Crude oil futures rangebound as economic impact of pandemic weighs on vaccine optimism

MOSCOW (MRC) -- Crude oil futures remained rangebound during mid-morning trade in Asia Nov. 23 as market optimism over the pace of development of COVID-19 vaccines was countered by the more immediate impact of the pandemic on economic activity and global demand, reported S&P Global.

At 10:30 am Singapore time (0230 GMT), ICE Brent January crude futures were up 5 cents/b (0.11%) from the Nov. 20 settle at USD45.01/b, while the NYMEX January light sweet crude contract was 5 cents/b (0.12%) lower at USD42.37/b.

The contracts contract rose 5.1% and 5% respectively in the week ended Nov. 20 in a rally driven primarily by vaccine optimism, with speculation the incoming Biden administration was reluctant to impose a nationwide lockdown in the US and the signing of the Regional Comprehensive Economic Partnership among Asia-Pacific nations also boosting sentiment earlier in the week.

However, the focus shifted back to the progression of the coronavirus Nov. 23, with the trajectory of crude prices likely tethered to the market's assessment of the pandemic's impact on the global economy and on energy demand.

"The market will be looking at the upcoming Markit PMI data releases across the European Union, the UK and the US for clues as to how badly the pandemic has hit business activity in major economies," DailyFX strategist Margaret Yang told S&P Global Platts Nov. 23. "This Wednesday's US initial jobless claim figures and EIA crude oil inventories will be closely watched, too," she added.

Other market analysts emphasized the upcoming OPEC and non-OPEC Ministerial Meeting on Dec. 1, which is expected to provide clarity over the OPEC+ alliance's production plan going into 2021. Most market analysts expect the meeting to confirm a three- to six-month extension of the current 7.7 million b/d production cut, but some analysts, encouraged by hints from key figures within the OPEC+ alliance, believe that deeper production cuts could also be announced.

"The broader market is very aware that even the most promising vaccine news will not have a discernible effect on oil demand until at least the second half of 2021. But what will have an immediate impact on the oil market - or rather bring into better equilibrium the balance of supply and demand by drawing down inventory more definitively - is an OPEC quota extension," Axi global chief market strategist Stephen Innes said in a Nov. 23 note.

As MRC informed previously, global oil demand may have already peaked, according to BP's latest long-term energy outlook, as the COVID-19 pandemic kicks the world economy onto a weaker growth trajectory and accelerates the shift to cleaner fuels.

Earlier this year, BP said the deadly coronavirus outbreak could cut global oil demand growth by 40 per cent in 2020, putting pressure on Opec producers and Russia to curb supplies to keep prices in check.

And in September 2019, six world's major petrochemical companies in Flanders, Belgium, North Rhine-Westphalia, Germany, and the Netherlands (Trilateral Region) announced the creation of a consortium to jointly investigate how naphtha or gas steam crackers could be operated using renewable electricity instead of fossil fuels. The Cracker of the Future consortium, which includes BASF, Borealis, BP, LyondellBasell, SABIC and Total, aims to produce base chemicals while also significantly reducing carbon emissions. The companies agreed to invest in R&D and knowledge sharing as they assess the possibility of transitioning their base chemical production to renewable electricity.

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, excluding producers' inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.
MRC

MOSCOW (MRC) -- The scheduled startup of Grupa Azoty’s (Tarnow, Poland) flagship Polimery Police propane dehydrogenation (PDH) and polypropylene (PP) project at Police, Poland, has been delayed to the first quarter of 2023 due to the impact of the COVID-19 pandemic, reported Chemweek.

The project is proceeding “without major obstacles,” said Grupa Azoty chairman Mariusz Grab, while reporting the company’s third quarter financial results. However, faced with the pandemic’s impact, the schedule has been “extended by three months,” Grab says. The contractor’s remuneration has also been increased by EUR33 million (USD39 million) as a result, he adds. Hyundai Engineering is the general contractor.

Construction of the estimated EUR1.5-billion project is currently 32% complete, according to the company. Completion was previously scheduled for the fourth quarter of 2022. Work currently underway includes foundation work, hydrotechnical works, and the installation of propane and ethylene tanks at the port of Police.

The Police project includes a 437,000-metric tons/year PDH plant, feeding a similar-capacity PP unit. Honeywell UOP is providing its PDH technology and W.R. Grace its Unipol PP process.

Grupa Azoty announced a net profit of 41 million Polish zloty (USD10.9 million) for the third quarter, down 32% year on year (YOY), due mainly to negative margins in its plastics business, it says. Sales totaled Zl2.4 billion, down Zl148 million YOY, while EBITDA of Zl250 million declined nearly 25% compared to the prior-year period. The company says its plastics and chemicals businesses were both “strong influenced” by the pandemic, contributing to zero margins in chemicals and negative margins in plastics.

