US crude imports to South Korea fall for sixth straight month in October

MOSCOW (MRC) -- South Korea's crude oil imports from the US in October fell for the sixth consecutive month, while local refiners continued to favor Middle Eastern crude, lifting October Saudi oil shipments by more than 30% from a year earlier, preliminary customs data showed on Nov. 16, reported S&P Global.

South Korean refiners imported 1.192 million mt, or 8.74 million barrels of US crude in October, down 37% from 13.88 million barrels received in the same month last year, customs data showed.

Over January-October, US crude imports fell to 92.91 million barrels, down 17.5% from the same period last year.

On the contrary, South Korea's crude imports from its top supplier Saudi Arabia in October rose 32.6% year on year to 4.08 million mt, or 29.91 million barrels, driven by lower official selling prices by Saudi Aramco.

Local refiners continue to find their staple high sulfur Middle Eastern crude to be the most viable and economical feedstock option in times of volatile refining margins and tepid consumer fuel demand, according to refinery officials and feedstock trading managers based in Seoul.

The majority of US crude that South Korean refiners purchase tends to consist of WTI and Eagle Ford, but companies have been reluctant to buy high volumes of the light and middle distillate-rich refinery feedstock due to dismal domestic demand for gasoline, jet fuel and diesel.

The country's jet fuel consumption is expected at around 4.1 million barrels in the fourth quarter, down 60% from the same period a year earlier, according to South Korean middle distillate marketing managers surveyed by S&P Global Platts.

Diesel consumption fell 3% year on year to 40.3 million barrels in Q3 and demand for the fuel is expected to fall to 39 million barrels in Q4, down 13% from a year earlier, the survey showed.

South Korean refiners have sharply increased intakes of Middle East crude since May as they started to reduce imports of US grades due to expensive WTI compared with Dubai-linked Persian Gulf grades.

South Korean refiners have paid an average outright price of USD43.82/b for Saudi crude imported so far this year, sharply lower than USD53.91/b paid for shipments from the US, according to latest data from state-run Korea National Oil Corp.

Despite US grades' higher quality over Middle Eastern sour crude, WTI used to trade at a discount to Dubai not so long ago, trading managers at SK Innovation and Hyundai Oilbank said.

In 2019, South Korea paid on average USD65.17/b for crude shipments from the US, cheaper than an average of $66.87/b paid for Saudi crude cargoes received in the year.

In total, Asia's fourth biggest energy consumer imported 11.087 million mt, or 81.27 million barrels (2.62 million b/d) of crude oil in October, down 1.3% from 82.33 million barrels a year earlier, customs data showed.

In the first 10 months of this year, the country's crude imports dipped 7.2% year on year to 825.4 million barrels.

South Korea's crude stockpiles decreased 11.3% year on year to 44.92 million barrels as of the end of September, according to KNOC data.

Final oil data for October will be released later this month by KNOC.

As MRC informed earlier, South Korean SK Global Chemical, a subsidiary of SK Innovation, plans to shut down its production processes for ethylene and ethylene propylene diene monomer (EPDM) within its naphtha cracking center in Ulsan, South Korea. The 200,000-t/y naphtha cracker, which started commercial operation in 1972, and the EPDM unit, which began commercial operation in 1992, will be mothballed from December 2020 to shift the company's focus to high-value added chemicals.

Ethylene and propylene are feedstocks for producing 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.
MRC

MOSCOW (MRC) -- Ferro has reported third-quarter net income up 12.9% year-on-year (YOY), to USD14.5 million, on net sales down 1.4%, to USD241.9 million, reported Chemweek.

Adjusted earnings totaled 19 cents/share, beating analysts’ consensus estimate of 15 cents/share, as reported by Refinitiv (New York, New York). Sales were up 18.1% on a sequential basis from the second-quarter, exceeding the company’s expectations.

“We currently expect the positive trends in demand for our products to continue in the coming months,” says Ferro CEO Peter Thomas. “Our customers do not appear to be de-stocking in the fourth quarter, as they have in more typical years, and we are seeing an uptick in demand for the new year as our customers’ markets continue to recover. We also believe that changes in consumer and other behavior resulting from the COVID pandemic will accelerate demand for Ferro products in multiple markets, including renewables, healthcare, and electronics.” The company does not anticipate a “significant impact” to demand from a second wave of the pandemic, Thomas adds.

Functional coatings segment sales declined 0.3% YOY, to USD154.2 million, while segment gross profit was down 11.4%, to USD41.6 million. Color solutions segment sales fell 3.2% YOY, to USD87.7 million, while segment gross profit declined 2.3%, to USD28.5 million.

As MRC informed before, on October 14, 2016, Ferro signed a definitive agreement to acquire 100% of the stock of Belgium-based Cappelle Pigments for EUR50.5 million (approximately USD56 million) on a cash-free and debt-free basis.

