US crude oil inventory builds likely extend as refinery runs hold below normal

MOSCOW (MRC) -- US crude oil inventory builds likely extended in the week ended March 12 as the Gulf Coast refinery complex continued to operate at reduced capacity in the wake of the February deep freeze, an S&P Global Platts analysis showed March 15.

Total commercial crude stocks likely climbed 400,000 barrels to around 498.8 million barrels last week, analysts surveyed by Platts said. The counter-seasonal build would leave stocks 6.5% above the five-year average of US Energy Information Administration data, opening the widest surplus since early January.

The expected increase comes as nationwide refinery runs continue to hold well below normal following the mid-February deep freeze that took as much as 4.4 million b/d of refinery capacity fully offline Feb. 18.

Nationwide refinery utilization is expected to average around 74% of total capacity, analysts said. While this is a 5 percentage point uptick from the week prior, it would leave utilization around 9 percentage points below pre-freeze levels and still more than 14% behind the five-year average.

While the bulk of the impacted refineries have seen at least partial restarts, at least eight facilities were still operating at less than full capacity last week, and at least two facilities comprising a combined 700,000 b/d of capacity had no estimated full restart date.

US crude production, which saw a sharp decline in February in the weeks following the winter weather, had recovered to pre-storm levels of around 10.9 million b/d in the week ended March 5, EIA data shows.

In total, the storm is likely to cost roughly 70 million barrels in lost refinery runs, according to S&P Global Platts Analytics, considerably overshadowing aggregate crude production losses of 20 million-25 million barrels.

US crude exports averaged 2.68 million b/d in the week ended March 12, according to data from cFlow, Platts trade-flow software, roughly flat from an EIA-reported 2.63 million b/d the week prior.

Refined products stock draws likely extended amid still-weak refinery runs, though strong margins likely incentivized production from operational facilities.

Total US gasoline inventories likely declined 1.4 million barrels to around 230.2 million barrels, analysts said, while distillate stocks were expected 900,000 barrels lower at around 136.6 million barrels. The draw would leave inventories respectively 5.7% and 3.4% behind their five-year averages.

US Gulf Coast cracking margins for WTI MEH averaged USD13.54/b in the five-days ended March 12, S&P Global Platts Analytics data showed, up from a February average of USD9.98/b. The strong margins come on the back of a steep rise in gasoline cracks.

The USGC unleaded 87 crack versus WTI MEH averaged USD19.26/b last week, up 65% from a February average of USD11.65/b. On the US Atlantic Coast, New York Harbor RBOB cracks versus Brent climbed above USD20/b and were the strongest since August 2018.

Gasoline cracks were further supported by upward trending demand. Apple Mobility data showed US driving activity in the week ended March 12 was up around 3% from the week prior and nearly 8% above year-ago levels.

As MRC informed before, the largest US refinery, Motiva Enterprises’ 607,000 barrel-per-day Port Arthur, Texas, plant, returned to normal operations. The refinery was shut on Feb. 15 when freezing temperatures, rarely seen on the US Gulf Coast, knocked out steam supply. Motiva began restarting the refinery on Feb. 24.

Motiva Chemicals has also resumed operations at its mixed-feed cracker in Port Arthur, USA. The process of restart of this cracker with the capacity of 635,000 mt/year of ethylene and 340,000 mt/year of propylene began on 27 February, 2021, and finished late last week. The cracker wa shut along with the refinery at the same site on 14 February, 2021, because of the deep freeze.

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

MOSCOW (MRC) -- Axalta announced that it has acquired Anhui Shengran Insulating Materials Co., Ltd., a leading Chinese producer of high-quality wire enamels used in a wide range of consumer electronics, electric vehicle, and industrial applications, according to Kemicalinfo.

The transaction is expected to close in the second quarter of 2021, subject to customary closing conditions. Financial terms have not been disclosed.

The acquisition will add new wire enamel products and capabilities to enhance Axalta’s offerings to customers across several end markets, including automotive, renewable energy, and consumer electronics.

“Anhui Shengran’s wire enamel products and capabilities are highly complementary to our growing Energy Solutions business,” said Shelley Bausch, senior VP of Global Industrial Coatings at Axalta. “This will be a solid platform for further specialization and growth as we support key customers in China. I am also excited to welcome the Anhui Shengran team to Axalta.”

“It was important to me that we were acquired by a company I could trust to treat my employees well, and I believe Anhui Shengran is in good hands,” said Zhangying Tu, executive director of Anhui Shengran. “We are excited to become part of Axalta, and we look forward to working together to add value and increase market share in the growing Energy Solutions market in China.”

With three distinctive product segments - wire enamels, impregnating resins and electrical steel coatings - Axalta’s Energy Solutions business provides a comprehensive portfolio of innovative and ecologically responsible insulating solutions for customers in new energy vehicles and other industrial markets.

As MRC informed earlier, in 2017, Axalta Coating Systems completed its previously announced acquisition of the Spencer Coatings Group, 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.
MRC

MOSCOW (MRC) -- South Korean SK Global Chemical (SKGC) has signed a deal with Chinese producer Zhejiang Satellite to build a 40,000 tonne/year ethylene (C2) acrylic acid (EAA) plant at Lianyungang in eastern China, said Chemengonline.

SK Global Chemical (Seoul, South Korea), a subsidiary of SK Innovation, signed an MOU with Chinese company Zhejiang Satellite for the establishment of a joint company that will be responsible for the production and sales of ethylene acrylic acid (EAA), a type of adhesive copolymer.

This joint company will be established this year with the total investment of approximately KRW 200 billion, with six to four contributions of SK Global Chemical and Zhejiang Satellite, respectively. This move is aimed at preoccupying the Chinese and Asian markets through the strategic ties of SK Global Chemical’s EAA production technology and sales channels, and Zhejiang Satellite’s stable source of raw materials.

