Opportunities and risks for the chemical industry in a post-pandemic world

MOSCOW (MRC) -- IHS Markit held an executive briefing on Tuesday in a virtual format on the occasion of the European Petrochemical Association (EPCA) annual meeting. The webinar examined opportunities and risks for the chemical industry in the post-pandemic world, said Chemweek.

Mark Eramo, global vice president/oil markets, midstream, downstream, chemicals at IHS Markit, set the scene describing COVID-19 as “one of the most impactful events in modern history” that had caused a “head-on collision between the personal and business world.” Planning a path forward “has never been more difficult, given the unprecedented level of complexity,” Eramo said.

Dan Evans, vice president and global head of refining and marketing at IHS Markit, highlighted the pandemic’s dramatic impact on the upstream oil and downstream refining sectors, including a worsening oversupply of petroleum products. He said that demand for refined products in 2025 will be at least 4 million b/d (MMb/d) lower than pre-COVID expectations, but that a lot of new refining capacity is due to come onstream in the intervening period.

Refining margins in 2022-23 will still be as weak if not worse than this year, according to Evans. As a result, at least 3 MMb/d of refining capacity will likely be closed worldwide in the next 3-5 years, more than half this figure in Europe, he said. “We have entered a new era of overcapacity in the refining industry,” Evans said.

Refining companies will seek greater integration with petrochemical production to address oversupply, Evans said. But this strategy has risks as well as opportunities. “The risk is that too many refiners do it, which could lead to overcapacity in the petrochemical space,” he said. IHS Markit forecasts that petrochemical yields from refineries could increase from 25-40% to 40-80% as integration increases.

Duncan Clark, vice president/aromatics and fibers at IHS Markit, provided an analysis of base chemical scenarios, covering six key products: ethylene, propylene, methanol, chlorine, benzene, and para-xylene. Clark cited an IHS Markit estimate that worldwide demand for base chemicals will be lower by 8 million metric tons (MMt) in 2020 than pre-pandemic forecasts. “We’re losing one and a half years of demand growth as a result of this pandemic,” Clark said.

Base chemicals were already headed for overcapacity before COVID-19 due to numerous capacity additions, according to IHS Markit. The pandemic “couldn’t have come at a worse time because these products were already facing overcapacity,” Clark said. “These markets will be under pressure for the next five years." IHS Markit is expecting “a poorer base chemicals performance in Western Europe than in the rest of the world” this year, largely linked to an anticipated slump in regional GDP, which has caused a significant downturn in demand for durables, with the automotive sector particularly hard it, Clark said.

IHS Markit estimates that worldwide ethylene demand will increase 0.9% in 2020 but decline 4.4% in Western Europe. It expects worldwide methanol demand to decline 4.4% this year but drop 15.0% in Western Europe. And it predicts benzene demand will decrease 4.7% worldwide in 2020 but fall 10.2% in Western Europe. These figures contrast with average annual growth of 4% for base chemicals worldwide in the last 10 years.

Adam Bland, executive director/solvents and surfactants at IHS Markit, highlighted one product that has clearly benefited from the pandemic, isopropyl alcohol (IPA), which is used to make cleaning and disinfectant products including hand sanitizer and as a processing solvent in the production of pharmaceuticals. “IPA is at the forefront of the battle with COVID-19,” said Bland. IHS Markit forecasts a 12% worldwide increase in IPA demand in 2020. As a result, about 250,000 metric tons of additional IPA will be used in medical markets this year.

Bland expects “a significant pullback in IPA demand in 2021,” assuming a recovery from the pandemic next year. However, he anticipates that widespread use of hand sanitizers will continue. As a result, there will be high demand for IPA “for many years to come,” Bland said. The overall economy will be the main indicator of the specialty chemical industry’s recovery from the crisis, according to Bland. IHS Markit forecasts that consumption of specialties will increase at a compound annual growth rate (CAGR) of 3.3% in 2022-25 with the Chinese specialties market achieving a CAGR of 5% but Western Europe expanding at a CAGR of just 1-2%.

Specialties, with their many applications and strong innovation, can also help the recovery of the world economy, Bland says. “The ‘new normal’ will present opportunities for growth,” he said. “Specialty chemicals will allow us to achieve more for less and, with foresight and innovation, we can enter a golden age of specialty chemicals."

Mukta Sharma, managing director/chemical consulting at IHS Markit, noted that worldwide chemical demand is forecast to decline in 2020 for the first time since 2008. Growth will average just more than 3%/year in the coming years, she said.

