Cepsa petchem earnings rise on rebound in phenol, acetone margins, high LAB demand

MOSCOW (MRC) -- Cepsa (Madrid, Spain) reports a 30% rise year on year (YOY) to EUR86 million (USD101 million) in clean EBITDA on a current cost of supply (CCS) basis for its chemicals business in the second quarter, due to a rebound in margins and volumes in the phenol/acetone segment and “high demand” in the detergents sector, said Chemweeek.

"The resilient nature and strong performance of this business managed to partially offset lower earnings in other business units,” it says. Overall group clean CCS EBITDA was down 66% YOY to €180 million, while Cepsa reported a clean CCS net loss of EUR93 million, impacted by non-cash asset impairments of certain upstream assets and a negative inventory valuation.

Demand for oil products was severely hit by the pandemic and subsequent lockdowns in Spain, including jet kerosene, which suffered a 92% decline YOY, it says. The decrease was partly offset by higher internal consumption at Cepsa’s chemical plants, with the product used as a raw material to produce linear alkylbenzene (LAB), which the company says has been in high demand as a raw material for detergents as a result of the COVID-19 pandemic.

Chemical product sales declined 3% to 691,000 metric tons compared with the prior-year quarter. Sales in the LAB segment rose by 11% YOY, lifted by the COVID-19-related demand increase, while sales in the phenol/acetone and solvents segments declined by 7% and 8%, respectively, compared with the equivalent period last year. A decrease in demand globally was partly countered by improved margins, particularly in Asia, due to shutdown of several competitors’ plants, it says.

Growth capital expenditure (capex) of EUR6 million in the quarter was spent mainly on the revamp of Cepsa’s LAB plant at Puente Mayorga, Spain, with a further EUR5 million of expenditure mainly on maintenance work at the same site. The company is investing a total of EUR100 million in the chemical plant in an ongoing program to increase its LAB capacity from 200,000 metric tons/year to 250,000 metric tons/year.

Cepsa says a contingency plan launched earlier this year in response to the pandemic to deliver savings of EUR310 million has been revised upward to EUR500 million for 2020, including EUR120 million in operating cost reductions and EUR380 million in capex cuts, it says. A total of EUR275 million in savings had been captured by the end of June, it says.

As per MRC, Cepsa Quimica (Shanghai) stopped the phenol and acetone plant in Shanghai for 5 days from December 10 of last year due to the repair work on the gas pipeline in the Shanghai Caojing Chemical Industry Park, where the plant is located.

Phenol is the main raw material for bisphenol A (BPA) production, which in turn is used to produce polycarbonate (PC).

According to MRC's ScanPlast, in the first half of 2020, the total estimated consumption of PC granulate in the Russian Federation (excluding imports and exports to Belarus) amounted to 47,300 tonnes against 40,700 tonnes in 2019. Total demand increased by 16%.
MRC

MOSCOW (MRC) -- BP Plc started up a new naphtha hydrotreater (NHT) last week at its 435,000 barrel-per-day Whiting, Indiana, refinery, reported Reuters with reference to company spokeswoman Sarah Howell's statement.

The 85,000-bpd NHT took three years and cost more than USD300 million to build, Howell said.

“The NHT allows the refinery to produce the full slate of US Environmental Protection Agency Tier 3 fuels, which require gasoline to have an average sulfur content of no more than 10 parts per million,” she said.

Hydrotreaters use hydrogen to remove sulfur from motor fuels.

As MRC informed before, BP reports a 43% year-on-year (YOY) decline to USD47 million in second quarter earnings for its petrochemicals business, which remains on schedule to be sold to Ineos for USD5 billion before the end of the year. BP says it received proceeds from divestments and other disposals in the quarter of USD1.1 billion, including “the first payment from the agreed sale of BP’s petrochemicals business to Ineos.”

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 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

MOSCOW (MRC) -- US polymer producer Formosa Plastics Corp., part of Formosa Petrochemical, announced a force majeure on polypropylene (PP) products from its Point Comfort, Texas, petrochemical complex effective August 8, the company said in a letter obtained by S&P Global Aug. 10.

