EU coronavirus lockdowns disrupting plastics converter logistics, output: sources

MOSCOW (MRC) -- The coronavirus-related lockdowns imposed across Europe are beginning to disrupt chemical logistical systems, impacting plastics converters' planning and operational capabilities, reported S&P Global with reference toresin buyers' statement.

Although it is normally the monthly contractual resin price development that is usually their main concern, the buyers said their focus this week has switched to more basic operational questions.

A number of countries - including France, Spain, Germany and Austria - unilaterally imposed full or partial border closures this week and a continent-wide shutdown was confirmed by the EU on Wednesday.

The effect of this has been to strain supply chains and logistical systems with it potentially affecting production and the delivery of resins and finished plastics.

"We are still taking deliveries but production (supply chain) is closing down bit by bit due to people that are absent, [and] that we cannot guarantee production. Day by day we assess. We are still up and running and we have lines closing due to a lack of people. If we close lines, we have no consumption, so we have (to be ready)," a plastics converter said Wednesday.

The impact of the coronavirus outbreak and the measures taken to limit its spread have meant that the situation in Europe is a fast changing one. On Tuesday, and prior to the border closures, converters indicated they were struggling to secure trucks to enable deliveries, in particular to food suppliers.

"We are struggling to get the logistics to get the trucks. It's no longer a question of price. In the France situation, every day there's new restriction. Our business is not impacted, but we are already in the food industry for a long time. We are confident to continue for a few days. We are going to the Italian model - a very restricted mode," another plastics converter said Tuesday.

"I make film for the food and pharma industries. But if I have one guy sick it may impact my system and my extrusion, so this is a daily check. How can I supply ... goods to the customers [with these potential issues] or [with] restrictions to supplying resins ... it seems quiet complicated to find trucks," the converter added.

"Sometimes it's not a time to be difficult. Today we need food, packaging for food, and it's not time to make money. Today we cannot think about making money and it's a huge cost. The company that makes benefit this year, we hope that they don't suffer. We are lucky. Let's be human," the same converter said.

Meanwhile, long-haul trucking remains a tricky endeavor due to the greater risk of supply interruptions. "What I hear today for Long haul in Eastern Europe, having drivers going across border without being quarantined. It's a day by day. It pushes up costs," a linear low density polyethylene producer said.

"So far it's not that bad for my business. Flex packaging is more, ... (there is) more of an increase in demand as there ... is more demand from supermarkets. I'm still receiving orders," the same LLDPE producer said.

However, the impact of any plant closure could be costly. "The only thing that I am looking at is how to keep my supply chain going. Closing the asset costs money. The flexible (packaging) business is still good. Good demand and I can get good orders then I will continue," the producer added.

Similarly, logistical issues have come to the forefront of both the virgin polyethylene terephthalate and the recycled PET markets this week, as borders close and travel becomes increasingly restricted.

"Now it is a disaster, huge queues, late arrivals," one producer said.

As the situation continues to change, market participants are monitoring transportation costs on a daily basis.

"We have not yet encountered logistics costs going up. We aren't yet in a situation where we see issues with deliveries, but this develops day by day," one recycler said. The human element of logistics is also a concern for market participants as they prepare for potentially large numbers of employees being absent due to illness and a reduction in the number of available drivers.

As per MRC's ScanPlast report, the estimated consumption of polyethylene terephthalate (PET) in Russia increased in January 2020 by 9% year on year. Totally, Russia recycled 55,390 tonnes of PET chips in January (excluding shipments of Russian material to the countries of the Customs Union). PET chips production in Russian in January 2020 totalled 43,200 tonnes.
MRC

MOSCOW (MRC) -- South Africa’s largest refinery SAPREF will “minimize” maintenance to critical activities, a spokeswoman said, as a national lockdown looms to contain the spread of coronavirus, said Reuters.

“Arrangements are in place to sustain crude supply into the refinery. Our intention is to continue to operate to support the supply of petroleum products to the country,” the spokeswoman added.

SAPREF, situated near Durban along the east coast, is a 50/50 joint venture between BP and Shell with a refining capacity of around 8.5 million tons a year. It accounts for 35% of the refining capacity in Africa’s most advanced economy, which is a net importer of petroleum products.

As MRC informed earlier, BP Plc surprised investors with a slight increase in its dividend, bucking the trend in what has otherwise been a bleak earnings season for Big Oil. In the final set of results for retiring Chief Executive Officer Bob Dudley, the London-based company offered some respite for investors who received nothing but bad news from BP’s peers. Big payouts, whether as dividends or buybacks, are the only thing attracting many investors to the industry in a world increasingly aware of the impact of fossil fuels on climate change and falling energy prices.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,093,260 tonnes in 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments rose from both domestic producers and foreign suppliers. The estimated PP consumption in the Russian market was 1,260,400 tonnes in January-December 2019, up by 4% year on year. Supply of almost all grades of propylene polymers increased, except for statistical copolymers of propylene (PP random copolymers).
MRC

MOSCOW (MRC) -- From Canada and the Caribbean to the Baltic and Singapore, oil tanks around the world are filling fast, despite a 50%-100% jump in lease costs, as oil companies and traders scramble to park unwanted crude and refined products, said Hydrocarbonprocessing.

