Russian rouble, stocks down as oil retreats on OPEC+ output boost

MOSCOW (MRC) -- The rouble weakened to a one-week low against the dollar at one stage losing almost 1%, hit by retreating oil prices after OPEC+ overcame internal divisions and agreed to boost output, a move that also sent Russian stocks tumbling, reported Reuters.

By 1529 GMT, the rouble was 0.8% weaker against the dollar at 74.63, a one-week low, and had lost 0.8% to trade at 88.16 versus the euro.

Brent crude oil, a global benchmark for Russia's main export, was down 5.4% at USD69.60 a barrel.

Oil prices were lower after OPEC+ ministers agreed on Sunday to increase oil supply from August to cool prices which have climbed to 2-1/2 year highs as the global economy recovers from the coronavirus pandemic.

"Despite the local drawdown, we view the increase in Russia's oil production quota as positive for the rouble in the medium term," said Promsvyazbank analysts in a note.

The fall in oil prices was adding to Russian headwinds on Monday, said Alfa Bank in a note, with risk-off sentiment over the spread of the Delta variant of the coronavirus offsetting strong earnings and resurgent consumer demand.

The rouble does have the support of a month-end tax period which usually prompts export-focused companies to convert revenues in foreign currencies into roubles and expectations of a rate hike by the central bank later this week. Governor Elvira Nabiullina said last month the board may consider raising rates from 5.5% by 25-100 basis points at its July 23 meeting to rein in inflation.

A Reuters poll on Monday showed market expectations leaning towards a 100 basis-point interest rate hike on Friday.

Russian stock indexes were at their weakest since late May. The dollar-denominated RTS index was down 3% to 1,555.5 points, its lowest since May 21. The rouble-based MOEX Russian index was 2.3% lower at 3,682.8 points, its weakest since May 25.

As MRC informed earlier, Russia's offline oil refining capacity is expected to decline by 19.5% month-on-month to 2.866 million tonnes in July, according to Refinitiv Eikon data and Reuters calculations. The offline capacity has been revised up in June, by 12.6% from the previous plan to 3.560 million tonnes.

Ethylene and propylene are the main feedstocks for the production of polyethylene (PE) and polypropylene (PP), respectively.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 953,400 tonnes in the first five months of 2021, which virtually corresponded to the same figure a year earlier. High denisty polyethylene (HDPE) shipments decreased. At the same time, PP shipments to the Russian market were 607,8900 tonnes in January-May 2021, up by 33% year on year. Shipments of homopolymer PP and PP block copolymers increased, whereas deliveries of PP random copolymers decreased.
MRC

MOSCOW (MRC) - The Gazprom neftekhim Salavat plant (GNS, Salavat, Bashkortostan) has summed up the results of production activities for the first half of 2021, the company said.

In the reporting period, the production of plasticizers at the enterprise increased by 33.8% and reached 16,140 tonnes, and the production of butyl alcohols increased by 25.6% and amounted to 54,470 tonnes.

At the same time, the production of low-density polyethylene (LDPE) increased to 18,710 tonnes, which is 5.3% more than in the first half of 2020.

In total, in the first 6 months of this year, the refining depth of crude oil was 93.6% (+ 2.5%), and the yield of light oil products reached 76.3% (+ 1.2%). Road petroleum bitumen was produced 94.58 thousand tons, which is 14.5% more compared to the same period last year - 82,570 tonnes.

The production of commercial gasoline at the enterprise increased by 2.8% and reached 637,290 tonnes. At the same time, the production of AI-95-K5 gasoline increased by more than 150.6% - from 33,770 tonnes in the first half of 2020 to 84,610 tonnes in the first half of 2021. Distillate of grade A gas condensate was produced by 60% more, and its volumes increased from 222,350 tonnes in the first half of 2020 to 355,750 tonnes in the first half of 2021.

It was also reported that last year the GNS increased the depth of oil refining to 91.9%. In the context of restrictive measures and measures to prevent the spread of a new coronavirus infection in 2020, employees of the Gazprom neftekhim Salavat oil refinery ensured the operation of the facilities in normal mode and fulfilled the production plan.