We remind that Russia's output of chemical products rose in September 2020 by 6.7% year on year. At the same time, production of basic chemicals increased in the first nine months of 2020 by 6.1% year on year, according to Rosstat's data. According to the Federal State Statistics Service of the Russian Federation, polymers in primary form accounted for the greatest increase in the January-September output. September production of primary polymers in Russia decreased to 852,000 tonnes from 888,000 tonnes in August due to shutdowns in Tomsk, Ufa and Kazan. Overall output of polymers in primary form totalled 7,480,000 tonnes over the stated period, up by 16.4% year on year.

Ferro Corporation is a leading global functional coatings and color solutions company that supplies technology-based performance materials, including glass-based coatings, pigments and colors, and polishing materials. Ferro products are sold into the building and construction, automotive, appliances, electronics, household furnishings, and industrial products markets. Headquartered in Mayfield Heights, Ohio, the Company has approximately 4,900 employees globally.
MRC

MOSCOW (MRC) -- Slumping fuel consumption during the pandemic is accelerating the long-term shift of refining capacity from North America and Europe to Asia, and from older, smaller refineries to modern, higher-capacity mega-refineries, reported Rueters.

The result is a wave of closures, often centering on refineries that only narrowly survived the previous closure wave in the years after the recession in 2008/09.

Fuel consumption has been stagnant or falling across most of North America, Western Europe and Japan since 2007 as a result of efficiency improvements.

North American, European and Japanese refineries have been left battling to protect their share of a declining market, creating downward pressure on profitability.

The problem of overcapacity has been masked during periods of strong economic growth but exposed every time the business cycle turns down.

In contrast to Western Europe, North America and Japan, fuel consumption has grown rapidly across the rest of Asia over the last decade.

The region’s three sub-markets in West Asia (centered on the Gulf), South Asia (centered on India) and East Asia (China) have been responsible for more than two-thirds of worldwide oil consumption growth since 2009.

Asia has seen sustained growth in its refining capacity to match the growth in consumption; refineries are typically built near consumption centers since it is operationally simpler to transport crude than products.

Asia and the Middle East account for 43% of worldwide refining capacity, almost exactly matching their 44% share in global oil consumption, with both shares up from 33% in 1999.

Asia’s refineries are more competitive because they are nearer growing markets; process large volumes with better economies of scale; and are equipped with more modern and sophisticated equipment.

In the 1960s and 1970s, new refineries were built at a minimum efficient scale of 100,000-250,000 bpd of crude capacity, but refineries commissioned in the 2000s and 2010s are generally 300,000-400,000 bpd or more.

New mega-refineries are often built with integrated petrochemicals units, enabling them to produce a higher share of higher value-added chemicals as well as lower-value fuels.

As a result, the new mega-refineries can squeeze a higher share of valuable products from the same crude at lower cost, outcompeting rivals in North America and Europe.

Facing a shrinking fuel market at home, North American and European refiners have found it increasingly difficult to compensate by growing fuel exports profitably.

And as the average size and complexity of new oil refineries has increased, the oldest, smallest and least complex refineries have become uneconomic.

The result is a wave of refinery closures, with jetties, tank farms and pipelines repurposed to become import terminals.

Most closures have been in North America and Europe, but smaller, older and fuel-only refineries in other parts of the world, including in Australia and the Philippines, have also been hit.

As MRC informed before, in early November 2020, Royal Dutch Shell announced it was closing its refinery in Convent, Louisiana, the largest such US facility and first on the US Gulf Coast to shut down since the coronavirus pandemic devastated worldwide demand. The shutdown will occur this month after Shell failed to find a buyer. The refinery is the ninth in North America targeted for a shutdown or to be idled since the pandemic, which has dealt a heavy blow to fuel demand globally.

We remind that Royal Dutch Shell plc. said earlier this month that its petrochemical complex of several billion dollars in Western Pennsylvania is about 70% complete and in the process to enter service in the early 2020s. The plant's costs are estimated to be USD6-USD10 billion, where ethane will be transformed into plastic feedstock. The facility is equipped to produce 1.5 million metric tons per year (mmty) of ethylene and 1.6 mmty of polyethylene (PE), two important constituents of plastics.

Ethylene and propylene are feedstocks for producing 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.
MRC

MOSCOW (MRC) -- OMV Petrom, the largest energy company in Southeastern Europe, has invested approximately EUR21 million at the Petrobrazi refinery in order to increase the bio-blending capacity and to improve the infrastructure for the transport, unloading and storage of bio-components within the refinery, according to Hydrocarbonprocessing.

OMV Petrom supplies fuels with a volumetric bio-content of 6.5% in diesel and 8% in gasoline.

