WTI slides nearly 4% as market eyes weakened demand outlooks

MOSCOW (MRC) -- Crude oil futures prices fell further Sept. 4, with front-month contracts settling near two-month lows as global demand outlooks dimmed following a mixed US jobs report, according to S&P Global.

NYMEX October WTI settled USD1.60 lower at USD39.77/b, while ICE November Brent was down USD1.41 to settle at USD42.66/b.

US payrolls expanded by about 1.4 million jobs in August, US Labor Department data showed Sept. 4, pushing the unemployment rate down to 8.4%. While the headline jobs figure was in line with market expectations, there were some signs of weakness in the report. About 17% of the monthly job gain was from temporary government hiring for the US Census, and the number of permanent job losses rose 534,000 to 3.4 million, Labor Department data showed.

NYMEX October RBOB settled 2.77 cents lower at USD1.772/gal and October ULSD declined 1.62 cents to settle at USD1.1515/gal.

The labor report may be paradoxically bearish for global markets as it may forestall further US stimulus efforts, analysts said.

"The biggest takeaway right now is that with what we've seen in equities and oil prices, a lot of the historic rebound we saw from negative $40/b or so prices to where we are now, a big component of that was that we had unlimited amounts of stimulus, or at least it felt unlimited, that was getting pumped into the economy," OANDA senior market analyst Edward Moya said. "But now we are seeing unemployment beating (US Federal Reserve) expectations. This means that the Fed was overly pessimistic and that is very, very concerning for risky assets that got propped up by the stimulus trade."

Front-month Brent and WTI last settled lower July 9.

US oil demand remains tepid despite the rebound in labor markets. Refined product demand slid 13% during the week ended Aug. 29, US Energy Information Administration data showed Sept. 4 - the largest one-week fall since the week ended April 3, during the ramp-up of nationwide coronavirus lockdowns. The fall pushed weekly product demand to the lowest since the week ended May 29, and the four-week moving average down to a six-week low of 18.28 million b/d.

The crude oil forward structure has turned significantly more bearish in recent days. The contango between front-month and year ahead WTI contracts opened to $3.72/b Sept. 4, the widest since May 27. The contango in front-to-12th month Brent contracts opened to USD4.22/b, the widest since May 29.

As MRC wrote before, more consolidation was expected in the European refining system post COVID-19 as operators had already been facing flat or falling demand and rising competition from new refineries in Asia, according to delegates at the S&P Global European Refining Virtual Conference Sept. 3. "There will be some consolidation in the refining system in Europe," according to Adi Imsirovic, research associate at the Oxford Institute for Energy Studies.As a result of the coronavirus pandemic, "we have lost 9 million barrels of demand," Imsirovic said, adding the immediate impact for a few simple refineries was that they "are worried about survival".

We remind tha tin 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 overall PE production totalled 1,712,400 tonnes in the first seven months of 2020, up by 58% year on year. Linear low density polyethylene (LLDPE) accounted for the greatest increase in the output. At the same time, overall PP production in Russia increased in January-July 2020 by 24% year on year to 1,063,700 tonne. ZapSibNeftekhim accounted for the main increase in the output.
MRC

Sinopec Qilu resumed LLDPE production in China after unscheduled maintenance

MOSCOW (MRC) -- Sinopec Qilu Petrochemical, part of Sinopec Group, has restarted its Linear low density polyethylene (LLDPE) unit in Shandong, reported Apic-online.

A Polymerupdate source in China informed that, the company resumed operations at the unit on August 29, 2020. The unit was shut for unplanned maintenance on August 11, 2020.

Located at Shandong province in China, the LLDPE plant has a production capacity of 140,000 mt/year.

As MRC informed earlier, Sinopec Qilu Petrochemical shut its No. 3 LLDPE unit for scheduled turnaround from 2 to 11 June, 2020.

According to MRC's ScanPlast report, June LLDPE shipments to the Russian market rose to 38,600 tonnes from 31,290 tonnes a month earlier, production increased. Russia;s overall LLDPE shipments totalled 191,700 tonnes in the first six months of 2020, down by 7% year on year. Production increased by 89% year on year, whereas exports grew by several times.

Sinopec corp. is one of the world's largest integrated energy and chemical companies. Business Sinopec Corp. includes oil and gas exploration, production and transportation of oil and gas, oil refining, petrochemical production, production of mineral fertilizers and other chemical products. In terms of refining capacity, Sinopec Corp. ranks second in the world, in terms of ethylene capacity - fourth.
MRC

INVISTA agrees to license PTA technology to Jiatong Energy

MOSCOW (MRC) -- INVISTA Textiles (U.K.) Limited’s technology and licensing business, INVISTA Performance Technologies (IPT), and Jiangsu Jiatong Energy Co., Ltd, a subsidiary of Tongkun Group (Tongkun), have reached agreement to license INVISTA’s latest P8 PTA technology for two PTA lines, said the company.

These two lines will be installed in Rudong, Nantong City, Jiangsu province, China. Both lines deploy INVISTA’s largest twin stream design respectively, utilising INVISTA’s latest P8++ PTA technology.