As MRC reported, GNS on 10 August, 2020 resumed production of LDPE after scheduled maintenance work. Production downtime lasted a little longer than originally planned. LDPE production capacities were stopped for repairs from 1 July 1. Meanwhile, from July 1, 2020, during the week, repairs were also carried out at the facilities of the gas pumping station for the production of high-pressure polyethylene (HDPE).

According to the ScanPlast of MRC, in May the total volume of HDPE output at Gazprom neftekhim Salavat reached 11,400 tonnes against 10,200 tonnes in April. Thus, in January - May of this year, the total volume of production of this type of PE at the Salavat enterprise amounted to 48,900 tonnes, which is 8% less than a year earlier.

OJSC Gazprom neftekhim Salavat (formerly OJSC Salavatnefteorgsintez) is one of the leading petrochemical companies in Russia, which carries out a full cycle of hydrocarbon processing. The list of commercial products manufactured by the enterprise includes more than 140 items, including 76 items of main products: motor gasolines, diesel fuels, kerosene, heating oil, toluene, solvent, liquefied gases, benzene, styrene, ethylbenzene, butyl alcohols, phthalic anhydride, etc. plasticizers, polyethylene, polystyrene, silica gels and zeolite catalysts, corrosion inhibitors, elemental sulfur, ammonia and urea, glycols and amines, a wide range of plastics household products, surfactants and much more.
MRC

MOSCOW (MRC) - The Netkanika company (Moscow) received a preferential loan from the city in the amount of 300 million rubles, which is planned to be used to expand the production of nonwovens used for the production of personal protective equipment, the company said.

The total investment will amount to 429 million rubles, where 129 million rubles are the company's own funds, said Vladimir Yefimov, Deputy Mayor of Moscow for Economic Policy and Property and Land Relations.

The company will use the funds provided to expand the existing and create a new production of nonwovens with high barrier properties. The decision to issue a loan was made by the Moscow Fund for the Support of Industry and Entrepreneurship.

"We are grateful to the Moscow leadership for supporting the project aimed at increasing the output and expanding the range of nonwovens for the needs of children's and adult hygiene and medicine. The design has been completed, some of the main equipment has been delivered to the plant site, the work on the project is on schedule. Moscow enterprises already this year will receive additional volumes of nonwovens within the framework of the project, "added Rifkat Galimzyanov, General Director of Netkanika.

"It is expected that as a result of the project, the company's revenue will grow by more than 20% compared to 2020, and tax deductions to the capital budget during the loan period will exceed 240 million rubles. In addition, the company will create about 25 new jobs." , - said the head of the Department of Investment and Industrial Policy Alexander Prokhorov.

Earlier it was reported that SIBUR and Netkanika, a manufacturer of nonwovens based on polypropylene, signed a strategic cooperation agreement aimed at developing exports of polypropylene nonwovens produced by Netkanika from SIBUR's polypropylene.

According to the ScanPlast survey of MRC, PP supplies to the Russian market in January-May this year amounted to 607,890 tonnes, which is 33% more than the same indicator a year earlier. The supply of propylene homopolymer (PP-homo) and propylene block copolymer (PP-block) also increased. The supply of stat-copolymer propylene (PP-random) has declined.

"Netkanika" is one of the largest producers of nonwovens in the country, with an annual output of over 1 billion m2. The company produces spunbond, spunmelt and meltblown used for the production of children's and adult hygiene products, disposable personal protective equipment such as masks and protective clothing for medical personnel, mattresses and spring blocks, heat, moisture and windproof membranes. For production, the technological lines Reicofil R3 and Reicofil R4, manufactured and commissioned by the German company Reifenhauser GmbH, are used.
MRC

MOSCOW (MRC) -- The anti-dumping investigation against primary high-density polyethylene (low-density polyethylene, HDPE) imported from Uzbekistan to the territory of the Eurasian Economic Union (EAEU) has been extended until October 26, 2021, the EEC said.

The investigation was initiated by the companies of the TAIF group - Nizhnekamskneftekhim and Kazanorgsintez in July 2020.

