Axalta easily beats estimates on strength in industrial, automotive demand

MOSCOW (MRC) -- Axalta has reported fourth-quarter net income up 67.1% year-on-year (YOY), to USD69.7 million, on net sales down 2.2%, to USD1.07 billion, said Chemweek.

Adjusted earnings totaled 58 cents/share, up 38.1% YOY and well ahead of analysts’ consensus estimate of 37 cents/share, as reported by Refinitiv (New York, New York). Volumes declined 3.8% YOY, and average price and product mix was down 0.2%. Lower YOY volumes were mostly the result of COVID-19-related macroeconomic impacts, with the automotive refinish coatings market hardest hit, Axalta says.

The company’s results “included tailwinds from rapidly improving demand across many industrial coatings segments, as well as benefits from the cost actions taken during 2020 to help offset pandemic volume impacts,” says Robert Bryant, president and CEO of Robert Bryant. “During the fourth quarter, Axalta saw evidence of ongoing demand recovery across most businesses and regions, while ongoing benefits from cost actions ahead of earlier expectations helped to deliver strong results for the quarter."

Performance coatings segment net sales were down 3.5% YOY, to USD703.9 million, while segment adjusted EBIT increased 9.7%, to USD129.5 million. Volumes fell 5.8% YOY, with declines in automotive refinish partly offset by higher industrial volumes. Average price and product mix was down 0.3% YOY.

Transportation coatings segment net sales increased 0.5% YOY, to $370.6 million, while segment adjusted EBIT nearly doubled, to USD47.9 million from USD25.6 million. Volumes were up 0.3% YOY, with higher global automotive production offsetting declines in light-truck production. Price and product mix effects were neutral, Axalta says.

As per MRC, Axalta said that it will realign its business structure to fold most organizational functions into its two global business units, transportation coatings and performance coatings.

As MRC reported earlier, in July 2017, Axalta Coating Systems completed its previously announced acquisition of the Spencer Coatings Group (UK), a leading manufacturer of high performance industrial coatings for heavy-duty equipment, general industrial, oil and gas, and glass coatings segments.

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.

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MOSCOW (MRC) - Imports of polypropylene (PP) into Belarus increased to about 115,600 tonnes in 2020, up 5.7% year on year, compared to the same period of 2019. The greatest increase in imports accounted for homopolymer PP, according to MRC DataScope.

December PP imports into the Republic of Belarus increased to 10,800 tonnes from 9,400 tonnes a month earlier. Local companies increased their purchases of injection moulding propylene copolymers in Russia. Total PP imports into the country reached 115,600 tonnes in January - December, compared with 109,400 tonnes year on year.

The demand for homopolymer PP increased, but demand for propylene copolymers decreased. The structure of PP imports by grades looked the following way over the stated period.

December imports of homopolymer PP increased to 7,900 tonnes from 7,600 tonnes a month earlier, purchases of injection moulding homopolymer PP in Russia increased. Overall imports of homopolymer PP reached 84,500 tonnes in 2019, up by 12.4% year on year.

December imports of propylene copolymers to Belarus were about 2,900 tonnes versus 1,800 tonnes a month earlier, local companies increased significantly their procurement of injection moulding block-copolymers of propylene (PP block copolymer) from Russian producers.
Thus, overall imports of propylene copolymers reached 31,100 tonnes in January-December 2020, down by 9% year on year.

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MOSCOW (MRC) -- SK Global Chemical and global waste solutions provider Brightmark have signed a memorandum of understanding (MoU) to form a partnership that aims to build a commercial-scale plastics renewal facility in South Korea, according to Apic-online.

Under the MoU, the parties will jointly utilize Brightmark's plastics renewal technology and confirm its commercial viability with the intention of forming a joint venture to develop, finance, construct and operate the plant.

The proposed facility is planned to have a capacity of 100,000 t/y. Both companies will perform a feasibility study during 2021 and intend to cooperate by combining experience of pyrolysis and post treatment. A planned schedule for the project was not available.

By the end of this year, they will complete an evalua-tion of the most optimal methods to operate, scale and develop Brightmark?s technology prior to finalization of a joint venture agreement for the plant development and operation.
Brightmark is currently building a USD260-million plastics renewal facility in Ashley, Ind., which will initially convert about 100,000 t/y of plastic waste into new products. It is scheduled to achieve full com-mercial scale this year.

As MRC reported previously, SK Innovation Co Ltd, the owner of South Korea's top refiner SK Energy, said in early February, 2021, that refining margins are expected to gradually recover this year on a pick-up in fuel demand as the impact of COVID-19 eases. The company, which has been battered by weak margins during the global pandemic, posted an operating loss of 243 billion won (USD218 million) in the October-December quarter.

We remind that SK Advanced is planning to start up the new polypropylene (PP) plant in Ulsan, South Korea this March 2021 as construction works are nearly completed. The PP unit is a joint venture between PolyMirae and SK Advanced, using the “Spheripol” process of LyondellBasell, and have an annual output of 400,000 tons/year. The unit will be utilizing the propylene output from SK’s 600,000 tons/year propane dehydrogenation (PDH) unit at the same complex. It is expected that SK Advanced would have a smaller propylene allocation for export once the new PP line comes online.

