BASF expects third-quarter net loss on impairments as COVID-19 crushes demand

MOSCOW (MRC) -- BASF has released preliminary figures for the third quarter and says it expects to post a net loss of EUR2.12 billion (USD2.50 billion) compared with a net profit of EUR911 million in the year-earlier period due to non-cash impairments and restructuring provisions, below current analyst estimates, said Chemweek.

However, the company says its operating performance was “better than expected” during the third quarter and expects to record a 5% sales decline to EUR13.81 billion from EUR14.56 billion in the third quarter of 2019. This was mainly driven by negative currency effects, the company says.

BASF also expects to record a third-quarter EBIT loss of EUR2.64 billion compared with a positive EUR1.34 billion in the prior-year quarter due to the impairments and restructuring provisions, below analysts’ consensus. The company says it identified fixed-asset impairments of EUR2.8 billion due to “considerably weaker macroeconomic developments as a consequence of COVID-19.” The impairments were largely the result of weaker demand from the automotive and aviation industries, which impacted the surface technologies segment in particular, and a continued oversupply of basic chemicals, which put pressure on margins in the chemicals and materials segments. In addition, impairments were recognized in the agricultural solutions segment as part of measures to streamline the production network. In BASF’s Other segment, provisions were recognized for the realignment of the global business services unit.

The sale of the assets and liabilities of the construction chemicals business and the related disposal gain will not be reflected until BASF reports its fourth-quarter results, the company says. Payments received until 30 September in connection with the construction chemicals divestment are, however, included in BASF’s statement of cash flows for the third quarter under cash flows from investing activities.

BASF says its third-quarter EBIT before special items is expected to be EUR581 million, above analysts’ consensus but well below the figure for the prior-year quarter, EUR1.06 billion. EBIT before special items rose by EUR355 million in the third quarter from EUR226 million in the previous quarter.

The year-on-year decrease in EBIT before special items was primarily due to the continued weak earnings contributions from the chemicals and materials segments due to ongoing high pressure on margins, BASF says. The nutrition and care, agricultural solutions, and industrial solutions segments and Other segment also recorded lower earnings compared with the prior-year quarter. EBIT before special items in the surface technologies segment was almost on a level with the prior-year period.

BASF’s surface technologies, materials, industrial solutions, and chemicals segments exceeded average analyst estimates for EBIT before special items in the third quarter, the company says. EBIT before special items was on a level with analyst estimates in the agricultural solutions segment but fell short of analyst estimates in the nutrition and care segment, BASF says. EBIT before special items of the Other segment “was more negative than analysts expected,” BASF says.

BASF has provided an outlook for the fourth quarter and full year. It expects a further improvement in EBIT before special items compared with the third quarter of 2020. The expected result would exceed current average analyst estimates for the fourth quarter, BASF says. The company expects full-year sales of EUR57–58 billion, down from EUR59.32 billion in 2019, mainly due to weaker demand as a consequence of the pandemic. BASF anticipates EBIT before special items of EUR3.0–3.3 billion for 2020, down from EUR4.6 billion in 2019. “As well as weaker demand, the company expects pressure on margins to continue, especially for basic chemicals, which will be partially offset by fixed-cost savings,” BASF says.

The outlook is based on various assumptions about the global economic environment in 2020, BASF says. The company assumes a decline in worldwide GDP and industrial production of 5.0%. It anticipates a worldwide decline in chemical production of 2.5% in 2020. It also bases its assumptions on an average euro/dollar exchange rate of $1.15 per euro in 2020 and an average annual Brent crude price of $40/bbl. “BASF’s forecast assumes that severe restrictions on economic activity to contain the coronavirus pandemic, such as lockdowns, are not re-introduced,” the company says.

BASF is due to release third-quarter results on 28 October 2020 and full-year results on 26 February 2021.

