COVID-19 - News digest as of 03.02.2021

1. 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.



MRC

Crude oil tests one-year highs as market eyes OPEC+ compliance

MOSCOW (MRC) -- Crude futures settled near one-year highs Feb. 2 amid a focus on OPEC+ production compliance and improved demand outlooks, reported S&P Global.

NYMEX March WTI settled USD1.21 higher at USD54.76/b and ICE April Brent climbed USD1.11 to USD57.46/b.

A second OPEC production survey, this time by Bloomberg, confirmed the group's over-compliance to cuts in January, with production coming in at around 120,000 b/d less than the 22.12 million b/d agreement.

OPEC+ ministers will convene Feb. 3 for a monitoring committee meeting. With production quotas set through March and oil prices rising to pre-crash levels on the back of Saudi Arabia's surprise extra output cut, delegates say they expect relatively peaceful talks on the committee's usual agenda items of quota compliance and oil market forecasts.

The monitoring committee is likely to stress the importance of fulfilling cut commitments, including so-called "compensation cuts" owed by several members.

Conventional wisdom and historic precedent suggest the rise in prices may erode OPEC+ production discipline. Compliance among the 10 OPEC members and nine non-OPEC countries with quotas under the deal slipped to 99% in December from 101% in November, according to several delegates who have reviewed the data that the committee will discuss.

Front-month Brent and WTI were last higher in late February 2020.

"Cuts by OPEC have had the desired effect, and the main caveat with OPEC is compliance rates," Geordie Wilkes, head of research at Sucden UK Ltd. said. "I think the cut by Saudi is certainly a sign of willingness to cooperate and get a deal, but also a sign that on the demand side things are still poor ... March, April does looks slightly more rosy."

Saudi Arabia announced in January that it would voluntarily cut output by 1 million b/d in February and March.
Demand outlook

NYMEX March RBOB settled up 2.59 cents at USD1.6160/gal and March ULSD climbed 2.77 cents to USD1.6746/gal.

Demand outlooks received a boost from positive developments on the global pandemic front. In the US, daily vaccinations outpaced the number of new COVID-19 infections for the first time Feb. 1.

"The Biden administration appears well on the way to hitting their goal of a 100 million vaccination in 100 days. US COVID new cases and hospitalizations are both declining, while vaccinations have eclipsed the total number of coronavirus cases," OANDA senior market analyst Edward Moya said in a note. "The demand outlook continues to improve alongside the global economic recovery. The biggest risk remains a setback in Chinese crude demand and so far that does not seem to be happening."

China's mass migration ahead of the Lunar New Year holiday, also referred to as Chunyun, is unlikely to affect gasoline and gasoil demand, consultancy Facts Global Energy said Feb. 2.

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 to the same period during 2020.

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

The holiday began Jan. 28, and according to Chinese Ministry of Transport data, both rail and air passenger volumes were 70% lower than in the first few days of last year's migration period.

FGE said it continues to expect a shift to personal cars, as people are likely to avoid public transportation, for long-distance travel in China, after vehicle traffic on highways during the first few days of Chunyun saw a much smaller decline of 5%-10%.

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 ScanPlast report, Russia's estimated PE consumption totalled 2,220,640 tonnes in 2020, up by 2% year on year. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, polypropylene (PP) shipments to the Russian market reached 1 240,000 tonnes in 2020 (calculated using the formula: production, minus exports, plus imports, exluding producers' inventories as of 1 January, 2020).
MRC

Sipchem turnarounds for polymer, ethyl acetate plants in Saudi Arabia

MOSCOW (MRC) -- Sahara International Petrochemical (Sipchem) has announced a scheduled turnaround at its polymers plant, International Polymers (IPC) and its ethyl acetate plant, Sipchem Chemicals (SCC), said Chemweek.

The turnaround at IPC began on 1 February and is expected to last for six days. IPC produces 200,000 t/yr of polypropylene (PP) and low-density polyethylene (LDPE) each.

The turnaround at SCC, which is conducted on its 100,000 t/yr ethyl/butyl acetate swing unit, also began on 1 February and is expected to last for 16 days.

Sipchem, a producer of methanol, polymers, and acetic acid, in 2019 merged its operations with fellow Saudi Arabia-based Sahara Petrochemicals, a supplier of PP. Since the merger, Sipchem has begun to operate a 468,000 t/yr propane dehydrogenation unit.

As per MRC, Sahara International Petrochemical Co. (Sipchem) is planning to mothball the Polybutylene Terephthalate (PBT) plant, owned by its affiliate, Sipchem Chemical Co., and Ethylene Vinyl Acetate (EVA) Film plant that is owned by affiliate firm, Saudi Specialized Products Co. Steps to implement the decision are underway, Sipchem said in a statement to Tadawul, adding that the suspension of both plants will start on Jan. 1, 2021, until further notice. The company expects a positive financial impact starting from Q1 2021 results.

As per MRC ScanPlast, November imports of other ethylene polymers, including ethylene-vinyl-acetate (EVA), were 9,100 tonnes, compared to 10,100 tonnes in October. Overall imports of other ethylene polymers reached 90,200 tonnes over the stated period versus 85,200 tonnes a year earlier.
MRC

Rohm schedules September turnaround for plant at Worms, Germany

MOSCOW (MRC) -- Rohm (Darmstadt, Germany) says it will carry out a scheduled turnaround in September 2021 of its methacrylate monomers plant at Worms, Germany, said Chemweek.