Sharma also highlighted the impending overcapacity in base chemicals. More than 140 MMt of annual capacity is set to be added in the next five years, from projects that had been sanctioned before the pandemic, she said. However, demand growth is forecast to be much lower than the capacity growth, at less than 100 MMt over the same period, according to IHS Markit. “This adds up to a rather prolonged period of lower earnings overall for the chemical industry,” Sharma said.

The situation during this challenging period will be complicated by the need to deal with likely price volatility and manage the energy transition and shift to greater circularity, she said. Circularity remains “high on the industry agenda,” Sharma said. The development of new plastics recycling technologies, particularly chemical recycling, is essential to establish a circular economy. “There are obstacles to overcome in terms of commercialization and scale, but chemical recycling would provide an elegant solution,” Sharma said.

As MRC informed earlier, European petrochemical industry faces short-term and longer-term challenges caused by or exacerbated by the COVID-19 pandemic. Speakers on Monday at the European Petrochemical Association’s (EPCA) 54th annual meeting, being held in a virtual format, said the crisis had been a learning experience for the industry.

According to MRC's DataScope report, Russian companies significantly raised their purchasing of PP in foreign markets in August partially because of a major increase in demand, imports were 21,200 tonnes versus 17,200 tonnes a month earlier. Thus, overall PP imports into Russia reached 143,200 tonnes in January-August 2020, compared to 120,100 tonnes a year earlier.

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MOSCOW (MRC) -- A potential circular economy hub aimed specifically at the chemical and manufacturing industries is being studied by Port of Antwerp, Belgium, reported Chemweek.

The proposed site, named NextGen District, covers 88 hectares. Port of Antwerp says it is launching a consultation phase to find investors “within the circular processing and manufacturing industry who intend to further develop the site in order to contribute to the transition to a climate-neutral society.”

The port says the consultation “specifically concerns candidates with core activities within the circular processing industry (primarily chemical processes) and the manufacturing industry.”

The area was formerly used by General Motors, with the port authority describing it as one of the last remaining available large sites in the port close to Europe’s largest chemical cluster. The industrial site is planned to be where end-of-life products will be reused, circular carbon solutions researched, and experiments conducted with renewable energy, it says. Room will also be allocated for relevant startups and “free-standing plots of various sizes aimed at chemical and industrial players.”

Efforts will be made to reduce carbon dioxide emissions and transition to alternative energy sources through projects such as generating renewable energy, using residual heat, and importing, storing, and converting hydrogen into building blocks for the chemical sector, it says.

“Port of Antwerp is home to the largest integrated cluster in Europe. We intend to strengthen, anchor, and support this cluster in the transition to a carbon-neutral and circular economy,” says Jacques Vandermeiren, the port’s CEO. “The energy transition and the circular economy were at the top of the agenda before the pandemic, and still are today,” he says.

As MRC informed before, Russia's output of products from polymers grew in August 2020 by 4.1% year on year. However, this figure increased by 1.9% year on year in the first eight months of 2020, reported MRC analysts. According to the Russian Federal State Statistics Service, August production of unreinforced and non-combined films rose to 126,300 tonnes from 118,200 tonnes a month earlier. Output of films products grew in January-August 2020 by 8.3% year on year to 863,200 tonnes.
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MOSCOW (MRC) -- Chevron Phillips Chemical Company (CPChem; The Woodlands, Texas), says B.J. Hebert will join the firm on 1 November as executive vice president and chief operating officer (COO), the latter a newly created position, said Chemweek.

Hebert, who has been president of Occidental Chemicals (OxyChem) since 2017, will be responsible for CPChem’s manufacturing operations and commercial functions.

A 33-year veteran of the chemical industry, Hebert began his career at Vista Chemicals, where he served in plant and operations engineering roles. During his time at OxyChem, he held numerous positions of increasing responsibility including senior vice president/basic chemicals, vice president and general manager/vinyls, and manufacturing director/chemicals.

As MRC reported earlier, Chevron Phillips Chemical, part of Chevron Corporation, declared force majeure Sept. 1 on its polyethylene (PE) products after assessing the impact of Hurricane Laura to its Gulf Coast PE operations.

According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. HDPE accounted for the main decrease in imports.

Headquartered in San Ramon, California, Chevron Corporation is the the second-largest integrated energy company in the United States and among the largest corporations in the world. Chevron is involved in upstream activities including exploration and production, downstream activities including refining, marketing and transportation, and advanced energy technology. Chevron is also invested in power generation and gasification processes.

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MOSCOW (MRC) -- GAIL India Ltd has restarted its polyethylene (PE) unit in Pata, Uttar Pradesh, according to CommoPlast.

Thus, the company's 400,000 tons/year high density polyethylene (HDPE)/linear low density polyethylene (LLDPE)swing plant in Pata, Uttar Pradesh resumed operations just a couple of days after the company shut down the unit on 25 September 2020 due to feedstock supply disruption.

