Wacker projects swing to profit in 2020, lower sales due to COVID-19 impact on volumes

MOSCOW (MRC) -- Wacker expects to post a net income of EUR200m in 2020, swinging from a net loss of EUR630m in 2019 on improved operational earnings, the German specialty chemicals firm said.

The company's earnings before income and taxes (EBIT) in 2019 were weighed by an impairment charge of EUR760m on the carrying amount of its polysilicon production facilities. Due to the coronavirus pandemic’s effects, the company’s sales contracted sharply in the second quarter, the company said in a statement.

The company's earnings regained some ground in the third and fourth quarters of last year, supported mainly by robust construction and polysilicon demand, but did not fully make up for the sales slump in the second quarter, it said. "Wacker's sales trend was slowed not only by somewhat lower volumes year over year, but also by price changes and exchange-rate effects," it said.

Volume declines amid the pandemic were especially strong in silicones for the automotive and textile segments, the company said. "Construction demand, on the other hand, remained comparatively stable, while business was very robust for products used in medical, health and hygiene applications," it added.

As per MRC, Wacker Chemie will cut 1,000 jobs by the end of 2022 to save costs and prepare for a “harsher competitive environment”. Munich-based chemical group Wacker Chemie AG has begun its “Shaping the Future” restructuring plan by announcing 1,000 jobs will be lost by the end of 2022 as it aims to save EUR250 million per year. The company announced around 800 posts will be culled at German sites with administrative staff and people working in indirect and non-operational roles those at risk.

Wacker Chemie AG is a worldwide operating company in the chemical business, founded 1914. The company is controlled by the Wacker-family holding more than 50 percent of the shares. The corporation is operating more than 25 production sites in Europe, Asia, and the Americas. The product range includes silicone rubbers, polymer products like ethylene vinyl acetate redispersible polymer powder, chemical materials, polysilicon and wafers for semiconductor industry.

According to MRC's DataScope report, PE imports to Russia decreased in January-November 2020 by 17% year on year and reached 569,900 tonnes. High density polyethylene (HDPE) accounted for the greatest reduction in imports. At the same time, PP imports into Russia increased by 21% year on year to about 202,000 tonnes in the first eleven months of 2020. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
MRC

MOSCOW (MRC) -- Global record high prices for suspension polyvinyl chloride (SPVC) proportionally affected prices of polymer in Russia. Domestic producers announced a roll-over and slight price hike for February shipments, despite lower export prices in China, according to ICIS-MRC Price report.

In the second half of 2020, global PVC prices reached record levels over the past 10 years due to a shortage. In January 2021, the situation did not change dramatically, although prices still went down in some regions. A similar situation was registered in the Russian market. Some Russian producers intend to achieve another price increase of Rb2,000-3,000/tonne for February shipments.

In the second half of last year, Russian producers reduced their export PVC sales, and there was no growth in exports this year either. However, Russian producers virtually did not have excessive quantities of resin during the same period of time, and sellers quickly allocated their quotas for February deliveries.

Last year's imports of suspension fell by 20% to 40,800 tonnes. Despite record high prices of Russian PVC, there has been virtually no import alternative for local converters since October 2020. And in fact, the opportunity to resume import supplies of resin appeared only in mid-January.

Thus, Chinese producers similarly reduced their export prices under the pressure of the downward trend of domestic prices for acetylene PVC. Prices dropped by up to USD900/tonne DAP China border. At the same time, complex logistics did not allow to talk about the prompt increase in shipments from China.

The absence of an operational alternative and limited warehouse stocks of Russian producers did not allow to talk about the possibility of price cuts for February deliveries. Moreover, some producers were considering the possibility of raising prices by Rb2,000/tonne and higher partially because of the weakening of the rouble against the dollar.

Negotiations over February shipments of Russian PVC began on Tuesday, deliveries of Russian resin with K64/67 were discussed in the range of Rb112,000-115,000/tonne CPT Moscow, including VAT, for quantities of less than 500 tonnes versus Rb110,000-115,000/tonne CPT Moscow, including VAT.
MRC

MOSCOW (MRC) - Production of polypropylene (PP) in Russia increased to about 1,883 mln tonnes in 2020, up 31% compared to 2019.
The main increase in production volumes was provided by ZapSibNeftekhim, as per MRC ScanPlast.

December PP production in the country exceeded 184,700 tonnes, compared with 169,1000 tonnes in November; several producers increased their capacity utilisation. Russia's overall PP production reached 1.883,000 mln tonnes in 2020, compared to 1.441,500 mln tonnes a year earlier. Six out of eight producers increased their capacity utilisation, two producers decreased production volumes.

The structure of PP production by plants looked the following way over the stated period.

SIBUR Tobolsk increased its capacity utilisation in December, the plant's PP production dropped to 51,400 tonnes that month versus 49,200 tonnes a month earlier. Tobolsk-Polymer's PP production reached 505,100 tonnes in 2020, up 8% year on year.

ZapSibNeftekhim produced about 47,600 tonnes of polypropylene in December compared with 40,000 tonnes in November. Overall sales of PP totalled 444,600 tonnes over the stated period.

Poliom increased capacity utilisation to almost 100% in December, and, as a result, produced about 18,700 tonnes of polypropylene, while a month earlier the volume of production did not exceed 15,000 tonnes. The Omsk plant's PP production totalled about 184,200 tonnes over the stated period, down by 14% year on year.
Nizhnekamskneftekhim produced a little more then 19,000 tonnes of propylene polymers in December versus 18,000 tonnes a month earlier.
The Nizhnekamsk plant's overall output of polymer reached 219,700 tonnes in the twelve months of 2020, compared to 211,700 tonnes a year earlier.