No specific date or duration for the planned maintenance program has been given.

The company announced in early January a series of scheduled shutdowns for four of its methyl methacrylate (MMA) and methacrylate monomer facilities in the first half of 2021, including one planned for 10–22 March also at its Worms plant. The other plants planned for turnaround in the first six months of the year are in Wesseling, Germany; Shanghai, China; and Fortier, Louisiana.

As per MRC, Rohm (Darmstadt, Germany) has put methyl methacrylate (MMA) and all its other methacrylate monomer products in Europe on sales control with immediate effect. The sales control measure has been imposed due to a shortage of raw material, it says. The company has also separately announced it will carry out planned maintenance on four of its MMA and methacrylate production facilities in Germany, China, and the US in the first half of 2021.

In October 2020 Rohm lifted sales control in Europe for MMA after resuming production following annual maintenance at its Worms plant, having imposed it mid-September due to increased demand and limited availability of raw materials. The Worms plant has a production capacity of 225,000 metric tons/year of MMA, while the Wesseling facility has a nameplate capacity of 95,000 metric tons/year of MMA.

According to MRC's DataScope report, last month's SPVC imports to Russia dropped to 0,600 tonnes from 1,600 tonnes in November. High PVC prices in foreign markets and a seasonal decline in demand in the last two months have put serious pressure on import purchases of PVC from Russian companies. Thus, overall imports were 40,800 tonnes in January-December 2020, compared to 50,900 tonnes a year earlier, with PVC from China and the United States accounting for the main reduction in imports. PVC shipments from these countries decreased by almost a third over the stated period.
MRC

Bayer sued by shareholders over Monsanto acquisition

MOSCOW (MRC) -- German law firms representing Bayer shareholders are suing the company for what it claims was a failure to warn shareholders adequately of the risks from pending lawsuits against Bayer’s acquisition target Monsanto, said Chemweek.

The share price of the Bayer group including the Crop Science and pharma divisions has almost halved since the takeover of Monsanto in June 2018 in the wake of lost lawsuits and mounting litigation against Monsanto for alleged health risks from the legacy business’s herbicide, Roundup (glyphosate). Bayer rejects the lawsuits as “unfounded”.

Business weekly WirtschaftsWoche reports that two firms are seeking compensation in a pilot lawsuit before a Cologne court on behalf of various investors.

They accuse the company of “breaches of duty under capital market law”, claiming that the “risks of the purchase were not adequately presented to the shareholders”. One of the firms believes that the case before the court could develop into a “model investor proceeding”, citing a previous trial involving the car manufacturer, Volkswagen (VW). “One lawsuit then becomes representative of all others negotiated.” That firm was reportedly involved in the VW proceedings. The second firm is representing shareholder Kingstown Capital Management, which seeks EUR37 million (USD45 million at the current rate) in compensation from Bayer, according to the WirtschaftsWoche report.

Bayer says that it will defend itself against what it perceives as unfounded allegations. "We believe that our company and its leaders have at all times acted in accordance with the obligations and applicable laws regarding the allegations made in the lawsuits, and that Bayer conducted appropriate due diligence regarding the acquisition process," it says. “This has also been confirmed by the studies of independent experts."

Bayer lost three cases brought against the legacy business, starting shortly after it had acquired Monsanto.

In August 2018, a California jury awarded a former school groundskeeper some USD279 million in a similar case. The state judge overseeing that trial reduced the award to some USD78 million. That case has gone to an appeal in which the plaintiff is seeking the reintroduction of the original penalty, while Bayer is counter-suing for the case to be dismissed. In March 2019, a federal jury convened by the US District Court for the Northern District of California awarded another California resident some USD80 million. The following July, a federal judge cut that award to just above USD25 million.

As of October last year, lawsuits from approximately 60,300 plaintiffs claiming to have been exposed to glyphosate-based products manufactured by Monsanto had been served upon the Bayer business in the US. Plaintiffs allege personal injuries resulting from exposure to those products, including non-Hodgkin lymphoma (NHL) and multiple myeloma, and seek compensatory and punitive damages. By the same date, nine Canadian lawsuits relating to Roundup seeking class action certification had been served against Bayer.

Bayer has moved to settle the bulk of outstanding lawsuits for some USD10.9 billion and that settlement is pending before US District Judge Vince Chhabria. The company reached a settlement deal in June 2020 involving most of the total approximately 125,000 known filed and unfiled claims, and to put in place a mechanism to resolve potential future claims. As of last October, the company had an agreement covering some 88,500 claimants with ongoing discussions over deals with thousands more.

As MRC informed earlier, Bayer’s supervisory board has announced the appointment of Sarena Lin to the company’s management board as chief transformation and talent officer, effective 1 February. She will be responsible for human resources, strategy, and business consulting and “drive the accelerated transformation of Bayer,” the company says. She will also serve as labor director. Lin will be based at Bayer’s Leverkusen, Germany, headquarters.

As MRC reported earlier, Covestro 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.

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.

According to MRC's ScanPlast report, Russia's estimated consumption of PC granules (excluding imports and exports to\\from Belarus) rose in January-November 2020 by 18% year on year to 83,600 tonnes (70,600 tonnes a year earlier).
MRC