COVID-19 - News digest as of 19.02.2021

1. U.S. winter freeze hits global olefins market

MOSCOW (MRC) -- A winter storm has paralyzed U.S. petrochemical production and disrupted 15% of the global olefins market, as per Hydrocarbonprocessing. Unplanned US outages have combined with a strong consumption backdrop with the return of China from the Lunar New Year, seasonally higher demand patterns in Q2, and recovery in global demand moving through the evolution of the coronavirus pandemic. The stage is looking set for a period of tightness and volatility in global olefins balances and prices, according to Wood Mackenzie.

MRC

MOCOW (MRC) -- Chemical production along the US Gulf Coast (USGC) remained largely offline Friday morning, but with the winter storm passing and temperatures on the rise, producers will be turning their attention to restoring operations. The precise timing will be difficult to gauge, however, said Chemweek.

"Restarting the production units will depend on different factors, ranging from fixing damage caused by the cold weather, restoring utilities, regaining access to natural gas and power supplies, or even just affording the natural gas and electricity spot prices that have rocketed during the storm," notes IHS Markit's Global Aromatics Weekly Market Report.

Temperatures in the Houston area are forecast to reach 55?F on Saturday and 65?F. The cold has had a much more severe impact than many of the Category 4–5 hurricanes that have hit the region in over past decades. "It is likely to be at least early next week before refinery and petrochemical facilities … can return to operations," says IHS Markit.

IHS Markit estimates that about 76% of US toluene capacity has been either shut down or operating at reduced rates. At least 74% of US benzene production capacity has been either shut down or curtailed, and the figures are even higher for derivativesaۥ79% of styrene capacity, 89% of cumene capacity, and 100% of cyclohexane capacity. The picture is similar for olefins, with 62% of US ethylene capacity offline and 66% of US polymer/chemical-grade propylene offline.

Facilities located in Louisiana have generally fared better than those in Texas. In the case of styrene, Americas Styrenics (AmSty) kept its two lines at St. James Parish, Louisiana, online the entire time. Westlake briefly idled its line at Sulphur, Louisiana, on Wednesday after a boiler went down, but the issue was resolved by Thursday. One of Cosmar's two lines at Carville, Louisiana, was already offline before the storm hit, but the other continued to operate, constrained only by the supply of feedstock ethylbenzene.

By contrast, the two styrene producers located in Texas Ineos Styrolution at Pasadena and Texas City, and LyondellBasell at Channelviewa shut down, and both have declared force majeure. Cosmar had declared force majeure long before the storm owing to an unplanned ethylbenzene outage.

"In general, the Louisiana plants appear to be better prepared to restart than the Texas plants," says IHS Markit. "In Texas, there are severe shortages of key utilities such as nitrogen, and to avoid overloading the utility infrastructure, plant startups are expected to be prioritized. We assume the styrene units will have to wait until the refineries and steam crackers restart. Until the styrene units can be assured of their raw material supply, benzene and ethylene, they will not restart. Our expectation is that the Texas units will be able to restart in about 10–14 days from this coming weekend."

IHS Markit says the vast majority of polyethylene and polypropylene lines have been down since Sunday, and they are not expected to return to service until the middle of next week. At least half of chlor-alkali and vinyls capacity on the USGC could be out of service.

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.
MRC

MOSCOW (MRC) -- The European Commission says it has approved Mitsui & Co.’s proposed acquisition of agricultural chemical distributor and formulator Belchim Crop Protection (Londerzeel, Belgium). Approval is conditional on Mitsui’s full compliance with a commitments package it offered to the Commission, according to Chemweek.

Mitsui notified the Commission of the proposed transaction on 15 December.

Belchim and Mitsui each distribute third-party crop protection products and supply their own formulated products for crops such as potatoes, vegetables, and vines, the Commission says. The two companies sell a range of products that are mostly based on off-patent active ingredients. In Western Europe, Mitsui is mainly active in crop protection through its subsidiary Certis Europe (Utrecht, Netherlands).

The Commission's investigation into the proposed deal found that it would have reduced competition in the markets for plant growth regulators (PGRs) and paraffinic oils.

PGRs are used to prevent or control sprouting in stored potatoes. In 2020, the active ingredient chlorpropham was banned by the EU and since then, Mitsui and Belchim have been among very few suppliers that sell, or are about to sell, alternative products to chlorpropham in post-harvest potato PGR markets in Denmark, Germany, Poland, Sweden, and potentially in Finland and Norway, the Commission says. “The transaction would have led to high combined market shares in countries where Mitsui and Belchim compete,” the Commission says. “Also, it would have eliminated competition from Mitsui as a potential entrant in Finland and Norway.” The Commission was, as a result, concerned that this would give rise to higher prices for potato PGRs in those countries.

Paraffinic oils are used to prevent or limit the spread of viruses in seed potatoes and flower bulbs. The Commission's investigation showed that Mitsui is the main supplier of paraffinic oils in the Netherlands. It also found that no suppliers other than Belchim were likely to make a significant entry in those markets in the near future. The Commission says it was concerned that the transaction would remove competition from Belchim and that the merged company would have maintained high market shares in the Netherlands. As a result of the merger, Dutch farmers could have seen higher prices for paraffinic oils, the Commission says.

Mitsui offered two commitments to address the Commission’s concerns. The company proposed to transfer the Mitsui distribution agreement and customer relationships for its potato PGRs in one or two packages—one for Germany and Poland, and the other for the Nordic countries—to one or two remedy takers. If Mitsui cannot transfer the packages within a certain timeframe, it has offered to transfer instead the Belchim distribution agreement and customer relationships for its PGR product under the same terms.