Following investments of approximately EUR21 million allocated, starting in 2018, Petrobrazi has increased the blending capacity of bio-content in fuels from 200,000 t to ~350,000 tpy of biofuels.

As per European regulations, the renewable energy content in transportation fuels must increase from 10% in 2020 to 14% in 2030, in order to support the reduction targets of greenhouse gas emissions arising from transportation. Bio-quota targets are set as energetic substitution targets, whereby each fuel has a different energy content defined.

“We are an energy company and we want to be part of the solution for a cleaner energy. We are investing in obtaining fuels with a high level of biofuel content, as well as in alternative solutions for mobility and in various others sustainable projects. It is a combined effort at all levels across our company, as we aim to reduce our carbon emissions by 27% by 2025 versus 2010”, said Radu Caprau, member of OMV Petrom executive board, responsible for Downstream Oil.

Petrobrazi has a total crude oil processing capacity of 4.5 MMtpy and, starting 2005, OMV Petrom has invested approximately EUR1.8 billion in the refinery. One third of this investment contributed to the reduction of the environmental impact. Through sustained investments, OMV Petrom has reduced the carbon emissions of its operations by 22% in 2019 vs. 2010. OMV Petrom is one of the first companies in Romania to sign the UN Global Compact, since 2013.

As MRC reported earlier, on 12 March, 2020, Austria’s OMV OMV, the international integrated gas and oil company headquartered in Vienna, and Mubadala Investment Company, the Abu Dhabi-based strategic investment company, signed an agreement that will give OMV a controlling stake in Borealis, one of Europe’s leading petrochemical companies. OMV, which currently owns a 36% stake in Borealis, will acquire an additional 39% from Mubadala, increasing its stake to 75%. Mubadala will retain a 25% interest.

And in late October, 2020, OMV and Mubadala Investment Company completed the transaction for OMV to acquire an additional 39% stake in Borealis from Mubadala.

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

ccording 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.

Romanian group OMV Petrom has become part of Austrian company OMV since 2004.
MRC

MOSCOW (MRC) -- Brenntag has announced an initial cooperation with CheMondis (Cologne, Germany), a B2B online marketplace for chemicals in Europe, said Chemweek.

Brenntag and CheMondis plan jointly to accelerate digital sales and marketing for the chemical industry. “Both companies recognize the increasing importance of online sales channels for the chemical industry and agreed to collaborate in this field,” Brenntag says.

The collaboration will start with making Brenntag’s portfolio for paints and coatings, and adhesives and sealants gradually available for online purchase on CheMondis in the German market.

"Over the last two years Brenntag has steadily built our Brenntag Connect e-commerce platform. The platform is now live in most of our mature markets. We see a strong upward trend in online business and with this complementary cooperation we extend our digital channels further,” says Maarten Stramrood, chief digital officer at Brenntag. “Our collaboration with CheMondis will provide our current and potential customers an even broader choice."

The collaboration “is a strong sign that online sales are becoming an increasingly important strategic component in the chemical industry,” says Sebastian Brenner, managing director of CheMondis. “Customers in our industry are demanding an online buying experience and CheMondis provides for that need."

CheMondis, founded in 2018 out of Lanxess as an independent start-up, says it has established “the leading open B2B marketplace for chemicals in Europe with more than 3,200 active companies and about 50,000 products listed.” Buyers have used CheMondis for several thousand digital transactions already, the company says.

As MRC informed earlier, Brenntag, the market leader in chemical and ingredients distribution, has reported a resilient third-quarter performance and says the impact from the COVID-19 pandemic on its business is “still limited". Net profit was down in the third quarter to EUR120.6 million (USD141.1 million) from a prior-year figure of EUR128.4 million on sales of EUR2.88 billion, down 7.7% year on year (YOY) on a constant currency basis. The company achieved YOY growth in operating EBITDA, up 4.9% to EUR264.4 million. The EMEA, APAC, and Latin America regions “showed a particularly good development,” but conditions in North America were tougher, Brenntag says. Group operating gross profit slipped 0.2% YOY to EUR690.6 million.

As MRC informed earlier, Brenntag Essentials and Brenntag Specialties. Each division will have a focus on customer- and supplier needs. The new operating model forms part of the company’s previously announced transformation program, Project Brenntag. Brenntag says that with the two new divisions it will better leverage on its strengths and sharpen its profile toward relevant industry segments.

In August 2020, Brenntag acquired the operating assets of Suffolk Solutions’ (Suffolk, Virginia) caustic soda distribution business. Financial terms of the deal have not been disclose.

We remind, Russia's September production of sodium hydroxide (caustic soda) were 108,000 tonnes (100% of the basic substance) versus 99,200 tonnes a month earlier. Overall output of caustic soda totalled 945,600 tonnes in the first nine months of 2020, down by 1.6% year on year.
MRC