BASF completes divestment of construction chemicals business to private equity firm

MOSCOW (MRC) -- On September 30, 2020, effective at midnight, BASF closed the divestiture of its Construction Chemicals business to an affiliate of Lone Star, a global private equity firm, said the company.

The purchase price on a cash and debt-free basis is EUR3.17 billion. The Construction Chemicals business now forms the newly founded MBCC Group, headquartered in Mannheim, Germany. “Lone Star has been a professional partner in this transaction and is committed to the future success of the business,” said Saori Dubourg, member of the Board of Executive Directors of BASF SE. “We highly appreciate the tremendous efforts to realize the carve-out and close the deal in such a fast and decisive manner. We wish the Construction Chemicals team much success for the future."

The divestment of the assets and liabilities of the Construction Chemicals business and the related disposal gain will be reflected in BASF’s financial reporting in the fourth quarter of 2020. Payments received in the context of the transaction until September 30 will be included in cash flows from investing activities in the Q3 2020 Statement of Cash Flows.

On December 21, 2019, BASF and an affiliate of Lone Star had signed a purchase agreement for the acquisition of BASF’s Construction Chemicals business. With around 7,500 employees, the Construction Chemicals business operates production sites and sales offices in more than 60 countries and generated sales of about EUR2.6 billion in 2019.

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

COVID-19 - News digest as of 01.10.2020

1. Dow to record restructuring charge of up to USD600 million, close manufacturing assets

MOSCOW (MRC) -- Dow says it will record a charge of between USD500-600 million in the third quarter for costs associated with the company’s ongoing restructuring program, and has outlined more details of its previously announced plan to close manufacturing facilities in the US and Europe to enhance its long-term competitiveness as the worldwide economy recovers from the COVID-19 pandemic, said Chemweek. Dow will rationalize its manufacturing asset footprint in its industrial intermediates and infrastructure business by “shutting down certain amines and solvents facilities in the United States and Europe as well as select small-scale downstream polyurethanes manufacturing facilities,” it says.

MRC

Japan gasoline imports jump 27% in August

MOSCOW (MRC) -- Japan’s gasoline imports jumped 27.3% in August from a year earlier due to cheaper overseas prices and tighter local supply as refiners kept run rates low amid slumping demand for jet fuel, the Ministry of Economy, Trade and Industry (METI) said, as per Hydrocarbonprocessing.

Imports totaled 422,654 kiloliters (85,755 barrels per day), up from 332,030 kl a year earlier, but they fell 5.3% from 446,206 kl in July which was the highest monthly import figure since August 2011. Gasoline imports in January-August rose 74% on-year. "Overseas gasoline prices are extremely low, which is giving us an incentive to import,” Tsutomu Sugimori, president of the Petroleum Association of Japan, said last week.

"Also, we have been running refineries at low rates to reflect plunging demand for jet fuels, forcing us to import gasoline to cover some shortage," said Sugimori, also the chairman of Eneos Holdings Inc., Japan's top refiner. Japan's refinery run rate has been at around 60% in the past few months as fuel demand collapsed due to the COVID-19 pandemic, especially jet fuel which was hurt by global curbs on air travel.

But Sugimori said the run rate is expected to recover toward winter when kerosene demand picks up, leading to lower gasoline imports. Jet fuel and kerosene are closely related and belong to a grade of oil products called middle distillates. The ministry data also showed crude oil imports fell 23.9% on-year to 11.64 MM kl (2.36 million bpd), the lowest for the month of August since 1988.

It marked an eighth consecutive monthly decline and followed a year-on-year fall of 31-32% in June and July, when crude oil imports hit the lowest for the month since 1967 and 1968, respectively. Crude oil imports in January-August fell 16.9% on-year.

As MRC informed earlier, Sumitomo Chemical and Saudi Aramco have jointly loaned out a total of USD2bn to Rabigh Refining and Petrochemical Co (Petro Rabigh), which faced shortfall of working capital as “the market environment has rapidly deteriorated” since end-2019. This project has been undertaken by Rabigh Refining and Petrochemical Company (Petro Rabigh), jointly founded by both companies. The financial completion guarantee has been terminated as of 30 September 2020, as Sumitomo has confirmed its fulfillment of specific requirements for continuous performance and debt-repayment ability stipulated in the project financing agreements, after consultation with a syndicate of banks.