Sales in the plastics segment declined Zl93 million YOY to Zl245 million, with an EBITDA margin of minus 3.3%, down 5.2 percentage points YOY. Prices of basic raw materials such as benzene and phenol remained low, while product prices - mainly polyamide - decreased sequentially during the third quarter and were approximately 20% lower YOY, it says. “The situation in the segment remains difficult,” it says.

The chemicals segment recorded a rise in 6.6% rise YOY in sales to Z612 million but EBITDA margin decreased by 5.8 percentage points to 0.1%. Sales in quantitative terms for most of the segment’s products were higher during the quarter compared to the prior-year period, although there was a “significant decrease” for sulfur and other urea solutions, it says. Prices were lower YOY for almost all chemical products, however, with the largest negative price deviations for oxo alcohols and melamine, which was hit by a decline in demand in the furniture market, it notes.

Grupa Azoty’s fertilizer segment was described as stable during the quarter, with increased sales volumes and a high EBITDA margin, due to relatively low gas prices, it says. Fertilizer sales totaled Zl1.44 billion, down YOY from Zl1.52 billion, with the EBITDA margin of 13.8% down slightly from the equivalent quarter last year.

As MRC informed earlier, in May 2019, PDH Polska, owned by top Polish chemical group Azoty and Grupa Azoty Police, signed a EUR 993 million turn-key contract with Hyundai Engineering Co., Ltd for the execution of the Polymers Police investment project. The "Polymers Police" project is a strategic undertaking of Grupa Azoty Capital Group implemented by PDH Polska S.A., a special purpose vehicle. "Polymers Police" is one of the largest chemical investments in this part of Europe. The aim of the project is to build a completely new petrochemical complex, the scope of which will include: PDH Unit; PP Production Unit; PP Logistics Infrastructure; Handling and Storage Terminal (gas terminal) and Auxiliary Systems. The annual production capacity of the complex is to reach 437 thousand tonnes of polypropylene.

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, excluding producers' inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.
MRC

MOSCOW (MRC) -- Solvay says it has reached an agreement to sell its technical-grade barium and strontium business in Germany, Spain, and Mexico, as well as its sodium percarbonate business in Germany to Latour Capital (Paris, France), an independent private equity firm, according to Chemweek.

The company says its joint venture (JV) with Chemical Products Corp. (Cartersville, Georgia) is included in the transaction as part of Solvay's barium and strontium business. The transaction - financial terms of which have not been disclosed - will be completed in the first quarter of 2021 and remains subject to the completion of information and consultation procedures with employee representatives and approval from the relevant regulatory authorities.

Didier Gaudoux, partner at Latour Capital, says that under Solvay’s umbrella, the businesses "have established leading competitive positions and proved to have very efficient production processes. We will support the management to deliver an ambitious and sustainable growth strategy, with the right investments in capacities and continuous improvements on ESG matters,” he says.

The agreement is a key step toward streamlining Solvay’s portfolio while reducing the company’s footprint by exiting its position in niche technical-grade chemical markets, the company says. The divestment also aligns with Solvay’s G.R.O.W. strategy, announced last year, it says.

As MRC reported earlier, in August, 2020, through the acquisition of the Solvay polyamide (PA) business, BASF enhanced its R&D capabilities in Asia Pacific with new technologies, technical expertise, and upgraded material and part testing services. BASF is planning to integrate the R&D centers from Solvay into its R&D existing facilities in Shanghai, China, and Seoul, Korea. The enhanced capabilities will boost BASF’s position as a solution provider to develop advanced material solutions for key industries.

We remind that BASF-YPC, a 50-50 joint venture of BASF and Sinopec, undertook a planned shutdown at its naphtha cracker on 30 April 2020. The company initially planned to start turnaround at the cracker on April 5, 2020. The plant remained under maintenance unitl 18 June, 2020. Located in Jiangsu, China, the cracker has an ethylene capacity of 750,000 mt/year and propylene capacity of 400,000 mt/year.

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, excluding producers' inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.
MRC

MOSCOW (MRC) -- Ineos declared force majeure on its low density polyethylene (LDPE) supplies from one of its plants in Cologne, Germany due to a power outage on November 11, reported NCT with reference to a source familiar with the issue.

The company could not be reached for comments at the time of publication, however.

The force majeure is slated to last for 3 weeks. The company’s metalocene linear low density polyethylene (mLLDPE) unit at the same site was reported to be unaffected, meanwhile.

The company’s Cologne plant has the capacity to produce around 400,000 tons/year of LDPE, while LLDPE plant has a production capacity of 230,000 tons/year.

