COVID-19 - News digest as of 17.02.2021

1. Sluggish demand hurts PTTGC full-year earnings

MOSCOW (MRC) -- PTT Global Chemical's (PTTGC) fourth-quarter net profit surged to Thai baht (Bt) 6.41bn from the same period last year on the back of higher product prices, with sales up 3% year on year, said Chemweek. Its full-year 2020 results, however, reflected a general weakness in demand caused by the coronavirus pandemic, with a 20% decline in sales nearly wiping out its profit. The company's EBITDA margin rose to 12% in the fourth quarter of 2020 from 5% in the same period of 2019, supported by strong margins at the olefins and derivatives business. Its olefins and derivatives business for the period posted an adjusted EBITDA margin of 23%, more than double 10% registered in the same period a year earlier. PTTGC's average polyethylene (PE) prices in the last three months of 2020 were up 22% year on year at USD1,074/tonne.


MRC

MOSCOW (MRC) -- Crude oil futures were slightly higher during mid-morning trade in Asia Feb. 16, extending overnight gains, as the ongoing Arctic blast across North America caused supply disruptions, propelling demand for heating fuel higher, reported S&P Global.

At 11.48 am Singapore time (0348 GMT), the ICE Brent April contract was up by 34 cents/b (0.54%) from the Feb. 15 settle to USD63.64/b, while the March NYMEX light sweet crude contract was up 79 cents/b (1.33%) to USD60.26/b.

The cold weather had hit Texas hard, with temperatures falling to their lowest in 30 years, resulting in power outages and disruptions in production as well as refining activities in the Permian Basin.

"Concerns over oil supply disruptions from Texas continue to prop up the market. Cold weather, power outages, and logistical issues have all led to disruptions," analysts from ING said in a Feb. 16 note, adding that as much as 1 million b/d of crude oil production may be disrupted due to the bad weather.

However, analysts noted the supply disruptions are likely to be short-lived, with weather forecasts expecting temperatures to rise after Feb. 18.

Analysts at ANZ said in a Feb. 16 note that the cold temperatures have also increased demand for heating fuel, similar to conditions in North Asia last month.

The winter storm has also affected refineries in the region, with many having to reduce operating rates or shut down completely, resulting in a bullish movement in gasoline futures and product cracks.

At 11.48 am Singapore time (0348 GMT), the March NYMEX RBOB gasoline futures contract was up by 5.80% from the Feb. 15 settle to USD1.7907/b.

"These refinery shutdowns have provided a boost to some of the product cracks as well, with both RBOB and heating oil cracks spiking higher on the back of the news," analysts at ING said.

While the weather conditions in the US exacerbate the prevailing supply tightness for crude oil and prop up prices temporarily, analysts believe there is ample evidence of support in the form of expectations of a speedy economic recovery following vaccine rollouts and an upcoming US stimulus package, as well as supply curtailments by OPEC+ countries, that may result in oil continuing to trade at strong levels.

Analysts at ANZ also noted that while demand is about 8%-9% below pre-pandemic levels, supply constraints are playing their part in balancing the oil markets.

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

MOSCOW (MRC) -- Kemira's net profit surged to EUR23.8 mln in the fourth quarter 2020 amid higher margins, despite a drop in sales, said the Finland-based chemicals firm.

The company's sales were EUR605.6 mln in Q4 2020 versus EUR657.7 mln in Q4 2019, down by 8% year on year. In 2020 sales were EUR2,427 mln versus EUR2,659 mln in 2019 down by 9% year on year.

Kemira's EBITDA stated EUR91.2 mln in Q4 2020 versus EUR69.6 mln in Q4 2019, up by 31% year on year. In 2020, this figure was EUR413 mln versus EUR382 mln in 2019, up by 8% year on year.

Its net profit was EUR23.8 mln in Q4 2020, compared to EUR8.6 mln in Q4 2019, up by 177% year on year, whereas in 2020, this figure was EUR138 mln versus EUR116.5 mln in 2019, up by 18% year on year.

Kemira's operative EBITDA is expected to be at the same or "at a slightly (less than 5%) lower level than in 2020 (EUR43 mln)", the company said.

"COVID-19 pandemic continues to cause uncertainty in 2021, but Kemira's end market demand is expected to recover gradually from 2020 in line with forecasted economic growth. Demand, particularly in the oil and gas market, is expected to recover," it added.