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

Sumitomo, Saudi Aramco lend USD2bn to boost Petro Rabigh working capital

MOSCOW (MRC) -- Sumitomo Chemical and Saudi Aramco have jointly loaned out a total of USD2bn to Rabigh Refining and Petrochemical Co (Petro Rabigh), which faced shortfall of working capital as “the market environment has rapidly deteriorated” since end-2019, said Hydrocarbonengineering.

This project has been undertaken by Rabigh Refining and Petrochemical Company (Petro Rabigh), jointly founded by both companies. The financial completion guarantee has been terminated as of 30 September 2020, as Sumitomo has confirmed its fulfillment of specific requirements for continuous performance and debt-repayment ability stipulated in the project financing agreements, after consultation with a syndicate of banks.

A financial completion guarantee is an arrangement whereby investing companies for a given project guarantee a full repayment of the loan to a lender on behalf of the project company during construction and for a specified period after the completion of the construction work, until confirmation is made that the project company is deemed capable of making repayment with continuous cash flow generated by stable operations.

In March 2015, Petro Rabigh signed project financing agreements with a syndicate of banks, including the Japan Bank for International Cooperation (JBIC) and the Public Investment Fund (PIF) of Saudi Arabia, to receive an aggregate loan of US$5.2 billion, which was 60% of the total cost of Rabigh Phase 2 Project (about USD9.1 billion). For these agreements, Sumitomo Chemical and Saudi Aramco have each offered a financial completion guarantee for 50% of USD5.2 billion based on the agreements with the syndicate of banks.

Petro Rabigh has already started the scheduled repayment of the debt principal since June 2019 (outstanding debt as of September 2020 is about USD4.6 billion). The company will continue to repay the balance of the loan out of cash flow generated from its operating activities.

Meanwhile, the market environment has rapidly deteriorated since the end of last year. Coupled with other factors including periodic shutdown maintenance, Petro Rabigh faced the shortfall of working capital. To cover this shortfall, Sumitomo Chemical and Saudi Aramco have decided to make a loan totalling USD2 billion (of which Sumitomo Chemical's portion is USD750 million, 37.5% of the ownership stake) to Petro Rabigh.

Sumitomo Chemical continues to provide necessary support so that Petro Rabigh can continue stable operation to achieve sustained growth.

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

PVC prices keep rising in Russia in October

MOSCOW (MRC) - The situation in the global suspension polyvinyl chloride (SPVC) market and the devaluation of the rouble continue to put pressure on prices in the Russian market. Russian producers announced a further price increase of Rb2,000-3,000/tonne, according to ICIS-MRC Price Report.

Russian producers traditionally cut SPVC prices in September - October in the previous years in the domestic market, including due to a decrease in demand. The current year was not typical for both the Russian and the global PVC markets in general.

Tight PVC supply in several regions of the world and record price levels put a serious pressure on PVC prices in Russia, as well as the weakening of the rouble. Russian producers also intend to achieve a price rise of Rb2,000-3,000/tonne for October shipments.

The demand for SPVC from Russian converters in September was at a good level, although some converters were cautious about purchases at the beginning of the month. At the same time, supply of PVC K58/70 has been tight since the middle of summer due to insignificant imports and problems with production from some producers.
Many converters intend to reduce the volume of PVC purchases in October, wishing to optimise their stocks of raw materials and finished products by November.

Nevertheless, weaker demand does not affect the prices of PVC from Russian producers, since the latter have an increased demand for PVC from consumers from other regions of the world. In addition, in some areas of export, PVC prices were significantly higher than the prices that Russian producers offer for supply to the domestic market in October. In particular, in Turkey last week PVC prices exceeded USD1,200/tonne CFR Istanbul. Prices in Asia have exceeded USD1,000/tonne CFR. Kaustik Volgograd plans to shut its 90,000 tonnes/year PVC capacities for the turnaround in the first ten days of October.

For most consumers in Russia, the current price situation was not typical. Buyers were used to the fact that in previous years, prices have been gradually decreasing since September until the end of the year.

And, as a result, consumers were not ready for the next wave of SPVC price increases. October deals for Russian PVC with K64/67 were negotiated in the range of Rb83,000-86,000/tonne CPT Moscow, including VAT, for quantities of less than 500 tonnes.
MRC