Mainland China to continue lead role in global styrene demand, prices

MOSCOW (MRC) -- Asia, especially mainland China, will continue to lead global styrene demand and price directions amid massive capacity additions and anti-dumping duties that will result in industry-wide restructuring, according to Brian Lee, executive director at IHS Markit, said Chemweek.

Impacted by COVID-19, the global styrene market this year will be slightly under 29 million metric tons, compared to more than 30 million metric tons previously, says Lee, speaking at IHS Markit’s Asia Chemical Conference 2020, being held in a virtual format. In terms of end use demand, the largest styrene application is for electronics and appliances at 32%, followed by packaging at around 32%, and building and construction at about 21%.

Northeast Asia capacity at 14 million metric tons/year (MMt/y) accounts for 49% of worldwide styrene production in 2020, while forecast demand in the region totals 16.1 million metric tons, with mainland China accounting for 63%, South Korea at 15%, and Taiwan at 12%. Hence, demand or supply shifts in mainland China will impact the overall industry.

The styrene market has rebalanced following limited capacity additions over the last 7-8 years, with producers enjoying healthy margins in the last five years. However, heavy capacity additions came onstream this year while demand was much lower than expected, leading to a longer market and poorer styrene margins than the previous few years, Lee says.

This situation will continue for the next couple of years as capacity additions outweigh demand growth, he says. Most of the new additions are integrated facilities in China, with Hengli Petrochemical (720,000 metric tons/year), Liaoning Bora (360,000 metric tons/year), and Zhejiang Petrochemical (1.2 million metric tons/year) starting up this year. In 2021 at least another 2.6 MMt/y of new capacity is expected, according to IHS Markit data.

Separately, the propylene oxide–styrene monomer (POSM) process of styrene production, despite its smaller capacities, is also making a comeback due to improved styrene margins over the last five years. The POSM portion of styrene production is forecast to increase to around 22% of total capacity within a couple of years, compared to around 18% in 2020. This means that propylene oxide (PO) balances and margin will also impact styrene.

The elasticity of styrene demand growth is around 0.7% of GDP growth. Prior to COVID-19, IHS Markit forecasted global GDP growth for 2020 of around 2.4%, with styrene demand growth at slightly less than 2% with a similar trend in 2021. However, as the pandemic spread, IHS Markit revised the long-term balance based on global GDP growth for 2020 at around negative 5.5%, with styrene demand growth at around minus 5%.

Demand growth in Northeast Asia during the first quarter of 2020 fell 15% year-on-year but the COVID-19 situation stabilized faster than expected, with monthly styrene demand growth turning positive from June onwards. The demand recovery increased further during the third quarter, supported by pent-up demand from China. If this trend continues in the fourth quarter, actual demand growth in 2020 would to be much better than previous IHS Markit forecasts.

As MRC informed earlier, AmSty is announcing its commitment that all products designed for foodservice and food packaging applications will contain 25 percent recycled content by 2030. The leading integrated producer of polystyrene and styrene monomer continues to reach milestones toward this goal with its circular recycling process operating commercially at Regenyx LLC, its joint venture with Agilyx Corporation.

According to ICIS-MRC Price report, October prices of Russian PS continued their upward trend. A shortage of material remained in the domestic market. Traders said Nizhnekamskneftekhim reduced its offer prices for this month's PS purchases to 40%. October prices of Nizhnekamskneftekhim's GPPS grew for the agreed with buyers quantities to Rb89,000-95,000/tonne CPT Moscow, including VAT, whereas HIPS - to Rb93,000-99,000/tonne CPT Moscow, including VAT.
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1. Shell to cut jobs and capacity at major Singapore refinery

MOSCOW (MRC) -- Royal Dutch Shell will halve crude processing capacity and cut jobs at its Pulau Bukom oil refinery in Singapore as part of an overhaul to reduce its carbon emissions, reported Reuters. The refinery on Pulau Bukom, a small island in the Southeast Asian city-state, can process 500,000 bpd of oil and is Shell’s largest wholly-owned refinery worldwide. The move brings the total refining capacity cuts by Shell in recent months to 571,000 bpd, or just over a fifth of its capacity globally. Shell aims to reduce the number of its refineries as part of a drive to slash carbon dioxide (CO2) emissions to net zero by 2050 and restructure its operations by reducing its oil and gas business and expanding its renewable energy and power division. The coronavirus pandemic has destroyed fuel demand, estimated at 4.7 million bpd less during the next five years, and accelerated a rationalization of global refining capacity, Rob Smith, director at consultancy IHS Markit, said.

