Oil tankers face new normal amid pandemic and decarbonization drive

MOSCOW (MRC) -- The global tanker shipping industry is likely to find a new normal in the medium term, with sales of second-hand ships taking center stage while orders for newbuilds slow down, said S&P Global.

Meanwhile, existing tanker companies may become bigger as ships change hands, or they may form pools to enable better bargaining with charterers, while shying away from ordering new ships. Uncertainties over how and when the coronavirus pandemic will end are partly behind the new approach, but so is the higher use of greener fuels. The global health crisis hit when the shipping industry was already in the throes of a major transition to a low-sulfur fuel regime, and starting to plan for its eventual decarbonzation.

While in 2020 to date shipowners benefited from a glut of oil supply and the ensuing demand for floating storage, leaner days may be ahead now that crude flows have evened out and global oil consumption has slumped. This, along with the longer-term impact on oil demand from the energy transition, is already having a clear effect on investment in the sector.

From January this year, the tanker sector, along with its dry bulk and container shipping peers, successfully executed a worldwide plan steered by the International Maritime Organization (IMO) under which marine fuels with more than 0.5% sulfur can only be used in ships that have exhaust systems called scrubbers fitted on them.

With larger-scale investments already made to adjust to the new system, tanker owners are now hesitant to pour money into fresh greenfield projects. The value of all kinds of ships is falling, according to Copenhagen-based Peter Sand, chief shipping analyst at BIMCO, the world’s largest international shipping association with more than 2,200 members. Even though sale and purchase activity in the tanker sector remained active into April, thereafter it started to ease, Sand said.

A sale and purchase broker cited the example of a 2005 built, 302,000 dwt VLCC recently changing hands at just under USD27 million. Sales of a couple of similar 15-year-old ships in April took place at around USD37-39 million.

Analysts point out that the April-May period was exceptional, in that low crude prices made floating storage of crude and refined products lucrative, and supported the prices of tankers as well. According to UK-based shipping consultancy VesselsValue, the phase of high-priced tanker sales has ended for the time being and rates are now in a period of adjustment. The total shipping order book, including tankers, is now at a 17-year low as the coronavirus pandemic has massively slowed contracting, Sand said. Orders for new tankers have dropped more than 40% in the first seven months of 2020 compared with the year-earlier period, according to BIMCO’s estimates.

Instead of ordering new ships, companies are looking for greater synergies. In June, through a combination of pool and time charter deals, Trafigura Maritime placed seven of its tankers with Navig8, which owns and operates vessels and also manages shipping pools. Around the same time, owner and operator companies NORDEN and Diamond S Shipping Inc. formed a joint partnership, DiaNor. Under the agreement, Diamond S is contributing 28 Medium Range tankers to the NORDEN-owned Norient Product Pool, making it one of the world’s largest, with close to 90 such ships. Diamond S CEO Craig Stevenson in a statement described the move as “much needed consolidation in the tanker industry."

Through long-duration arrangements such as time charters, or contributing ships to a single pool, owners can increase the possibility of garnering higher freight and avoid having to undertake complete transfer of ownership through mergers and acquisitions.

As MRC informed earlier, global oil refiners reeling from months of lackluster demand and an abundance of inventories are cutting fuel production into the autumn because the recovery in demand from the impact of coronavirus has stalled, according to executives, refinery workers, and industry analysts. Refiners cut output by as much as 35% in spring as coronavirus lockdowns destroyed the need for travel. As lockdowns eased, refiners increased output slowly through late August. But in top fuel consumers the United States and elsewhere, refiners have been decreasing rates for the last several weeks in response to increased inventories, a sustained lack of demand, and in response to natural disasters.

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

MOSCOW (MRC) -- ExxonMobil Chemical, is in plans to bring on-stream its polypropylene (PP) plant following turnaround, said Apic-online.

A Polymerupdate source in Singapore informed that, the company is likely to complete maintenance at the plant by end-October, 2020. The plant was shut for maintenance in mid-September, 2020.

Located at Singapore, the PP plant has a production capacity of 500,000 mt/year.

According to MRC's ScanPlast report, Russia's 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.

ExxonMobil is the largest non-government owned company in the energy industry and produces about 3% of the world's oil and about 2% of the world's energy.