"As a result of this production outage and pursuant to Formosa's General Terms and Conditions of Sale, Formosa is declaring Excuse of Performance (force majeure) on its Formolene polypropylene products effective Aug. 8, 2020," the letter said.

A call to Formosa seeking further information about the outage and the force majeure was not returned by the time of publication.

The letter stated they were evaluating the impact of this event and their ability to produce and supply material.

As MRC reported earlier, Formosa Plastics' new 1.5 million mt/year cracker in Point Comfort, Texas, came online in H1 January, 2020, and was seen ramping up through January.

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.

Formosa Petrochemical is involved primarily in the business of refining crude oil, selling refined petroleum products and producing and selling olefins (including ethylene, propylene, butadiene and BTX) from its naphtha cracking operations. Formosa Petrochemical is also the largest olefins producer in Taiwan and its olefins products are mostly sold to companies within the Formosa Group. Among the company's chemical products are paraxylene (PX), phenyl ethylene, acetone and pure terephthalic acid (PTA). The company"s plastic products include acrylonitrile butadiene styrene (ABS) resins, polystyrene (PS), polypropylene (PP) and panlite (PC).
MRC

1.CIA says majority of UK chemical companies expect improved stability, sales in third quarter

MOSCOW (MRC) -- A survey of UK chemical companies has revealed that 80% expect improved stability and a rise in domestic and international export sales over the next three months, with over 70% also seeing the same upward trend for exports to the EU, despite significant uncertainty remaining, said Chemweek. The survey of its member companies by the Chemical Industries Association (CIA; London, UK) shows the majority also expect to see an improvement in capital expenditure, although around 10% of companies expect job losses and a reduction in R&D expenditure. The decline in industry sales came to a halt in the second quarter of 2020, with half of the companies surveyed now reporting “stability or improvement,” the CIA says. Exports to the EU and the rest of the world remained at current levels or improved during the quarter for half of those surveyed, as did capex and business utilization, it says. Stability and growth in employee numbers during the quarter, as well as spending on R&D, was reported by 80% of companies contacted, it adds.




MRC

MOSCOW (MRC) -- The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), rose 2.7 percent in July on a three-month moving average (3MMA) basis following a 0.1 percent gain in June. On a year-over-year (Y/Y) basis, the barometer fell 8.9 percent in July, said Americanchemistry.

The unadjusted data show a 1.3 percent gain in July following a 3.4 percent gain in June and a 3.6 percent gain in May. The diffusion index rose to 41 percent. The diffusion index marks the number of positive contributors relative to the total number of indicators monitored. The CAB reading for June was revised upward by 1.36 points and the May reading was revised upward by 1.40 points.

"With three consecutive months of gains, the latest CAB reading is consistent with recovery in the U.S. economy," said Kevin Swift, chief economist at ACC. The CAB has four main components, each consisting of a variety of indicators: 1) production; 2) equity prices; 3) product prices; and 4) inventories and other indicators.

Production-related indicators were mixed in July. Despite improvement in new home sales, housing starts and building permits, trends in construction-related resins, pigments and related performance chemistry were soft. Reflecting a recovery in light vehicles and other industries, resins and chemistry used in durable goods were mixed. Plastic resins used in packaging and for consumer and institutional applications were mixed. Performance chemistry strengthened, while U.S. exports were mixed. Equity prices gained, and product and input prices strengthened. Inventory and other supply chain indicators turned positive.

The CAB is a leading economic indicator derived from a composite index of chemical industry activity. Due to its early position in the supply chain, chemical industry activity has been found to consistently lead the U.S. economy’s business cycle, and the barometer can be used to determine turning points and likely trends in the broader economy. Month-to-month movements can be volatile, so a three-month moving average of the CAB reading is provided. This provides a more consistent and illustrative picture of national economic trends.

Applying the CAB back to 1912, it has been shown to provide a lead of two to 14 months, with an average lead of eight months at cycle peaks as determined by the National Bureau of Economic Research. The median lead was also eight months. At business cycle troughs, the CAB leads by one to seven months, with an average lead of four months. The median lead was three months. The CAB is rebased to the average lead (in months) of an average 100 in the base year (the year 2012 was used) of a reference time series. The latter is the Federal Reserve’s Industrial Production Index.

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.
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