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MOSCOW (MRC) -- Honeywell announced Zhenhua Petrochemical Co. Ltd will use Honeywell UOP’s C3 Oleflex technology for propane dehydrogenation to process 1 million metric tons per year of polymer-grade propylene for a proposed plant in Dongying City, Shandong Province, China, according to Hydrocarbonprocessing.

Honeywell UOP, a leading technology provider for the oil and gas industry, will provide services, equipment, catalysts and adsorbents for the Zhenhua plant. The project, which will be conducted in two phases, marks the 42nd and 43rd awards for C3 Oleflex technology in China, which has seen strong growth as demand continues to rise for propylene, the primary component in many plastic resins, films and fibers.

Since 2011, 68 of the last 91 dehydrogenation projects globally have been based on UOP technology, including many in China. Global production capacity of propylene from Oleflex technology currently stands at approximately 7.9 million metric tons per year.

“Customers such as Zhenhua Petrochemical trust us to deliver catalytic dehydrogenation technology to feed downstream polymer-grade propylene production and meet the ongoing demand for propane derivatives in China,” said Bryan Glover, vice president and general manager, UOP Process Technologies. “With this project, we will have licensed capacity to generate more than 15 million metric tons per year of polymer-grade propylene in China.”

UOP’s C3 Oleflex technology uses catalytic dehydrogenation to convert propane to propylene and is designed to have a lower cash cost of production and higher return on investment compared to competing dehydrogenation technologies. The Oleflex technology’s low-energy consumption, low-emissions and fully recyclable, platinum-alumina-based catalyst system also helps minimize impact on the environment. The independent reactor and regeneration design helps maximize operating flexibility and onstream reliability.

As MRC reported earlier, in May, 2020, Honeywell announced that Enterprise Products Partners L.P. will use Honeywell UOP’s C3 Oleflex technology in its second propane dehydrogenation plant, called "PDH 2". Located near Mont Belvieu, Texas, PDH 2 will produce 750,000 metric tons per year of polymer-grade propylene as part of Enterprise’s expansion of propylene manufacturing capacity.

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

According to MRC's ScanPlast report, PP shipments to the Russian market reached 880,130 tonnes in the nine months of 2020 (calculated using the formula: production minus exports plus imports, exluding producers" inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.

Zhenhua Petrochemical is a joint venture between Zhenhua Import and Export Corporation and Dongying Yatong Petrochemical company in Dongying Port. Dongying Yatong Petrochemical Co. Ltd., one of the leading petrochemical companies in Shandong, produces and operates gasoline, diesel, liquefied petroleum gas, MTBE, propylene, sulfur, petroleum coke, fuel oil and other petrochemical products. In recent years, it has been committed to upgrading the oil-to-chemicals industry chain and increasing investment in chemical projects.
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MOSCOW (MRC) -- Pemex needs a complete overhaul that includes modifications to its business strategy and reforms to its governance and procurement as the state oil company puts a drag on the country's growth, reported S&P Global with reference to the International Monetary Fund's statement.

Despite missing its financial objectives, Pemex has kept its strategy mostly unchanged, even after the coronavirus pandemic, and will likely need additional budget support, the IMF found in its 2020 Article IV Consultation report on Mexico.

"Given lower oil prices and a downgrade to speculative grade, Pemex's business strategy needs urgent modification," said the report, released Nov. 4.

This reluctance to reconsider its goals contrasts with the reaction by other major oil companies around the world, which have reduced capex and reset production and refining goals, the report said.

In the opinion of the IMF economists who wrote the report, Pemex will not be able to reach its midterm crude production goal and will "at best" stabilize its current production.

The company has promised to reach 2.4 million b/d by the time the president ends his six-year term in 2024. However, private analysts expect the output to actually fall to between 1.5 million-1.6 million b/d, with some pessimists even pointing to as little as 1.1 million b/d, the report said.

"The bulk of existing production comes from just a few fields that in many cases have peaked and are on a declining trend," the report said.