MRC

MOSCOW (MRC) -- A fire struck the plant of the JG Summit Petrochemicals Group, a Gokongwei company, in Barangay Simlong in Batangas City on Saturday night, according to the Batangas City Fire Station, said Theworldnews.

It was the police that informed firefighters about the blaze, which started at around 10 p.m. One person was reported injured, according to Col. Rex Malimban, chief of the Batangas Police Provincial Office.

“The initial information we received was that used oil was ablaze," Malimban said in a phone interview around 11 p.m.

The amount of petrochemicals stocked in the facility was not immediately known, but Malimban said an initial report reaching his office said the fire had already reached the fourth alarm.

Malimban said several fire trucks from the Batangas Bureau of Fire Protection had been deployed, while other firefighting units at the regional office were put on stand by in case reinforcements would be needed. Here’s a video of the fire, courtesy of the Batangas Filipino Chinese Volunteer Fire Brigade.

JG Summit operates a cracker at the Batangas site as well as polypropylene (PP) and polyethylene (PE) units. JG Summit Olefins in the Philippines was targeting to bring on stream its additional ethylene and propylene supply in November this year.

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

MOSCOW (MRC) -- Dutch chemicals and materials company DSM has agreed another collaboration in 3D printing, coming after deal last week with US firm Nexa3D, said the company.

The latest collaboration is with Nedcam, which originated as a spinoff from the Marine Research Institute Netherlands. Under that deal, Nedcam will offer “Fused Granulate Fabrication” (FGF) 3D printing, using DSM materials. The partners will also explore new applications in tooling, large-size and circular end-use parts.

DSM believes that FGF is a critical technology to address the need for manufacturing structural and large-size components using highly filled polymers at competitive production lead times, it said. Nedcam, for its part, provides an important link between product development and market demand, and their printing activities would help accelerate the adoption of 3D printing, or additive manufacturing, DSM said. The companies also noted the potential for waste reduction.

Nedcam currently produces plugs and moulds from various materials, including glass fibre reinforced composites and steel - often for single or limited use, and resulting in “tonnes of waste every year". FGF production using DSM's recyclable materials offered a route to a more sustainable process, they said. "By combining DSM’s 3D printing and thermoplastics expertise with our production knowledge and production facilities, we want take the necessary steps toward a sustainable and fully circular model production process,” said Erwin van Maaren, co-founder and commercial director at Nedcam.

As MRC informed earlier, DSM formed a 50/50 joint venture (JV) with VDL Groep (Eindhoven, Netherlands), called Dutch PPE Solutions, to produce medical facemasks and establish the first permanent production of critical facemask components in the Netherlands. The companies are investing several million euros to purchase manufacturing equipment and build manufacturing facilities to produce meltblown polypropylene (PP), the critical material layer in medical facemasks that filters viruses, and make medical masks.

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.

MRC

MOSCOW (MRC) -- Avient, formerly PolyOne, says market conditions have improved through the third quarter for most of the company, according to Chemweek.

“A number of end markets that were negatively impacted by the pandemic in the second quarter are recovering,” Avient says, adding that third-quarter revenue is expected to total about USD905 million. The company expects third-quarter adjusted earnings to total 43 cents/share, compared with 44 cents/share in the year-ago period.

“We are seeing a recovery in demand in the third quarter,” says Robert Patterson, chairman and CEO of Avient. “Most notably, our composites business is benefitting from increased demand for outdoor high performance applications.”

The company is also increasing its cost-reduction estimate from the acquisition of Clariant’s masterbatches business, which closed on 1 July. Avient now expects USD75 million/year in cost savings to result from the deal by 2023, compared with USD60 million/year previously forecast.

As MRC reported earlier, in December 2019, Clariant (Muttenz, Switzerland) agreed to sell its entire Masterbatches business to PolyOne Corp. (Avon Lake, Ohio). The transaction values the Masterbatches business at USD1,560 million, representing about 12.2 times the last twelve months reported EBITDA (ending September 2019) on a cash and debt free basis.

We remind that Russia's output of chemical products rose in August 2020 by 5% year on year. At the same time, production of basic chemicals increased year on year by 5.3% in the first eight months of 2020, according to Rosstat's data. According to the Federal State Statistics Service of the Russian Federation, polymers in primary form accounted for the greatest increase in the January-July output.
MRC