Global oil inventories to become tight by mid-2021

MOSCOW (MRC) -- Global refineries will increase crude processing sharply over the next six months to stabilise stocks of fuels such as gasoline and diesel – even if substantial coronavirus controls remain on travel and service sector businesses, said Hydrocarbonprocessing.

The prospective rise in processing and consequent draw down in crude inventories in the second and especially third quarters is what has been boosting futures prices and causing calendar spreads to tighten. The oil market’s rapid evolution from a massive production surplus last year to deficit has been most evident in the United States, where reliable data on stocks is published weekly by the Energy Information Administration (EIA).

U.S. inventories of crude and products outside the strategic petroleum reserve amounted to 1,283 million barrels on March 5, which was just 12 million barrels or 1% above the previous five-year average. Crude stocks were 29 million barrels or 6% above the five-year average, mostly as result of the disruption to refineries caused by cold weather and power failures in Texas last month.

But inventories of finished fuels and intermediate refinery products had already fallen to 15 million barrels or 2% below the average for 2016-2020. The gasoline shortfall has become particularly severe, with inventories 15 million barrels or 6% below the five-year average.

Total stocks of crude and products have fallen by 168 million barrels since July, largely reversing the 198 million build between March and June associated with the epidemic and volume war between Saudi Arabia and Russia. In the next few months, U.S. refineries will have to accelerate crude processing and fuel production to prevent stocks from depleting further.

If coronavirus controls on travel, services and international passenger aviation are relaxed, that would provide an even bigger boost to consumption. But it is important to stress that crude processing will have to accelerate even if controls are maintained to prevent fuel stocks from eroding to undesirably low levels.

The depletion of petroleum inventories is most obvious in the United States because of its high-frequency real-time data, but the phenomenon is worldwide.

Commercial petroleum inventories in the OECD countries have fallen by around 284 million barrels since July, reversing most of the 335 million barrel build between last February and June, according to the EIA. In March, OECD inventories are likely to fall slightly below the average for the previous five years, for the first time since the epidemic started to spread outside China in February last year.

As MRC informed before, slumping fuel consumption during the pandemic is accelerating the long-term shift of refining capacity from North America and Europe to Asia, and from older, smaller refineries to modern, higher-capacity mega-refineries. The result is a wave of closures, often centering on refineries that only narrowly survived the previous closure wave in the years after the recession in 2008/09.

We remind that PetroChina has nearly doubled the amount of Russian crude being processed at its refinery in Dalian, the company's biggest, since January 2018, as a new supply agreement had come into effect. The Dalian Petrochemical Corp, located in the northeast port city of Dalian, was expected to process 13 million tonnes, or 260,000 bpd of Russian pipeline crude in 2018, up by about 85 to 90 percent from the previous year's level. Dalian has the capacity to process about 410,000 bpd of crude. The increase follows an agreement worked out between the Russian and Chinese governments under which Russia's top oil producer Rosneft was to supply 30 million tonnes of ESPO Blend crude to PetroChina in 2018, or about 600,000 bpd. That would have represented an increase of 50 percent over 2017 volumes.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 241,030 tonnes in January 2021 versus 217,890 tonnes a year earlier. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, PP shipments to the Russian market reached 141,870 tonnes in January 2021 versus 123,520 tonnes a year earlier. Supply of homopolymer PP and PP block copolymers increased.
MRC

European chlorine output hits highest total for two years

MOSCOW (MRC) -- Chlorine production in Europe increased 3.3% year on year (YOY) in January to 855,883 metric tons, with the average daily rate of 27,609 metric tons also rising 6% month on month from December’s daily rate of 26,045 metric tons, or 807,438 metric tons in total, according to Chemweek.

It is the fourth consecutive monthly rise YOY in output, and the highest monthly total for two years, according to data from Euro Chlor, the European chlor-alkali industry association.

Caustic soda stocks rose YOY by 6,617 metric tons to 233,430 metric tons in January and increased 12.3% compared to December 2020’s total of 207,855 metric tons, it says.

Europe’s average chlorine production capacity utilization rate in January rose YOY by 2.5% to 86.7%, the highest rate achieved since February 2020.

Euro Chlor’s figures are drawn from the EU-27 countries plus Norway, Switzerland, and the UK. The association represents 38 companies producing chlorine in 19 countries.

As MRC reported earlier, in January 2021, Industria Quimica del Istmo (Iquisa; Mexico City, Mexico) hired Bluestar Chemical Machinery Co. (BCMC) to build a membrane-cell chlor-alkali plant in Coatzacoalcos, Mexico, with capacity to produce 150,000 metric tons/year of chlorine. BCMC said then it will supply its proprietary electrolysis technology for the project, which is to begin construction this month and to be completed within two years.

We remind that November production of sodium hydroxide (caustic soda) in Russia were 111,000 tonnes (100% of the basic substance) versus 108,000 tonnes a month earlier. Russia's overall output of caustic soda totalled 1,165,600 tonnes in the first eleven months of 2020, down by 1.3% year on year.
MRC

Sipchem 2020 net profit falls on lower prices

MOSCOW (MRC) -- Sipchem's net profit fell by 41.3% year on year to Saudi riyal (SR) 175.9m last year, partly weighed by lower selling prices for most of its products, the Saudi Arabia-based producer said in a stock exchange filing, said Argaam.

Sahara International Petrochemical Co. (Sipchem) reported a net profit after Zakat and tax of SAR 175.9 million in 2020, down 41% compared to a net profit of SAR 299.5 million a year earlier.

The profit drop was attributed to lower sales revenue and selling prices for most of Sipchem’s products, along with lower production in the polypropylene plant, due to unplanned shutdown and turnaround maintenance.