As MRC reported earlier, COVID-19 occurred at an already challenging time for the petrochemical industry and has required it to take some drastic actions, said the leaders of the worldпїЅs two biggest chemical companies, BASF and Dow, on Monday at the 54th European Petrochemical Association (EPCA) annual meeting, which is taking place in a virtual format. The pandemic has also accelerated key industry trends, particularly those around sustainability and the environment, they said.

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

US oil refiners look to leapfrog Canadians in making renewable diesel

MOSCOW (MRC) -- US oil refineries are moving aggressively to produce renewable diesel, partly to cash in on Canada’s greener fuel standard before Canadian refiners modify their own plants, reported Reuters.

Canadian Prime Minister Justin Trudeau’s government intends to present its Clean Fuel Standard this year, aiming to cut 30 million tons of emissions by 2030.

Renewable diesel, made by processing spent cooking oil, canola oil or animal fats, can be used in high concentrations or without blending in conventional diesel engines.

So far, Canadian companies have been slow in preparing to make the fuel, with only three projects publicly announced, said Ian Thomson, president of the Advanced Biofuels Canada industry group.

At least five US refiners have announced plans to produce renewable diesel or said they are considering it, including Phillips and HollyFrontier Corp.

“This is Canada’s to lose,” Thomson said. “If Canada’s refiners want to get left out of the game, they will dig their heels in and oppose the standard. Meanwhile, the Americans will build.”

Renewable diesel is a niche market, making up just 0.5% of the 430-billion gallon per year global diesel market, according to investment bank Morgan Stanley.

Greenhouse gas emissions from renewable diesel and traditional biodiesel are typically 50% to 80% lower than conventional diesel.

US states such as Colorado and Washington are moving toward such standards and along with Canada’s fuel standard, a sufficient market is developing, said HollyFrontier executive Tom Creery, on the company’s second-quarter earnings call.

Suncor Energy Inc., Canada's second-biggest oil producer, has been considering a renewable diesel plant in Montreal, but the pandemic slowed its progress, said Chief Sustainability Officer Martha Hall Findlay.

Canadian refiners face longer regulatory delays than competitors in the United States, setting them at a disadvantage, she said.

“The timelines would force investment in facilities outside Canada because of the sheer fact that we can’t build them that fast,” Hall Findlay said. “That seems a little backward.”

New supply could far overshoot demand if all announced projects are built, Morgan Stanley said.

Parkland Fuel Corp. is producing renewable diesel and renewable gasoline in its Burnaby, British Columbia refinery, and is considering expanding capacity, said senior vice-president Ryan Krogmeier.

“There’s a tremendous opportunity for Canada to harness its natural resources,” he said. “The market for renewable fuels is really taking off.”

However, Canada’s criteria for crops to be made into biofuels are too strict to be practical, said farmer Markus Haerle, a corn and soybean grower and chair of Grain Farmers of Ontario.

Federal officials have told the group that farms must meet strict requirements to qualify their crops, such as growing them at least 30 meters (98 ft) from waterways and on land that has not been significantly cleared of trees.

“We know farmers won’t be able to be certified under those criteria,” Haerle said.

The same standards will apply to imported fuels, said Samantha Bayard, spokeswoman for Canada’s environment ministry.

As MRC informed before, Canada's Inter Pipeline Ltd said in September 2020 that it would sell a major portion of its European bulk liquid storage business to Spain-based CLH Group for 420 million pounds (USD537.73 million). Proceeds from the sale will be used to cut debt, improve the balance sheet and help with Inter's spending plans, including on its Heartland Petrochemical Complex in Alberta, the company said.