To increase crude output, Pemex needs to partner with third parties who possess the highly specialized technologies needed. But with recent decisions like the cancellation of licensing rounds, the government might be reducing overall interest in the energy sector from private investors, the report found.

The refining strategy also poses major execution hurdles, the IMF concluded.

The Mexican President Andres Manuel Lopez Obrador has said he intends to turn Mexico into an "energy independent" country, ultimately stopping all imports of refined products, mainly from the US, and has actually started the construction of a new refinery in the port of Dos Bocas.

Mexico imports between 70% and 80% of the gasoline and diesel it needs, according to official data from the Energy Secretariat.

Mexico in 2019 imported 1.2 million b/d of petroleum products from the US with a total value of over USD29 billion, according to the US Energy Information Administration.

The refining strategy will likely augment the company's financial losses further as the Dos Bocas refinery will subsume the bulk of the company's expenditures, putting pressures on margins, and leaving little for maintenance investments, the report concluded.

Finally, the IMF mentioned in the report that consideration should be given to ways to strengthen Pemex governance and procurement processes, considering the company's challenges in meeting its financial objectives and the corruption scandals it has suffered in the past.

A company representative did not respond to requests for comment.

As MRC informed earlier, Pemex is advancing a refinery rehabilitation program that will enable it to process 1.2 million b/d of crude oil by the end of 2020 and evaluating a reconfiguration of its petrochemical facility at Cangrejera, Mexico, into what would be its eighth refinery.

We also remind that in 2016, Pemex shut its steam cracker at its Cangrejera complex for maintenance on February 15. The cracker was idle for about 14 days. The conducted repairs at the cracker were a part of planned maintenance.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,594,510 tonnes in the first nine months of 2020, up by 1% year on year. Only high denstiy polyethylene (HDPE) shipments increased. At the same time, PP shipments to the Russian market reached 880,130 tonnes in the nine months of 2020 (calculated using the formula: production minus exports plus imports, exluding producers" inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.

Pemex, Mexican Petroleum, is a Mexican state-owned petroleum company. Pemex has a total asset worth of USD415.75 billion, and is the world's second largest non-publicly listed company by total market value, and Latin America's second largest enterprise by annual revenue as of 2009. Company produces such polymers, as polyethylene (PE), polypropylene (PP), polystyrene (PS).
MRC

MOSCOW (MRC) -- Covestro has lifted force majeure at its 270,000-metric tons/year toluene diisocyanate (TDI) plant in Dormagen, Germany, said Chemweek.

"We have lifted the force majeure for TDI in the EMEA [Europe, Middle East, and Africa] region on 1 November. Our TDI plant in Dormagen is up and running," says a spokesperson. The company declared force majeure mid-October, following the failure of a central pump at the facility, affecting all of its TDI products in the EMEA region. The plant had been undergoing maintenance and was originally expected to restart mid-October.

"The producer is recovering slowly but has not started the plant fully due to some challenges,” according to a market source. “They are still sourcing some TDI from their other plant in China,” the source adds.

Covestro’s TDI plant in Shanghai, China, has a capacity of 275,000 metric tons/year, according to IHS Markit data. Covestro took this TDI unit offline for 30 days from 22 October, and will supply from inventories, according to James Elliott, principal research analyst at IHS Markit.

As MRC informed earlier, Covestro has launched a new production line for polycarbonate (PC) films in the Map Ta Phut Industrial Estate in Thailand.

As MRC reported earlier, Covestro has closed the sale of its European polycarbonates (PC) sheets business to the Munich-based Serafin Group effective January 2, 2020. This includes key management and sales functions throughout Europe as well as production sites in Belgium and Italy.

According to MRC's ScanPlast report, overall estimated consumption of PC granules in the Russian market reached 58,000 tonnes in January-July 2020, up by 22% year on year (47,500 tonnes).

Covestro (formerly Bayer MaterialScience) is an independent subgroup within Bayer. It was created as part of the restructuring of Bayer AG from the former business group Bayer Polymers, with certain of its activities being spun off to Lanxess AG. Covestro manufactures and develops materials such as coatings, adhesives and sealants, polycarbonates (CDs, DVDs), polyurethanes (automotive seating, insulation for refrigerating appliances) etc. With 2019 sales of EUR12.4 billion, Covestro has 30 production sites worldwide and employs approximately 17,200 people (calculated as full-time equivalents) at the end of 2019.

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