Crude plunges 5% on Europe lockdowns, US inventory build

MOSCOW (MRC) -- Oil futures settled near one-month lows Oct. 28 as fundamental outlooks dimmed amid tightened COVID-19 restrictions in Europe and a US crude inventory build, as per S&P Global.

NYMEX December WTI settled USD2.18 lower at USD37.39/b, and ICE December Brent was down USD2.08 at USD39.12/b.

German Chancellor Angela Merkel announced a four-week shutdown of bars, restaurants and other leisure facilities nationwide beginning Nov. 2, according to media reports. The country has seen 14,964 new COVID-19 cases and 85 deaths from the disease in the last 24 hours, the government said.

French President Emmanuel Macron announced a similar set of new restrictions in an evening address to the nation on Oct. 28, a day after the country reported 523 coronavirus deaths.

In the US, the seven-day moving average of new coronavirus infections climbed to a fresh all-time high 71,532 on Oct. 27, according to data from The COVID Tracking Project.

Bearish outlooks broke crude futures out of their recent trading range, front-month WTI and Brent last settled lower on Oct. 2.

"WTI crude could remain vulnerable if the US follows Europe's lead in bringing back tougher lockdowns," OANDA senior market analyst Edward Moya said in a note.

NYMEX November RBOB settled 6.2 cents lower at USD1.0814/gal and November ULSD was down 4.35 cents at USD1.1142/gal.

A strengthened US dollar added additional pressure to oil prices. The ICE US Dollar Index climbed to around 93.4 in afternoon trading, up from 92.93 on Oct. 27 and on pace to close at the highest since Oct. 19.

Meanwhile, US commercial crude stocks climbed 4.32 million barrels to 492.43 million barrels in the week ended Oct. 16, Energy Information Administration data showed Oct. 28. The build pushed stockpiles to more than 10% above the five-year average, marking the first time the nationwide supply hang has expanded since the week ended Sept. 4.

The build comes as US crude production rebounded to 11.1 million b/d last week, up 1.2 million b/d from the week prior as Gulf of Mexico output normalized in the wake of Hurricane Delta.

The steep selloff in crude comes even as two-thirds of the US Gulf of Mexico's crude oil volumes were shut in Oct. 28 ahead of Hurricane Zeta, which strengthened into a Category 2 storm just hours before an anticipated landfall near New Orleans.

An estimated 1.23 million b/d of crude production was shut in, reflecting 66.6% of US Gulf output, according to the US Bureau of Safety and Environmental Enforcement.

As MRC reported earlier, producers took 85% of the US Gulf's crude oil flows ahead of Hurricane Zeta and, now that the storm has passed, some Louisiana refineries are beginning to restart after suffering from the widespread power outages throughout the New Orleans area.

Ethylene and propylene are feedstocks for producing 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

Sumitomo Chemical swings to loss on one-off items, COVID-19 impact; elevates forecast

MOSCOW (MRC) -- Sumitomo Chemical swung to a net loss of GDP1.0 billion (USD10.4 million) in the fiscal first half ended 30 September, compared with a net profit of GDP29.7 billion a year earlier, said Chemweek.

The figure includes one-off, unrealized losses on securities amounting to GDP33.6 billion. Sales were down 5.4% year on year (YOY) to ?1 trillion. Operating profit plunged 50.4% YOY to GDP50.7 billion, from GDP102.5 billion in the year-ago period. Quarterly figures have not been disclosed.

Sales at Sumitomo's petrochemicals and plastics business segment, the company's largest, declined by 30.8% YOY to GDP243 billion. It sank to an operating loss of GDP31.2 billion from an operating profit of GDP17.4 billion a year earlier due to declining shipment volumes, deteriorating margins for petchem products, and a periodic shutdown for maintenance at Petro Rabigh (Rabigh, Saudi Arabia), a joint venture with Saudi Aramco. Amid the economic downturn caused by the COVID-19 pandemic, shipments of synthetic resins mainly for automotive use declined. Impacted by a drop in market prices for raw materials, the prices of petrochemical products hovered at a low level, Sumitomo says. Market prices for plastics decreased in line with falling feedstock costs. Prices of fiber intermediates and methyl methacrylate also declined.