Ever since the acquisition of the EAA business from Dow Chemical Company in 2017, it had been SK Global Chemical’s goal to expand the high value-added packaging material business, mainly in emerging countries in Asia including China. By securing the EAA plant in Lianyungang, China, SK Global Chemical will be able to complete the triangular formation of global high value-added materials production bases in USA, Europe and Asia. Two other EAA plants of SK Global include one in Texas, the U.S., and one in Tarragona, Spain.

SK Global Chemical shared that this strategic investment reflects the surging demand for EAA materials in emerging Asian countries, including China. The packaging materials market for fresh food has been rapidly growing due to the high demand for boxed or delivered foods in China. SK Global Chemical’s EAA materials are renowned for their green packaging technologies in the growing fresh food packaging materials market.

Luanyungang, China, the new land for EAA factories, has recently started creating a massive eco-friendly chemical and industrial complex. It is expected to grow into the No. 1 chemical and industrial complex in China. The site has been selected for its advantageous location near the exporting and importing infrastructure and utilities such as the power grid and waste-water disposal, as well as a stable source of ethylene, one of the key ingredients.

As per MRC, SK Global Chemical (SKGC), one of the largest producers of petrochemical products in South Korea, closed its cracking unit No. 1 in Ulsan (Ulsan, South Korea) on a permanent basis on December 8, 2020. According to a letter from the company to its customers, production at this facility with a capacity of 190,000 tonnes of ethylene and 135,000 tonnes of propylene per year will be halted due to unfavorable market conditions. However, SKGC will continue to supply ethylene to its domestic customers from other crackers.

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.

SK Global Chemical is a division of SK Group, Korea's first refinery in operation for over 50 years. SK Group has more than 70 thousand employees working in 113 offices around the world. Its largest enterprises produce mainly petrochemical products.

(USD1 = W1,137)
MRC

MOSCOW (MRC) -- State-run Indian Oil Corporation, the country's top refiner, plans to sell hydrogen-producing units at its plants to private sector entities, reported Reuters with reference to the company's chairman S. M. Vaidya's statement.

In her annual budget for the 2021/22 fiscal year presented last month, Nirmala Sitharaman, India's finance minister proposed the sale of some assets of state-run companies to mobilise funds.

To begin with IOC plans to sell two hydrogen units of 72,500 tonnes per annum capacity each at its 276,000 barrels per day (bpd) Koyali refinery in western Gujarat state by the end of 2021, Vaidya told reporters on the sidelines of an industry event. "We are starting with the Gujarat refinery. Let's see how it goes before we start the process for other refineries," Vaidya said.

IOC operates about a third of India’s 5 million bpd refining capacity.

Vaidya said the IOC will pay annual operation and maintenance charges to the new owner.

"We are trying to leverage hydrogen units. The asset value and O&M (operation and maintenance) cost will be taken into consideration for selecting a licensor or new buyer," he said.

However, he said the firm had no plans to sell other units of the refineries for now.

The sale of hydrogen units made sense, however, as IOC would be the sole customer of the hydrogen produced by the new owner from the units located at its Koyali refinery, he said.

As MRC informed before, Indian Oil has just announced plans to expand the capacity of its refinery at Panipat, India, from 15 million metric tons/year (MMt/y), to 25 MMt/y. The company will also build a polypropylene (PP) unit and a catalytic dewaxing unit at the site. The cost of the project is 329.46 billion Indian rupees (USD4.45 billion). The plan is the latest in a series of projects approved by Indian Oil to improve integration with petrochemicals at the company's refinery sites. The capacity of the planned PP facility has not been disclosed.

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

According to MRC's ScanPlast report, Russia's estimated polyethylene (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

MOSCOW (MRC) -- Pembina Pipeline booked a Canadian dollar (CD) 323m (USD256m) impairment charge in Q4 on its share of a planned integrated propane dehydration/polypropylene (PDH/PP) project in Alberta province, the Canadian midstream energy company said the company.

The project by Pembina's joint venture with Kuwait’s Petrochemical Industries, Canada Kuwait Petrochemical (CKPC), remains suspended indefinitely, Pembina confirmed. The suspension is the result of “the significant risks arising from the ongoing COVID-19 pandemic, most notably with respect to costs under the lump sum contract for construction of the PDH plant, which remains under a force majeure condition,” it said.

CKPC is working through a process to manage, defer or cancel existing agreements with, among others, the lump-sum consortium, lenders, and technology licensors, in order to minimise the need for additional capital contributions, Pembina said. The impairment charge is for the full amount of Pembina’s investment in CKPC.

Nevertheless, Pembina continues to believe in the strategic rationale of the project, it said. “We remain equally committed to supporting further development of the petrochemical industry in Alberta and are ideally positioned to do so as the leading transporter of ethane in the province of Alberta,” it added.

Meanwhile another Canadian midstream energy company, Inter Pipeline, continues to look for a partner for its PDH/PP project in Alberta, due to start up in early 2022. Inter Pipeline also initiated a review of strategic alternatives for the company, a move that came after it recently received an unsolicited takeover bid valued CD13.5bn.

As MRC wrote before, in February 2019, it was announced that Pembina Pipeline and Petrochemical Industries Co. of Kuwait are moving forward with plans to build a propane dehydrogenation (PDH) and polypropylene complex in Alberta. The plant will convert about 23,000 barrels of propane per day into about 550,000 metric tons of polypropylene (PP) per year. The partners expect it to cost USD4.5 billion and come onstream in 2023. Another firm, Inter Pipeline, is already building a PDH and PP complex in Alberta. It is expected to cost USD3.5 billion and be completed in 2021.

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.

(USD1 = CD1.26)
MRC