Tomskneftekhim produced about 12,800 tonnes of polypropylene in December compared with 12,400 tonnes in November. Total PP production by the producer increased to 148,300 tonnes in January-December 2020, up 1% year on year.

December PP production at Ufaorgsintez was about 11,500 tonnes from 11,300 tonnes a month earlier. The Ufa plant's overall output of polymer reached 120,300 tonnes in January-December 2020, down 6% year on year.

Neftekhimiya (Kapotnya) last month produced about 13,000 tonnes of PP in December, compared with 12,500 tonnes in November. The producer's PP output in 2016 reached 149,800 tonnes, up 9% year on year.

Stavrolen decreased capacity utilisation in December and produced about 10,700 tonnes of propylene polymers versus 10,800 tonnes a month earlier. The Budenovsk plant's overall output of propylene polymers increased in 2020 to 111,000 tonnes from 105,200 tonnes a year earlier.


MRC

1. Sasol flags rise in headline earnings per share, sees sequential improvement

MOSCOW (MRC) -- Sasol is expected to deliver a strong set of results for the six months ended 31 December 2020 (2021 financial half year), underpinned by a strong cash cost, working capital and capital expenditure performance despite the effects of the COVID-19 pandemic, a severe decline in crude oil prices and softer chemical product prices, said the company. In addition, our Lake Charles production was impacted by hurricanes experienced in the US Gulf Coast, resulting in lost production of approximately 300kt for the 2021 financial half year.



MRC

MOSCOW (MRC) -- Crude oil futures settled near 11-month highs Feb. 1 as tightened supply outlooks overshadowed pandemic-related demand concerns, reported S&P Global.

NYMEX March WTI settled USD1.35 higher at USD53.55/b and ICE April Brent climbed USD1.41 to $56.45/b.

Feb. 1 marked the start of Saudi Arabia's 1 million b/d voluntary crude production cuts, setting the stage for a much tighter supply outlook in the coming months. The start of the Saudi production cuts comes amid strong compliance from OPEC+ as a whole, underscoring bullish market sentiment and overshadowing near-term risks to the demand outlooks posed by lockdowns in Europe and Asia.

"We are probably going to continue to see the current virus concerns sort of weigh on the medium-term demand outlook, but overall markets are pretty much content that there will not be a big wave of oversupply concerns and that is going to be very positive for crude prices," OANDA senior market analyst Edward Moya said.

Front-month WTI settled just 2 cents shy of its most recent 11-month high seen Jan. 14, but Brent futures remained well within their recent range amid global demand growth concerns.

Chinese manufacturing purchasing managers index data for January was weaker month on month and below what the market was expecting, raising questions about the country's oil demand in coming weeks.

Recent pandemic flare-ups have prompted Chinese officials to discourage citizens from traveling during the upcoming Lunar New Year holiday but, despite these efforts, the negative impact on transportation fuel demand is likely to be limited compared with the same period of 2020.

S&P Global Platts Analytics projected China's gasoline demand at about 3.4 million b/d in January through February, up 20% year on year but 5.5% below the same period of 2019.

"It is very unlikely to repeat the demand damages in last year. There is not much room for downward adjustment of the demand forecast for January and February this year," a London-based analyst said.

Diesel futures received an extra boost from forecasts for the polar vortex to bring record cold weather to the northern US in the coming days.

NYMEX March ULSD settled 4.85 cents higher at USD1.6496/gal, up nearly 3% from the session prior, while March RBOB climbed 3.74 cents to settle at USD1.5901/b.

Latest forecast models show large swaths of the upper Midwest, including Chicago and Detroit, are expected to see unseasonably cold weather, with temperatures that will fall below zero next week.

Platts ULSD Chicago Buckeye was assessed at a 75 cent/gal discount to NYMEX ULSD Feb. 1, steady with the prior session.

US distillate inventory draws are expected to extend during the week ended Jan. 29, analysts surveyed by Platts said, with stocks likely falling 1.3 million barrels to 161.5 million barrels. The counter-seasonal drawdown would narrow the surplus to the five-year average to 7%, the lowest since the week ended Jan. 6.

As MRC informed previously, oil producers face an unprecedented challenge to balance supply and demand as factors including the pace and response to COVID-19 vaccines cloud the outlook, according to an official with International Energy Agency's (IEA) statement.

We remind that the COVID-19 outbreak has led to an unprecedented decline in demand affecting all sections of the Russian economy, which has impacted the demand for petrochemicals in the short-term. However, the pandemic triggered an increase in the demand for polymers in food packaging, and cleaning and hygiene products, according to GlobalData, a leading data and analytics company. With Russian petrochemical companies having the advantage of access to low-cost feedstock, and proximity to demand-rich Asian (primarily China) and European markets for the supply of petrochemical products, these companies appear to be well-positioned to derive full benefits from an improving market environment and global economy post-COVID-19, says GlobalData.

We also remind that in December 2020, Sibur, Gazprom Neft, and Uzbekneftegaz agreed to cooperate on potential investments in Uzbekistan including a major expansion of Uzbekneftegaz’s existing Shurtan Gas Chemical Complex (SGCC) and the proposed construction of a new gas chemicals facility. The signed cooperation agreement for the projects includes “the creation of a gas chemical complex using methanol-to-olefins (MTO) technology, and the expansion of the production capacity of the Shurtan Gas Chemical Complex”.

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

According to MRC's DataScope report, PE imports to Russia decreased in January-November 2020 by 17% year on year and reached 569,900 tonnes. High density polyethylene (HDPE) accounted for the greatest reduction in imports. At the same time, PP imports into Russia increased by 21% year on year to about 202,000 tonnes in the first eleven months of 2020. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
MRC