As MRC reported earlier, on 24 September 2020, a fire broke out at the Oil and Natural Gas Corporation (ONGC) gas processing plant in Hazira, India with no casualty or injury reported. As a result, the ruptured pipeline disrupted feedstock supply to GAIL. ONGC’s own petrochemical plant, namely ONGC Petro Additions (OPaL) was not affected by the incident as it is situated in a different location.

OPaL operates the petrochemical complex in Gujarat, India that houses a naphtha cracker with an annual output of 1.1 million tons/year of ethylene and 400,000 tons/year of propylene. Downstream units including a 340,000 tons/year PP line, a 360,000 tons/year HDPE/LLDPE swing line, and a 340,000 tons/year HDPE line.

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.
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MOSCOW (MRC) -- Chemical distributors, logistics providers, and transportation firms face similar market challenges to their counterparts in the chemical manufacturing industry caused by COVID-19, said Chemweek.

They also need to adapt to trends such as digitization and sustainability that the pandemic has accelerated and intensified. Speakers at a logistics and supply chain panel, held on Tuesday as part of the European Petrochemical Association (EPCA) annual meeting, taking place this year in a virtual format, nevertheless agreed that the crisis has made chemical supply chains more agile and innovative than ever before.

Christian Kohlpaintner, CEO of chemical distribution market leader Brenntag, said that that 2020 has been “an interesting ride” for all participants in chemical supply chains, and that companies had managed to maintain business continuity. “We kept the shop open, all of us with few exceptions,” Kohlpaintner said. Brenntag faced, particularly in the early days of lockdown, “massive swings in demand from customers and suppliers” and the imposition of border controls, at a time when it had to prioritize the safety of its employees and business partners, Kohlpaintner said. “We did everything to maintain financial strength while helping customers and suppliers to navigate through the crisis,” he said. Meanwhile, the measures taken to protect employees meant “we had the best safety performance ever,” Kohlpaintner said.

Kohlpaintner listed three hypotheses for supply chain companies and logistics providers that, in his view, have arisen from the crisis: a shift from “just in time to just in case,” a move from segregation to integration, and a repositioning of sustainability strategies “from the fringe to the core." Adopting a just-in-case approach means learning from COVID-19 and getting ready for the next “abnormally strong challenge,” Kohlpaintner said. “We have to be smart and create stable supply chains to be prepared for the next crisis,” he said.

Brenntag relied on its global presence and network of supply chains to cope with COVID-19 as the pandemic spread west from China and the rest of Asia to Europe and the Americas. “It helped us to have early warnings, so products could be supplied to customers from different supply chains,” Kohlpaintner said.

Meanwhile, customer/supplier interfaces will become more integrated and less segregated in a process driven by digitization. Brenntag has seen “strong flexibility, even on the customer and supplier side,” and a huge increase in the use of digital technologies during the pandemic, Kohlpaintner said. “This more integrated view of our value chains will continue,” he said. Sustainability will be at the core of supply chain companies’ plans following the crisis, Kohlpainter said. “Sustainability needs to be considered a clear driver of our strategy,” he said. All the changes driven by the pandemic, including the closure of logistics sites to cut costs and long-term changes to the working environment, have sustainability implications, he said.

Jan Arnet, CEO of chemical transportation and logistics provider Bertschi, gave an account of how the company has demonstrated resilience during the pandemic, its staff adapting quickly to home-working practices and office processes moving successfully online as the company introduced measures to protect other employees such as drivers and cleaners. “Without that external push [COVID-19], it would have taken us one and a half years to make these changes,” Arnet said.

The key enablers were digitized IT systems and solution-oriented action. According to Arnet, “this current innovative spirit” can be leveraged to increase automation, flexibility, and focus in supply chains partly through “diversification of sourcing without adding complexity and reducing working capital without losing opportunity.”

Gina Fyffe, CEO at petrochemical shipping and trading company Integra, said that COVID-19 had “changed the conversation” about supply chains, focusing attention on building resilience. For the future, areas of focus include supply sources, inventories, and infrastructure, she said. “COVID-19 has taught us that our supply chains are global and that national agendas such as trade and tariff barriers can backfire,” said Fyffe. “We have the opportunity to renew, adapt, learn, and amend."

As MRC informed earlier, European petrochemical industry faces short-term and longer-term challenges caused by or exacerbated by the COVID-19 pandemic. Speakers on Monday at the European Petrochemical Association’s (EPCA) 54th annual meeting, being held in a virtual format, said the crisis had been a learning experience for the industry.

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.
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