As MRC wrote before, a 660,000-metric tons/year phenol-acetone plant operated by Ineos in Gladbeck, Germany, was shut for maintenance from 27 October until 6 December, 2020.

According to MRC's ScanPlast report, September estimated LDPE consumption in Russia fell to 23,930 tonnes from 47,610 tonnes a month earlier. Russian producers reduced their domestic LDPE shipments due to shutdowns for maintenance at production capacities in Ufa, Tomsk and Kazan. Russia's estimated LDPE consumption totalled about 406,500 tonnes in January-September 2020, which virtually corresponded to the last year's figure.

Ineos Group Limited is a privately owned multinational chemicals company consisting of 15 standalone business units, headquartered in Rolle, Switzerland and with its registered office in Lyndhurst, United Kingdom. It is the fourth largest chemicals company in the world measured by revenues (after BASF, Dow Chemical and LyondellBasell) and the largest privately owned company in the United Kingdom.
MRC

MOSCOW (MRC) -- Braskem, the largest petrochemical company in the Americas and a world leader in the production of biopolymers, and Denmark-based Haldor Topsoe, a global leader in supply of catalysts, technology, and services for the chemical and refining industries, have announced that they achieved their first-ever demo-scale production of bio-based monoethylene glycol (MEG), reported CISION.

As a result of the collaboration between the two companies, the MOSAIK technology development has been progressing according to schedule at the demonstration unit located in Lyngby, Denmark.

The demonstration unit was started up in 2019 with the primary goal to demonstrate all key design features of the pioneering technology that transforms sugar into renewable MEG. Since then, the remaining process units of the plant have been built and put into operation, and the production process has been optimized.

MEG is a raw material for polyethylene terephthalate (PET), which has numerous applications and is an essential feedstock in sectors such as textiles and packaging, especially beverage bottles. Currently, MEG is predominantly made from fossil-based feedstocks, such as naphtha, gas, or coal. The global MEG market represents a value of approximately USD 25 billion.

The technology will also co-produce, in a lower quantity, monopropylene glycol (MPG), which has a wide variety of applications ranging from unsaturated polyester resins (UPR), commonly used in construction materials, to cosmetic products.

The next phase will involve providing samples to strategic partners for testing and validation. The results of the demonstration plant operations and the validation of products will be essential for the decision to deploy the technology on a commercial scale.

The development of bio-MEG is strategic to Braskem. "This first-ever production of MOSAIK-MEG is a major step forward in our project and underlines Braskem's commitment to the Circular Economy through renewable chemicals. This technology has the potential to revolutionize the PET market. That's why we are increasingly closer to start building this new value chain, so we can deliver the sustainable solution that society is looking for", says Gustavo Sergi, executive officer of Renewable Chemicals and Specialties at Braskem.

"We are extremely pleased to have achieved the first production of bio-based MEG together with Braskem. Topsoe's strategic vision is to deliver technologies to reduce or even eliminate carbon emissions from the production of fuels and chemicals. Advancing technologies to produce bio-based chemicals and making them a commercially attractive option is an essential step on the way to a more sustainable future," says Kim Knudsen, Chief Strategy & Innovation Officer at Haldor Topsoe.

As MRC informed before, in mid-November 2020, Braskem said it had completed a USD10-million expansion of its innovation and technology center at Pittsburgh, Pennsylvania. The expansion adds eight R&D labs, and equipment for developing technologies around catalysis, recycling, and 3D printing. This includes capabilities in catalysis and petrochemical process technologies, 3D printing research, as well as chromatography, polymer cracking and microscopy analyses.

MEG is used to produce PET, which is used in the manufacturing of plastic bottles, films, packaging containers, in the textile and food industries.

As per MRC' ScanPlast, calculated consumption of polyethylene terephthalate (PET) reached 52,71o tonnes in September 2020, down 27% compared to the same time a year before. Total consumption of PET in Russia in the nine months of 2020 reached 530,750 tonnes, down 22% than the same indicator last year.

Haldor Topsoe is a global leader in supply of catalysts, technology, and services to the chemical and refining industries. Topsoe aims to be the global leader within carbon emission reduction technologies by 2024. By perfecting chemistry for a better world, we enable our customers to succeed in the transition towards renewable energy. Topsoe is headquartered in Denmark and serves customers around the globe.

Braskem S.A. produces petrochemicals and generates electricity. The Company produces ethylene, propylene, benzene, toluene, xylenes, butadiene, butene, isoprene, dicyclopentediene, MTBE, caprolactam, ammonium sulfate, cyclohexene, polyethylene theraphtalat, polyethylene, and polyvinyl chloride (PVC).
MRC