According to MRC's ScanPlast report, 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.
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MOSCOW (MRC) -- Sky-high U.S. natural gas prices have prompted some Midwestern ethanol producers to reduce processing in the last week, hoping instead to sell off some of their natural gas to take advantage of current high spot prices caused by the spike in cold weather, said Hydrocarbonprocessing.

Ethanol margins in the Corn Belt have dropped sharply due to the frigid weather, falling to negative-USD3.92 a gallon, lowest since at least 2010, Refinitiv Eikon data showed. Natural gas prices have soared because of power needs, hitting their highest levels in years due to the cold snap.

At the Waha hub in the Permian basin in Texas, next-day gas prices rose last week to as high as USD157.714 per million British thermal units (mmBtu).

The astronomical prices forced some ethanol producers who have not yet purchased all their needed natural gas to consider whether to reduce processing to avoid the high prices. It has forced others who have their natural gas bought to consider whether to reduce production rates to sell into the spot market. One ethanol producer reduced his company’s run rate by more than 25% last week to sell natural gas that he earlier had bought at a contracted price.

He calculated that his typical cost for gas used to produce ethanol comes to just over $30,000 per day in the spot market. But the surge in prices means that cost would amount to $2 million if he were buying gas daily. As a result, this producer said, he had to try to sell off his natural gas, cutting ethanol production in the process.

“The price is so ridiculous that I can’t do anything else that makes that kind of money,” said the producer, who wished to remain anonymous for market purpose.

As per MRC, a winter storm has brought unusually cold temperatures, snow, and freezing rain to Texas and western Louisiana, forcing a large share of US light olefins production offline. As of the evening of Tuesday, 16 February, IHS Markit had confirmed the shutdown of at least 61% of US ethylene capacity, 59% of US chemical- and polymer-grade propylene (CGP, PGP) capacity, and 22% of US fluid catalytic cracking (FCC) capacity. Many plants that remained online were running at reduced capacity.

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.
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MOSCOW (MRC) - Hopes of a speedy aviation recovery this year have been knocked back by global travel restrictions after the emergence of new coronavirus variants and a slower than expected vaccination rollout, dimming the outlook for jet fuel demand and oil prices, said Reuters.

Jet fuel suffered the biggest demand decline among oil products as aviation activity collapsed last year and is seen by market participants as one of the main factors influencing 2021 oil demand growth, given the lingering uncertainties. Almost 10% of total oil demand in OECD countries was for jet fuel in 2019, dropping to 6% in 2020, International Energy Agency (IEA) data shows. By comparison, gasoline demand remained around 30% in both 2019 and 2020.

Goldman Sachs last month lowered its forecast for first-quarter global oil demand by 700,000 barrels per day (bpd), or 0.7% of total consumption, mainly because of renewed travel restrictions. Analysts and traders had expected a swift recovery for jet fuel consumption on the back of a bounce in leisure travel. However, vaccination programs have been delayed and the skies remain empty, with thousands of planes grounded by the pandemic and many airlines pushed to the verge of bankruptcy.

"For the short-term, there is still no sign of recovery for jet fuel," said a senior jet fuel trader associated with a Japanese refiner. Most traders and analysts now expect the situation to improve only in the second half of the year as vaccine rollouts continue and domestic flights pick up. A recovery in international flights, however, is expected to take longer.

Long-haul flights burn an average of about 35 times more fuel than regional flights, the IEA says, and are responsible for more than a third of total fuel used by the aviation sector. Jet fuel demand will remain at about 5.4 and 5.7 MMbpd in the first and second quarters respectively, research consultancy Energy Aspects projects, far below average global consumption of 7.9 MMbpd in 2019.

In Asia, jet fuel cracks, or margins, have gained in recent weeks but remain at record lows for the time of year. "Refiners with substantial domestic markets will try to run just enough to produce jet fuel to meet domestic demand as the international market is still weak," one senior jet fuel trader said.

In Europe, jet fuel cracks continue to rise, mainly owing to expected heavy refinery maintenance work rather than strong demand. Jet fuel held in independent storage in the Amsterdam-Rotterdam-Antwerp (ARA) hub rose in the week to Thursday to 983,000 tonnes, almost 110% higher than the same period last year.

Global jet fuel floating storage, meanwhile, rose to about 4 million barrels in early February, having dropped from a peak of about 20 million barrels in August 2020 to almost 2.5 MMb last month, according to data intelligence firm Kpler.

The emergence of more contagious variants of the virus has severely affected intercontinental travel, with recovery expected to be arduous, which analysts and traders say could be most painful for Middle East refiners that are heavily reliant on such flights.

With new refining capacity coming online in the region this year, the refiners have no option but to export more jet fuel to already oversupplied markets. In the United States, airline passenger volumes are still down 65% from pre-pandemic levels, said U.S. industry group Airlines for America.

American Airlines said in its fourth-quarter report that it is looking at 2021 as "a year of recovery" but could not predict exactly when passenger demand will return.

As per MRC, a winter storm has brought unusually cold temperatures, snow, and freezing rain to Texas and western Louisiana, forcing a large share of US light olefins production offline. As of the evening of Tuesday, 16 February, IHS Markit had confirmed the shutdown of at least 61% of US ethylene capacity, 59% of US chemical- and polymer-grade propylene (CGP, PGP) capacity, and 22% of US fluid catalytic cracking (FCC) capacity. Many plants that remained online were running at reduced capacity.

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.
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