Mitsui also offered to transfer to a remedy taker the Belchim distribution agreement and other relevant data and agreements for its paraffinic oils for virus control in seed potatoes and flower bulbs in the Netherlands. The businesses Mitsui proposed to divest include access to brands and intellectual property, application machinery, and education and training.

“These commitments fully remove the overlaps between Mitsui and Belchim in the markets where the Commission had identified competition concerns,” the Commission says.

As MRC informed earlier, Mitsui Chemicals operated its naphtha cracker normally following a maintenance turnaround. The company resumed operations at the cracker on July 19, 2020. The cracker was shut for maintenance on June 11, 2020. Located in Osaka, Japan, the cracker has an ethylene capacity of 500,000 mt/year and a propylene capacity of 280,000 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 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.

Mitsui Chemicals is a leading manufacturer and supplier of value added specialty chemicals, plastics and materials for the automotive, healthcare, packaging, agricultural, building, and semiconductor and electronics markets. Mitsui Chemicals is a Japanese Chemicals company, a part of the Mitsui conglomerate. The company has a turnover of around 15 billion USD and has business interests in Japan, Europe, China, Southeast Asia and the USA. The company mainly deals in performance materials, petro and basic chemicals and functional polymeric materials.
MRC

MOSCOW (MRC) -- Crude futures weakened during midmorning trade in Asia Feb. 19 as the support received from supply disruptions in the US due to freezing temperatures eased, allowing prices to return to fundamental values, reported S&P Global with reference to market sources.

At 11:08 am Singapore time (0308 GMT), the ICE April Brent contract was down USD1.39/b (2.17%) from the Feb. 18 settle at USD62.54/b while the NYMEX March light sweet crude contract fell USD1.54/b (2.54%) at USD58.98/b.

The US Energy Information Administration's weekly inventory report released late Feb. 18 estimated a 7.3 million barrel draw in crude inventories the week ended Feb. 12. The EIA also reported a 3.4 million draw in distillate inventories and a smaller-than-expected build of 700,000 barrels in gasoline inventories over the same period.

Despite the report seemingly signaling a bullish sentiment, price reaction was tepid as markets focused on adjusting for recent gains that came on the back of temporary supply disruptions in parts of the US.

"Oil prices are coming off the boil as the power crisis spurred on by the massive winter storm is starting to ebb ... the market will now be more inclined to shift back to regular supply and demand fundamentals," said Stephen Innes, chief global markets strategist at Axi, in a Feb. 19 note.

Warmer and milder temperatures are expected to return by Feb. 20, in the US, according to the US National Weather Service.

"As support from the wintery weather in US eases, traders are eager to take profit off the table before the weekend, resulting in the pullback," told David Lennox, resource analyst at Fat Prophets, to S&P Global Platts on Feb. 19.

Despite the recent easing in oil prices, analysts agreed the current levels still reflect the fundamental support the market is receiving from a recovering demand outlook and supply discipline from the OPEC+ alliance.

All eyes are on the next OPEC+ meeting on March 4, where the group is expected to discuss April production quotas. Given the strength in oil prices despite the recent pullback, some analysts said the odds of easing supply restrictions are increasing.

"Oil may cool slightly on this news [of easing supply curbs], but there is nothing here that should be a cause for concern. Saudi Arabia and OPEC+ will continue to be responsive to macro conditions and manage supply through what remains a period of uncertainty on demand," said Innes.

Rollbacks in productions quotas are expected to be conservative, as the alliance remains cognizant of the fragile state of demand recovery.

"Even before the the weather related disruptions in the US, shale production was not increasing significantly despite high oil prices, showing that the threat of US shale producers ramping up production was not severe. As we are still in the early days of vaccine-backed economic recovery, the alliance will likely keep production levels stable," said Lennox.

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) -- A winter storm has paralyzed U.S. petrochemical production and disrupted 15% of the global olefins market, as per Hydrocarbonprocessing.

Patrick Kirby, Wood Mackenzie Principal Analyst, said: “The recent cold snap in the US has dramatically impacted the country’s petrochemical industry. The concentration of the winter storm has been particularly pronounced in Texas, which geographically represents the workhorse of the US olefins industry.

"The impact of extremely low temperatures, alongside the loss of gas and power supplies, has caused widespread disruption to US olefins operations. The region is familiar with hurricane activity causing disruption to activities. However, the nature and operational impact of the unseasonably cold temperatures has been a surprise to many market participants."

Genscape, Wood Mackenzie’s sister company, currently estimates that over 80% of US olefins capacity is offline. Additionally, capacity that is still online is most likely operating at reduced rates or impacted by wider supply chain disruptions. "This is a significant impact to one of the world’s largest concentrations of olefins capacities, just under 20% of the global total, and tops recent disruption seen in August 2020 from Hurricane Laura.

"US olefins industry capacity has been in expansion mode over the last several years, facilitated by shale gas economics. The recent disruption is therefore impacting a larger base of US and global olefins supply. "Upstream and downstream disruptions will likely result in a staggered and complex capacity restart once immediate weather and power disruption issues pass. This could potentially extend the emergency from days to weeks before market continuity and stability returns,” added Kirby.

Unplanned US outages have combined with a strong consumption backdrop with the return of China from the Lunar New Year, seasonally higher demand patterns in Q2, and recovery in global demand moving through the evolution of the coronavirus pandemic. The stage is looking set for a period of tightness and volatility in global olefins balances and prices, according to Wood Mackenzie.

One factor that is increasingly clear heading into early 2021 is the increasing fragility of global supply chains and the disruption that can arise from structural interconnectivity. “For regions that are able to step up to meet the call on olefins and derivatives supply through the near-term, such as the Middle East and other locations, the opportunity and rewards are likely to be high,” said Kirby.

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.
MRC