The EEC documents say that according to the applicants, in 2019, primary high-density polyethylene was supplied from Uzbekistan to the territory of the EAEU at prices below the normal cost in the domestic market of the republic.

The dumping margin for HDPE supplies amounted to 29.2%. The delivery price also exceeded the weighted average prices for HDPE produced on the territory of the EAEU, Interfax reports.

The initiators of the investigation also noted that from 2016 to 2019, the rate of imports of HDPE from Uzbekistan exceeded the growth rate of demand for these products in the EAEU market. The growth of imports from Uzbekistan, combined with dumping, led to containment of the rise in HDPE prices in the EAEU from 2016 to 2018 and to a decrease in prices for it in the Union market in 2019 relative to 2018. This led to a deterioration in the production and financial and economic indicators of the industry, Russian companies noted.

According to the applicants, there is a threat of further growth in dumping supplies "due to the significant volume of production capacity" for the production of HDPE in Uzbekistan.

The production of HDPE in Uzbekistan is carried out by the Uz-Kor Gas Chemical JV (Ustyurt Gas Chemical Complex, UGCC), which produces HDPE under a license from LOTTE Chemical (Korea) and the Shurtan Gas Chemical Complex (ShGKhK, SGCC).

According to the ICIS-MRC Price Report, the supply of polyethylene increased in Uzbekistan at domestic auctions last week. At the same time, the main increase fell on LPNP С4, and there was no offer of pipe HDPE at the auction. Buying activity during the week was at a good level, while some types of PE fell in price.

Uz-Kor Gas Chemical was commissioned in 2016 and has production capacity for the production of ethylene 400 thousand tons per year, HDPE 387 thousand tons per year, propylene and polypropylene (PP) 83 thousand tons per year. Shurtan GCC has a production capacity for the production of HDPE and LLDPE in the amount of 125 thousand tons per year.
MRC

MOSCOW (MRC) -- Oil prices are sending mixed signals about the production-consumption balance in the second half of 2021 and early 2022, implying the market is currently tight but likely to see significantly more output in the near future, reported Reuters.

In the physical market, Brent’s five-week calendar spread is trading around USD1.50 per barrel, which puts it in the 93rd percentile for all trading days since 2010, confirming the market is currently short of crude.

In futures, Brent’s six-month spread is around USD3.70 per barrel, also in the 93rd percentile for all trading days since 1990, signalling traders expect inventories to remain below average.

But front-month futures prices have risen less than 10% over the last two months, implying traders anticipate substantially more crude could be made available to the market without much further increase.

The current mix of flat prices and spreads is consistent with the view OPEC+ will increase production significantly in the remainder of 2021 and early 2022 to satisfy increasing demand while keeping stocks relatively low.

As MRC wrote before, The OPEC+ producer group, on July 18, reached a deal to increase its production quotas by 400,000 b/d each month starting in August, amounting to a 2 million b/d total increase by the end of the year. The agreement also involved an extension of the coalition's supply management pact through to 2022. The OPEC+ resolution puts an end to an acrimonious spat between Saudi Arabia and the UAE, which had arisen after the UAE had objected to Saudi Arabia's plan to tie OPEC+ production increases to a lengthening of the supply management pact, insisting that its baseline production level, from which its quota is determined, be raised first.

We remind that China's crude oil imports fell 3% from January to June versus a year earlier, in the first first-half contraction since 2013, as an import quota shortage, refinery maintenance and rising global prices curbed buying. Imports totalled 40.14 million tonnes last month, data released by the General Administration of Customs showed on Tuesday, equivalent to 9.77 million barrels per day (bpd).

Ethylene and propylene are the main feedstocks for the production of polyethylene (PE) and polypropylene (PP), respectively.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 953,400 tonnes in the first five months of 2021, which virtually corresponded to the same figure a year earlier. High denisty polyethylene (HDPE) shipments decreased. At the same time, PP shipments to the Russian market were 607,8900 tonnes in January-May 2021, up by 33% year on year. Shipments of homopolymer PP and PP block copolymers increased, whereas deliveries of PP random copolymers decreased.
MRC