Sipchem also recorded an impairment loss of SAR 280 million in 2020 from cash generating units, namely International Diol Company (IDC) (SAR 100 million) and EVA Film Plant, owned by Saudi Specialized Products Company (SAR 180 million).

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.

According to ICIS-MRC Price report, on Wednesday, 10 March, 1,500 tonnes of Turkmenbashi refinery's PP raffia grade were put up for export sale at the State Commodity and Raw Materials Exchange of Turkmenistan. The starting price was set at USD1,515/tonne FOB/FCA. PP prices were growing dynamically during the trades and finally reached another record - USD1,775/tonne FOB/FCA, the total volume of PP was sold in one day.
MRC

Clariant will increase prices for Pigments & Pigment Preparations

MOSCOW (MRC) -- Clariant, a focused and innovative specialty chemical company, has announced global price increases across its product portfolio, as per the company's press release.

The increase, which is effective March 19th, 2021 or as soon as contracts allow, is necessary to recover significant on-going cost inflation for basic raw materials, energy and transportation.

Prices for the pigment portfolio will increase by 1.2 USD/KG and for pigment preparations by 0.5 USD/KG or its equivalent in local currency.

Selected individual products will experience higher price increases due to the severe impact of their specific raw material costs.

As MRC reported earlier, in October 2020, Clariant (Muttenz, Switzerland) announced the construction of a new state-of-the-art catalyst production site in China. This project represents a significant investment which further strengthens Clariant’s position in China and enhances its ability to support its customers in the country’s thriving petrochemicals industry.

The new facility will be primarily responsible for producing the Catofin catalyst for propane dehydrogenation, which is used in the production of olefins such as propylene. Thanks to its excellent reliability and productivity, Catofin delivers superior annual production output compared to alternative technologies, resulting in increased overall profitability for propylene producers, says the company. Construction at the Dushan Port Economic Development Zone in Jiaxing, Zhejiang Province was scheduled to commence in Q3 2020, and Clariant expects to be at full production capacity by 2022.

Propylene is the main feedstock for the production of polypropylene (PP).

According to MRC's ScanPlast report, PP shipments to the Russian market reached 141,870 tonnes in January 2021 versus 123,520 tonnes a year earlier. Supply of homopolymer PP and PP block copolymers increased.

Clariant AG is a Swiss chemical company and a world leader in the production of specialty chemicals for the textile, printing, mining and metallurgical industries. It is engaged in processing crude oil products in pigments, plastics and paints.
MRC

Lenzing swings to loss as pandemic pressures textile fiber prices

MOSCOW (MRC) -- Fibers producer Lenzing swung to a net loss of EUR10.6 million (USD12.7 million) in 2020 from a net profit of EUR114.9 million the year before, on sales of EUR1.6 billion, down 22.4%, said Chemweek.

EBITDA fell 39.9% to EUR196.6 million. The EBITDA margin decreased from 15.5% to 12.0%. Fourth-quarter figures have not been disclosed. The immediate effect of the pandemic on Lenzing’s business was to increase pressure on prices and volumes in the textile fiber segment, in particular in the second quarter of 2020. There was a recovery of demand in the second half of the year, primarily for wood-based specialty fibers including Tencel™, which had a positive impact on revenue and earnings, but could not compensate for losses, Lenzing says.

Lenzing says it responded to the tough market environment caused by COVID-19 by implementing a package of measures and says it remains on track in terms of its strategy. The company adjusted production volumes. It also intensified measures for structural earnings improvement to mitigate the effect of the pressure on fiber prices and demand, and reduced its operating costs.

"2020 was largely dominated by the COVID-19 pandemic,” says Stefan Doboczky, CEO of Lenzing. “Lenzing responded quickly and with determination to the increased pressure on prices and volumes. In the second half of the year, we saw a broad recovery of the fiber market."

Lenzing says that in 2020 the company reached its target to generate 50% of revenue from specialty fibers. The company says it aims to generate more than 75% of its fiber revenue from specialties by 2024. Lenzing says it is on track to start up a lyocell fiber plant in Thailand at the end of 2021. The EUR400-million plant will have a capacity of 100,000 metric tons/year.

The project in Thailand, and a dissolving wood pulp plant under construction in Brazil, also form part of Lenzing’s target to reduce its greenhouse gas emissions per ton of product 50% by 2030 and be climate-neutral by 2050. The plant in Brazil will feed more than 50% of the electricity it generates into the public grid as renewable energy.

Lenzing says the outlook for its business is unclear because of uncertainty surrounding the pandemic, but that there are signs of an upturn. Meanwhile, “the currency environment is expected to remain volatile in the regions relevant to Lenzing,” the company says.

"The significant recovery of demand from the third quarter of 2020 onwards, starting in China, continued into the first quarter of 2021 and is currently providing a friendly market environment,” Lenzing says. “With the prospect of a broad population being vaccinated against COVID-19 in the near future, optimism and confidence in an early return to normality are also growing within the textile value chain."

As a result, earnings visibility remains limited, Lenzing says. The company expects its 2021 operating result to develop “at a similar level in 2021 as in the pre-crisis year 2019."

As per MRC, textile fiber manufacturer Lenzing reports a steep fall in net profit for the first half of 2020, to EUR1.5 million (USD1.8 million) from EUR78.8 million in the first half of 2019, on revenue down 25.6% from EUR1.09 billion to EUR810.2 million.

According to ICIS-MRC Price report, on Wednesday, 10 March, 1,500 tonnes of Turkmenbashi refinery"s PP raffia grade were put up for export sale at the State Commodity and Raw Materials Exchange of Turkmenistan. The starting price was set at USD1,515/tonne FOB/FCA. PP prices were growing dynamically during the trades and finally reached another record - USD1,775/tonne FOB/FCA, the total volume of PP was sold in one day.
MRC