We remind that in 2017, Inter Pipeline's board of directors authorized the construction of a world-scale integrated propane dehydrogenation (PDH) and polypropylene (PP) plant. The facilities, collectively referred to as the Heartland Petrochemical Complex, are estimated to cost USD3.5 B in aggregate and will be located in Strathcona County, Alberta near Inter Pipeline’s Redwater Olefinic Fractionator.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,496,500 tonnes in the first eight months of 2020, up by 5% year on year. Shipments of all ethylene polymers increased, except for linear low desnity polyethylene (LLDPE). At the same time, PP shipments to the Russian market reached 767,2900 tonnes in the eight months of 2020 (calculated using the formula - production minus exports plus imports - and not counting producers' inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.
MRC

JJC, SVAP, Shenzhen Qianhai Gatsway end Jiangsu Jurong petrochem deal

MOSCOW (MRC) -- SunVic Chemical Holdings' Jiangsu Jurong Chemical (JJC) subsidiary, SunVic Asia Pacific Investments Holdings (SVAP) and Shenzhen Qianhai Gatsway Petrochemical have terminated a framework agreement, in which Shenzhen Qianhai would acquire a 100% equity interest in Jiangsu Jurong Petrochemicals (JJP) from JJC and SVAP, as per Apic-online.

The agreement was terminated due to financial con-straints of Shenzhen Qianhai, and because of an explosion last year in the chemical zone where JJP's plants are located in Yancheng City, China, which led to a government shutdown of the chemical zone.

The transaction, which had an aggregate cash consideration value of RMB 388-million, was to include a methyl tertiary butyl ether facility and a jetty at JJC's site in Xiangshui, China.

JJC holds a 69% interest in JJP, while SVAP, an associated company of SunVic Chemical Holdings, holds a 31% stake.

With the continued shutdown of the chemical zone, the management team of JJC doesn't expect to be able to dispose of JJP in the foreseeable future.

As MRC reported earlier, China's Sinopec has started operation of a 800,000 tons-per-year ethylene facility at its Zhanjiang refinery. The refinery, located in the southern Chinese coastal city of Zhanjiang, commenced operation of its 200,000 barrel per day crude oil refining units in June.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,496,500 tonnes in the first eight months of 2020, up by 5% year on year. Shipments of all ethylene polymers increased, except for linear low desnity polyethylene (LLDPE). At the same time, PP shipments to the Russian market reached 767,2900 tonnes in the eight months of 2020 (calculated using the formula - production minus exports plus imports - and not counting producers' inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.
MRC

Siemens to build large CO2-free hydrogen production plant in southern Germany

MOSCOW (MRC) -- Siemens Smart Infrastructure and WUN H2 GmbH signed a contract to build one of the largest hydrogen production plants in Germany, said Hydrocarbonprocessing.

It will be built in Wunsiedel in the north of Bavaria. With a power intake of six megawatts in the initial development phase, the plant will run solely on renewable energy and will be CO2-free. The electrolysis plant from Siemens Energy will have the capacity to produce over 900 tons of hydrogen per year in this first phase. When fully expanded, it will be able to supply up to 2,000 tons. Groundbreaking is scheduled for the end of this year and commissioning at the end of 2021.

Germany has pledged to be greenhouse gas-neutral by 2050. To this end, all sectors that use energy, such as transportation and industry, must press ahead with decarbonization. The plant in Wunsiedel will serve as a model for all of Germany. It will convert the renewable energy available in this region, e.g., from photovoltaics and wind power, into storable hydrogen (H2), making it available for applications in mobility and industry. This is especially useful when, on sunny and windy days, more energy from renewable sources is produced than needed.

The electrolysis plant will be built in the Wunsiedel Energy Park next to the Siemens manufactured battery storage facility already in operation, complementing the forward-looking energy concept. “This project is another element of a practiced, successful technology partnership between Siemens and SWW Wunsiedel GmbH.

