction, automotive, appliances, electronics, household furnishings, and industrial products markets. Headquartered in Mayfield Heights, Ohio, the Company has approximately 4,900 employees globally.
MRC

US refining capacity poised for first big drop in nearly a decade

MOSCOW (MRC) -- US oil refining capacity this year could decline by the largest amount in nearly a decade as pandemic-related travel curbs and a fire shut several plants, reversing years of small gains, reported Reuters.

Refiners globally have been idling plants as the COVID-19 pandemic slashed fuel demand as much as 30%. In the United States, Marathon Petroleum Corp will close California and New Mexico plants in response to the demand slump.

Philadelphia Energy Solutions closed and sold its refinery to a property developer after a fire and series of explosions tore through the plant last summer.

The three processed a combined 523,000 barrels per day of oil, or nearly 3% of total US refining, reducing capacity to 18.5 million bpd, according to Reuters calculations.

The last large drop was in 2012 when a refinery in the US Virgin Islands was shut, reducing overall capacity by 408,000 bpd. An investor group acquired the plant and aims to restart it this year, which would add 200,000 bpd, and could dampen the sharp fall in capacity.

But the pandemic also is rolling back planned additions and some analysts think additional plants may close. Exxon Mobil Corp recently delayed until 2023 an expansion of its Beaumont, Texas, refinery that would nearly double its capacity.

Past recessions temporarily cut growth, but this year’s sharp drop likely will halt expansions for some time, said David Hackett, president of fuels consultancy Stillwater Associates.

“COVID-19 has taught us people really can work from home,” he said, estimating demand for motor fuels could remain depressed through 2021.

US refiners increased overall capacity most years even as the number of refineries has fallen since 1981. Total capacity last fell by more than half a million bpd in 1992 when 575,000 bpd was lost following the 1990-1991 recession.

Overall gains could resume in 2021, said John Auers, an executive vice president at oil and petrochemical consultants Turner, Mason & Co.

But he cautioned a return to historical annual increases “will really be driven by the ability to grow exports” of gasoline, diesel and jet fuel.

As MRC wrote before, ExxonMobil Corp is preparing deep spending and job cuts, according to people familiar with the matter, as it fights to preserve a 8% shareholder dividend with a multi-billion-dollar quarterly loss looming. It was unclear how extensive the cuts will be. The largest US oil company slashed this year’s budget by 30% in April, but Chief Executive Darren Woods’s turnaround through rebounding demand and increased asset sales have not panned out and losses are climbing.

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.

Exxon Mobil Corporation, doing business as ExxonMobil, is an American multinational oil and gas corporation headquartered in Irving, Texas. It is the largest direct descendant of John D. Rockefeller's Standard Oil, and was formed on November 30, 1999 by the merger of Exxon (formerly the Standard Oil Company of New Jersey) and Mobil (formerly the Standard Oil Company of New York). ExxonMobil's primary brands are Exxon, Mobil, Esso, and ExxonMobil Chemical. ExxonMobil is incorporated in Texas. One of the world's largest companies by revenue, ExxonMobil from 1996 to 2017 varied from the first to sixth largest publicly traded company by market capitalization. ExxonMobil is one of the largest of the world's Big Oil companies.
MRC