As MRC informed earlier, in September 2020, Kemira signed a multi year extension of its polymer supply agreement with Ithaca Energy. Kemira said it had signed a multiyear extension to its polymer supply agreement with Ithaca Energy (Aberdeen, UK). The agreement extends the contract between the two companies, signed in 2018, covering the supply of polymers to enhance oil extraction performance at one of the assets operated by Ithaca Energy in the UK North Sea.

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

MOSCOW (MRC) -- Ecolab today reported fourth-quarter net income down 24% year-on-year (YOY), to USD300.3 million, on net sales down 6%, to USD3.07 billion. Adjusted earnings totaled USD1.23/share, down 15% YOY and slightly short of analysts’ consensus estimate of USD1.25/share, reported Chemweek with reference to Refinitiv (New York, New York).

Growth in healthcare and sciences businesses was offset by declines in industrial businesses. Sales decline “stabilized” in the institutional and specialty, and other, businesses, Ecolab says.

“We had a solid business performance during the fourth quarter in the face of significant COVID-19 related end market restrictions that were more substantial and widespread than anticipated,” says Ecolab president and CEO Christophe Beck. “Our underlying business continued its sequential improvement as sales trends remained stable and operating income further improved, driven by new business and customer penetration gains, along with continued pricing and lower costs.”

Global industrial segment net sales fell 2% YOY, to USD1.54 billion, while segment operating income was up 18%, to USD316.4 million. Sales grew in the food and beverage and paper businesses, but declined modestly in the water business and decline significantly in the downstream business.

Global institutional and specialty segment sales fell 21% YOY, to USD881.8 million, while segment operating income was down 62%, to USD94.4 million. Sales declined significantly in the in the institutional business, and modestly in the specialty business, with both divisions hit by the second wave of COVID-19 infections during the quarter.

Healthcare and life sciences segment sales grew 26% YOY, to USD318.1 million, while segment operating income increased 71%, to USD53.8 million. COVID-19 drove demand higher, leading to higher volumes across the segment.

Other segment sales were down 7% YOY, to USD283.2 million, while segment operating income fell 9%, to USD43.5 million. A modest increase in the pest elimination business was offset by declines in the rest of the segment, including textile care and colloidal technologies, Ecolab says.

“As we enter 2021, we expect COVID-19 will continue to have a significant effect on the economy and our end markets, with its primary impact in the early part of the year,” Beck says. “We expect to see the beginning of the COVID-19 recovery in our global end markets starting in the second quarter but believe it will take several quarters to fully realize a new normal.”

As MRC informed before, in November 2020, Douglas M. Baker Jr., CEO of Ecolab Inc., announced his retirement effective January 1, 2021, according to ISSA. Baker will remain in his current position as Ecolab board chairman. Christophe Beck has been appointed Baker’s successor as CEO. Earlier, Beck serves as the company’s president and chief operating officer.

We remind that Russia's output of chemical products rose in November 2020 by 9.5% year on year. At the same time, production of basic chemicals increased in the first eleven months of 2020 by 6.6% 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-November 2020 output. November production of polymers in primary form rose to 896,000 tonnes from 852,000 tonnes in October. Overall output of polymers in primary form totalled 9,240,000 tonnes over the stated period, up by 17.1% year on year.
MRC

MOSCOW (MRC) - The continuous rise in polypropylene prices in Europe and Turkey has significantly affected prices in nearby regions, in particular in the Ukrainian market. Russian producers announced the second increase in polypropylene prices for Ukrainian consumers in a month, according to the ICIS-MRC Price Report.

Negotiations on the February price of Russian PP started in the first days of the month, and at the beginning of the month, Russian producers decided to raise export prices by USD130/tonne. This week, under the pressure of yet another jump in prices in Turkey and Europe, Russian polypropylene has risen in price by another USD190/tonne.
Deals for February shipments of Russian homopolymer PP at the beginning of the month were in the range of USD1,370-1,410/tonne FCA.

Prices for additional volumes of polypropylene and shipments in the second half of February rose to USD1,560-1,600/tonne FCA. A similar situation was with the prices of European and Middle Eastern polypropylene for the Ukrainian consumers.

Export prices of European producers were announced for homopolymer PP in the range of EUR1,250-1,310/tonne FCA in the first week of February, and already in the second week of the month, some producers announced another price increase by EUR100/tonne.

Last week, prices for Middle Eastern homopolymer PP increased in the Turkish by USD100 - 300/tonne, and then the Middle East producers announced a similar rise in prices for the Ukrainian market. Price offers for March shipments rose to USD1,600 per tonne, CIF Odessa, while in the first week of February, deals were done in the range of USD1,360 - 1,420/tonne CIF Odessa.
MRC