In Sumitomo's energy and functional business, hurt by the COVID-19 pandemic, shipments of materials for automotive use decreased, including synthetic rubber as well as separators and cathode materials for lithium-ion secondary batteries. Operating income in the segment plummeted by 62% YOY to GDP4.7 billion from GDP12.8 billion in the same period of the previous year, and sales dropped 19.6% YOY to ?105 billion.

Revenue at Sumitomo's IT-related chemical segment rose 3% YOY to GDP213 billion and operating income grew by 44.7% YOY to GDP22 billion. Shipments of processing materials for semiconductors, including high-purity chemicals and photoresists, increased driven by growing demand. Shipments of materials for display applications increased due to stay-at-home demand and work-from-home demand, it adds.

The health and crop-science business swung to an operating profit of GDP9.9 billion, against an operating loss of GDP8.1 billion a year earlier due to improved margins for methionine. Revenue at the business rose 27% YOY to GDP186 billion after the acquisition of four South American subsidiaries of Nufarm in April 2020.

Sumitomo’s other business unit is pharmaceuticals.

The company has upgraded its forecast for the full year ending 31 March 2021. It now expects net profit to be GDP30 billion, compared with an earlier estimate of GDP20 billion. Sumitomo has raised its operating-income guidance to ?105 billion, versus a previous projection of ?70 billion. No changes have been made to the full-year revenue forecast of GDP2.2 trillion.

The upward revision is attributed to “resilient performance of shipments in the pharmaceuticals and IT-related chemicals sectors despite the delay expected in the recovery of sales of synthetic resins in the petrochemicals and plastics sector."

As MRC informed earlier, Sumitomo Chemical has begun construction of a new polypropylene (PP) compounding plant in Jiangsu province, its fifth facility in China, due to start up next year.

According to ICIS-MRC Price report, Poliom took off-stream its PP production for the scheduled maintenance on 2 September; the shutdown will take a little more than two weeks. The plant's annual production capacity is 230,000 tonnes. It is also worth noting that Ufaorgsintez also shut its production capacities for a scheduled turnaround on 12 September, the outage will last until 10 October.
MRC

VYNOVA resumes operations at two PVC plants in Europe

MOSCOW (MRC) -- European chlor-alkali and polyvinyl cloride (PVC) producer VYNOVA has resumed operations at its PVC plant in Beek, the Netherlands, reported NCT with reference to market sources.

The producer is also preparing to restart production at its Mazingarbe plant in France.

PVC plants could reportedly be restarted after the return of the producer’s monomer vinyl cloride (VCM) unit in Tessenderlo, Belgium from a maintenance shutdown, which supplies feedstock to both PVC plants.

However, this news could not be confirmed directly by the company at the time of publication.

Vynova’s Beek plant has a PVC production capacity of 225,000 tons/year, while the Mazingarbe plant can produce 250,000 tons/year of PVC. Meanwhile, the company’s Tessenderlo site produces 740,000 tons/year of VCM.

As MRC wrote before, VYNOVA last carried out a maintenance turnaround at its PVC plant at Mazingarbe within 10 days from late July to eary August, 2017.

According to MRC's ScanPlast report, Russia's overall PVC production totalled 718,500 tonnes in January-September 2020, down by 0.3% year on year. At the same time, only two producers managed to increase their PVC output.

VYNOVA is a leading European PVC and chlor-alkali company. It operates production sites in five countries and has over 1,250 employees, realising an annual turnover of EUR1 billion. The company's products play a key role in manufacturing numerous industrial products and consumer goods that improve the quality of life. Established in 2015, VYNOVA is the chlor-vinyls platform of the International Chemical Investors Group (ICIG).
MRC

PKN Orlen petchem earnings, volumes stable

MOSCOW (MRC) -- Refining and energy group PKN Orlen (Plock, Poland), the country’s largest petrochemicals producer, says its petchems business delivered EBITDA in the third quarter flat with last year's equivalent period at 502 million zloty (USD123 million), said Chemweek.

Sales volumes were flat year on year (YOY) at 1.3 million metric tons, with sales in Poland rising 7% on higher olefins, fertilizers, and polyvinyl chloride (PVC) sales, while sales in Lithuania grew 110% YOY driven by an expanded market share, it says.

Sales declined 16% YOY in the Czech Republic, due mainly to the slump in demand from the automotive and construction sectors, and the effect of maintenance shutdowns, it adds.

The company says its 270,000-metric tons/year PE3 polyethylene unit in Litvinov, Czech Republic, also reached full capacity during the quarter after commissioning earlier this year.