We want to achieve locally already today what Germany is targeting for 2050, namely a complete energy transition across all sectors,” stated Uwe Bartmann, CEO of Siemens Germany and CEO of Smart Infrastructure Regional Solutions & Services Germany. The project will give the northern Bavaria region its very own hydrogen source. Until now, gas for end customers had to travel a relatively long way. The hydrogen will be filled into gas cylinders for local distribution and shipped by truck to local and regional end customers, mostly in Upper Franconia, the Upper Palatinate, southern Thuringia and Saxony, as well as Western Bohemia (Czech Republic). The plant will also help ease grid bottlenecks and provide flexibility for the grid. A public hydrogen filling station for trucks and buses may be added later at the same location to aid the conversion of heavy-duty traffic and public transportation to CO2-free drive technology.

As MRC informed earlier, Siemens says that its digital industries business is teaming up with Lianhetech Seal Sands (Middlesbrough, UK), a contract manufacturer of fine chemicals for use in the crop protection, pharmaceutical, and performance chemicals industries, to double the overall capacity of the Lianhetech plant at Seal Sands near Middlesbrough. Lianhetech Seal Sands is a subsidiary of Lianhetech (Taizhou, China).

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

LPG trade in NW Europe falls as petchems feedstock demand eases

MOSCOW (MRC) -- Total liquefied petroleum gas (LPG) cargo trade for September in northwest Europe fell 10% to an estimated 680,000 metric tons compared to August, amid falling intake as petrochemical feedstock, which declined 18% month-on-month to 450,000 metric tons, according to OPIS records, said Chemweek.

Total LPG imports into the region totaled 200,000 metric tons in September, well below this year’s highest monthly total of 650,000 metric tons, in the wake of the peak period to date for the COVID-19 pandemic across Europe. The propane/naphtha spread narrowed across September, as the CIF NWE naphtha price outpaced that of CIF ARA propane, narrowing from minus USD62/metric ton at the start of the month to minus USD26/metric ton by the end of September, OPIS pricing data showed.

North Sea LPG supplies entering the petrochemical feedstock pool totaled 250,000 metric tons for September, equivalent to 56% of the total petchem intake for the month, compared to 37% in August. September feedstock intake from the US East Coast was 23%, up from 21% in August, while imports from the US Gulf Coast were down to 15% from 38%.

The retail and refining sector saw LPG intake almost double to 150,000 metric tons in September compared to August, according to OPIS records. Exports out of NWE in September fell by a third to 85,000 metric tons, with cargoes moving to the Baltic and Turkey. Two areas appeared to be notable for a changing pattern of trade in September. Intake of LPG to Antwerp picked up considerably to an estimated 190,000 metric tons, from 85,000 metric tons in August. A new 80,000-metric ton butane storage tank in Antwerp holding supplies for Ineos was completed last month, while further storage facilities were completed this year in Antwerp with a 70,000-metric ton propane tank for BASF, according to market sources.

The second area seeing an increase in trade are North Sea LPG exports into the Baltic. The cargoes have appeared alongside similar timing for reduced exports from the Russian Baltic port of Ust-Luga. From May to September, an estimated 160,000 metric tons of LPG cargo has moved from North Sea ports including Braefoot Bay in Scotland, and Karsto and Mongstad in Norway, into Finland, Sweden, and Poland. Imports to the southern Swedish port of Karlshamn are understood to be facilitating a re-export, or break-bulk trade, onto coasters to supply local Baltic outlets.

A further 120,000 metric tons of LPG has been supplied into the Baltic from the US over the same five-month timeframe. Exports of LPG from Ust-Luga in the Russian Baltic have reduced from an estimated 100,000 metric tons in May to 36,000 metric tons in September, according to OPIS records. In September last year exports of LPG from the port were an estimated 160,000 metric tons. Work at key production facilities in a petchems complex at Tobolsk, Russia, thought to be utilizing LPG as part of the feedstock intake, were completed mid-May, according to OPIS records.

We remind that 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. August production of non-porous polymer boards, sheets and films exceeded 38,700 tonnes versus 36,400 tonnes in July. Thus, overall output of these products reached 271,900 tonnes over the stated period, up by 3.5% year on year.
MRC