Tongkun and INVISTA have been working together for 10 years in PTA. INVISTA’s first P7 and first P8 technology platforms were successfully installed, commissioned, and operated at another subsidiary (Jiaxing Petrochemical) of Tongkun Group. Based on the successful co-operation on these projects, Tongkun has again selected INVISTA’s latest P8++ PTA technology for the Jiatong project.

Adam Sackett, IPT vice president PTA, commented: "We are honoured that our industry-leading P8++ PTA technology has been selected again by Tongkun Group. Our companies have a long history of PTA innovation, and we look forward to working together on this new chapter of technology and cooperation between the two parties."

A kick-off meeting was successfully concluded on 15 August 2020, by Jiatong, INVISTA and CTCI (the engineering contractor). A project start-up date of 4Q22 is targeted for the first line.

PTA is used to produce polyethylene terephthalate (PET), which is used in the manufacturing of plastic bottles, films, packaging containers, in the textile and food industries.

According to MRC's ScanPlast report, Russia's estimated PET consumption totalled 367,720 tonnes in the first six months of 2020, up by 19% year on year. Russian companies processed 62,910 tonnes in June.
MRC

CCI gives approval to SABIC acquisition of additional stake in Clariant

MOSCOW (MRC) -- The Competition Commission of India (CCI) has cleared SABIC BV's incremental acquisition of a 6.51% shareholding in Clariant AG, according to Apic-online.

The transaction, which will raise SABIC's stake in Clariant to 31.5%, is part of SABIC's growth strategy in specialties.

In September 2018, the companies signed a memorandum of understanding to merge their specialty chemicals businesses into a new high-performance materials specialty chemicals business, following SABIC's purchase of a 24.99% interest in Clariant, which was completed the same month.

Last July, the parties agreed to temporarily postpone discussions of merging the businesses, attributing the delay to unfavorable market conditions.

As MRC wrote before, SABIC swung to a second-quarter net loss of 2.22 billion Saudi riyals (USD587 million) from a net profit of SR2.03 billion in the prior-year period. The loss for the three-month period to end-June is mainly attributed to lower average product prices, lower sales volumes, and an impairment charge of SR1.18 billion related primarily to "certain petrochemical assets in the European region," Sabic says. The company, acquired by Saudi Aramco for USD69.1 billion in a deal completed in June, says the lower prices and volumes were mainly due to the impact of the COVID-19 pandemic. The adjusted net loss figure of SR1.04 billion, excluding the asset write-down, missed analysts’ consensus estimate for a profit of SR900 million. Sabic reported a net loss of SR1.05 billion in the first quarter of this year.

We remind that Sinopec SABIC Tianjin Petrochemical Co. (SSTPC), a 50-50 joint venture of Sinopec and SABIC, completed the debottlenecking of its ethylene cracker on 11 July 2020, adding another 30,000 tons/year output to its current capacity. Followed the expansion, the Tianjin based plant become the country's largest compressor unit, producing 1.3 million tons of ethylene annually.

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.

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

Braskem new joint venture EDC plant startup planned for H2 2022

MOSCOW (MRC) -- A demonstration ethylene dichloride (EDC) plant scheduled to be built in Brazil will cost about USD18 million and is slated to start up by the second half of 2022, reported S&P Global with reference to a top executive with Brazilian petrochemical producer Braskem's statement Sept. 2.

Fabio Barbosa, Braskem's head of commercial chlor-alkali, disclosed those details via email about the joint venture announced on Aug. 20. He also said construction was slated to begin in 2021.

Braskem has teamed up with US chemistry technology company Chemetry to build the plant, which will use less power and cost less than traditional production methods.

California-based Chemetry will employ its eShuttle EDC process, which involves a metal chloride reaction with ethylene to make EDC, bypassing the need to make chlorine gas to react with ethylene.

EDC is a precursor to polyvinyl chloride (PVC), a construction staple used to make pipes, window frames, vinyl siding and other products.

In May 2019 Braskem shut its sole 520,000 mt/year EDC plant in Brazil, as well as an upstream chlor-alkali plant and a salt mining operation, when a government report linked the mining activity to geological damages in Maceio, the capital city of the state of Alagoas.

The company has since been dependent on EDC imports to maintain downstream PVC production. Before the shutdown, Braskem had occasionally imported EDC cargoes to supplement its own output after having expanded PVC capacity.

Braskem aims to restart the shut plants in early November, once infrastructure is in place to ensure delivery of salt imports to feed the chlor-alkali plant and a new permanent substation is online to provide power for that unit. The Maceio salt mining operation has been permanently shut.

The new EDC plant could further reduce the company's occasional EDC import needs as well.

According to MRC's DataScope report, imports of suspension polyvinyl chloride (SPVC) into Russia totalled 13,800 tonnes in the first half of 2020, up by 5% year on year, whereas exports grew by 7% year on year.

Braskem S.A. produces petrochemicals and generates electricity. The Company produces ethylene, propylene, benzene, toluene, xylenes, butadiene, butene, isoprene, dicyclopentediene, MTBE, caprolactam, ammonium sulfate, cyclohexene, polyethylene theraphtalat, polyethylene, and polyvinyl chloride (PVC).

MRC