"Refining margins may be under pressure until global production capacity is reduced by around 3 million b/d, which may take several quarters,” according to PKN Orlen. “Permanent restructuring of the refining industry seems to be inevitable, and biofuels and integration with petrochemicals should gain in importance," it says.

We remind that in H1 September 2019, Honeywell announced that PKN Orlen had licensed the UOP MaxEne process, which can increase production of ethylene and aromatics and improve the flexibility of gasoline production. The project, for the PKN Orlen facility in Plock, Poland, currently is in the basic engineering stage.

Ethylene is the main feedstock for the production of polyethylene (PE).

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).

PKN Orlen would be the first refining and petrochemicals company in Europe to use the Honeywell UOP MaxEne technology for molecule management of a naphtha stream to produce high-quality products including olefins, aromatics and gasoline.
MRC

Clariant sales, EBITDA decline on lower volumes, currency effects

MOSCOW (MRC) -- Clariant says its third-quarter sales declined 14% year on year (YOY) to 893.0 million Swiss francs (USD979.5 million) due to lower volumes and negative currency effects that also squeezed profitability, with EBITDA for the period lower by 16% YOY, to SFr127 million, according to Chemweek.

The company’s EBITDA margin recorded a slight YOY decrease of 0.3 percentage points, to 14.2%. Net profits have not been disclosed.

Clariant’s care chemicals and catalysis businesses recorded higher EBITDA margins due to more favorable product mixes, cost mitigation, and efficiency improvement, the company says. Natural resources posted a lower EBITDA margin, mainly due to lower volumes in industries affected the most by COVID-19 such as automotive, textiles, and oil, the company says.

Clariant expects third-quarter sales to be the lowest of the first three quarters of 2020. Its natural resources business was affected the most, with all three segments of the business impacted negatively by oversupply in oil markets and the pandemic. Sales in care chemicals and catalysis softened only slightly, it says.

Natural resources' EBITDA fell 38% YOY, to SFr44 million on 22% YOY lower sales, to SFr356 million, due to lower volumes resulting from weaker demand, especially in the oil and mining services segment. Care chemical sales decreased 9% YOY, to SFr330 million, but EBITDA increased 16% YOY, to SFr72 million, due to performance measures and a favorable product mix, the company says. Sales of Clariant's catalysis business were 9% lower YOY, to SFr207 million, and EBITDA decreased 5%, to SFr42 million.

“Over the first nine months of 2020, we successfully upheld the profitability of our continuing operations despite an exceedingly challenging environment. Although the COVID-19 pandemic had a significant negative impact on several of Clariant’s key end markets in the third quarter, the performance resilience clearly validates the success of our strategic focus on the three core specialty business areas,” says Hariolf Kottmann, executive chairman ad interim at Clariant.

Clariant anticipates that the COVID-19 pandemic will have a continued, but slightly less negative impact on sales and profits in the fourth quarter of 2020 compared with the third quarter. The company says it will continue with its performance programs to achieve above-market growth, higher profitability, and stronger cash generation in the midterm.

Clariant says it will also continue its transformation program, which has reshaped the company's portfolio through the divestment of healthcare packaging in October 2019 and masterbatches in July 2020, and that it is “progressing with the planned divestment of pigments while preparing the rightsizing of the organization.”

As MRC reported before, earlier this month, Clariant (Muttenz, Switzerland) announced the construction of a new state-of-the-art catalyst production site in China. This project represents a significant investment which further strengthens Clariant’s position in China and enhances its ability to support its customers in the country’s thriving petrochemicals industry.

The new facility will be primarily responsible for producing the Catofin catalyst for propane dehydrogenation, which is used in the production of olefins such as propylene. Thanks to its excellent reliability and productivity, Catofin delivers superior annual production output compared to alternative technologies, resulting in increased overall profitability for propylene producers, says the company. Construction at the Dushan Port Economic Development Zone in Jiaxing, Zhejiang Province was scheduled to commence in Q3 2020, and Clariant expects to be at full production capacity by 2022.

Propylene is the main feedstocks for the production of polypropylene (PP).

According to MRC's ScanPlast report, 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.

Clariant AG is a Swiss chemical company and a world leader in the production of specialty chemicals for the textile, printing, mining and metallurgical industries. It is engaged in processing crude oil products in pigments, plastics and paints.
MRC