Millions of barrels are struggling to find buyers among industrial users and refiners, which have cut operations as the impact of the coronavirus has destroyed demand and a Saudi-Russia market share battle has led to a flood of supply.

Fuel storage rates doubled this month in some onshore European and U.S. hubs as traders rushed to secure tanks in the hope of selling their products at a higher price when the coronavirus outbreak eases and demand recovers. Europe’s Amsterdam-Rotterdam-Antwerp (ARA) refining and storage hub saw the cost of storing diesel and jet kerosene rise by between 50% and 100%, traders and industry watchers said.

"Storage prices for gasoil doubled in the last three weeks from 2 euros (USD2.16) per cubic metre per month to 4 euros,” said Patrick Kulsen from Insights Global, a firm that tracks oil product storage and exports in the ARA region.

As most airliners ground their fleet because of the virus, jet fuel storage rates have increased by 50% since before the coronavirus crisis to 3 euros per cubic metre per month, a source with a storage firm in the ARA region said on condition of anonymity.

The picture in the Mediterranean is similar. In the last three weeks, Barcelona storage prices rose to USD3.5 per cubic metre per month from USD2.85 for storage for as far out as the end of 2021, a Mediterranean jet fuel trading source said. In Cushing, Oklahoma, the delivery point for benchmark U.S. crude, traders said rates more than doubled to 50 cents per barrel per month from about 20 cents a month ago.

Highlighting the current premium for storage, shares in Dutch storage company Vopak were trading close to their 2015 highs despite a global market rout in recent weeks. Vopak declined to comment and unlisted German storage firm Oiltanking did not respond to a request for comment.

As MRC informed earlier, major energy companies in the United States imposed work-from-home rules for office staff and began health checks for remote or critical workers as coronavirus spread and threatened an industry reeling from falling demand and profits. BP, Exxon Mobil, Kinder Morgan, Motiva Enterprises and Royal Dutch Shell told most office staff to work from home starting Monday. Federal regulators on Friday were pressed by companies to ease work rules for pipeline operators and to limit visits to some sites. Shell and Chevron began health checks of workers and visitors at some key U.S. facilities, spokesmen said.

As MRC informed earlier, operations at Italian petrochemical producer Versalis (part of Eni) have not affected by emergency quarantine measures in the country. Italian Prime Minister Giuseppe Conte extended its emergency coronavirus measures Wednesday evening and announced the closure of "non-essential" commercial businesses. This follows the announcement of a nationwide lockdown on Monday, limiting movement for around 60 million people. Under these measures people will only be allowed to leave their homes for work or health reasons. Versalis has three steam crackers in Italy, capable of producing 1.675 million mt of ethylene, 750,000 of propylene and 285,000 mt of butadiene a year.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 215,390 tonnes in the first month of 2020, up by 23% year on year. Shipments of all grades of high density polyethylene (HDPE) and linear low density polyethylene (LLDPE) increased due to higher capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 127,240 tonnes in January 2020, up by 33% year on year. ZapSibNeftekhim's homopolymer PP accounted for the main increase in shipments.
MRC

MOSCOW (MRC) -- Curacao is pursuing a USD162 million arbitration claim against Venezuela’s state-run PDVSA oil firm over its management of the island’s oil refinery, reported Hydrocarbonprocessing with reference to an executive of Refineria di Korsou.

The Dutch Caribbean island last week seized a PDVSA-owned oil storage terminal in neighboring Bonaire to enforce claims for overdue payments, maintenance costs and environmental damage at RdK, Marcelino de Lannoy, RdK’s interim managing director, said in an interview.

Curacao separately expects a contract with commodities firm Klesch Group to operate the 335,000-barrel-per-day Isla refinery and its storage facilities will be delayed. Klesch is committed to the deal but any agreement may be delayed until May or June because of travel restrictions due to the coronavirus pandemic, de Lannoy said.

Globally, demand for oil and petroleum products have fallen due to the pandemic, slashing prices and profit margins for many refineries. But the sharp price has lifted demand for storage space, including at the island’s Bullenbay oil terminal, with its 17.75 million barrels of storage and blending capacity.

PDVSA ran RdK’s Isla refinery on Curacao for about 34 years through last year. US sanctions against Venezuela led to a halt of operations. PDVSA failed to make lease payments, did not meet take or pay agreements with RdK or fulfill maintenance requirements, de Lannoy said.

Neither PDVSA or the Venezuelan oil ministry immediately responded to requests for comment.

RdK’s claim was filed earlier this month at the International Centre for Dispute Resolution, an arbitration group in New York, de Lannoy said. An ICDR spokesman said the group does not comment on its work.

A Dutch court in Curacao authorized a legal attachment of the Bonaire Petroleum Corp site. De Lannoy said Curacao would seek to auction the site if it wins the arbitration case.

PDVSA and the Venezuelan government have missed billions of dollars in payments to creditors in recent years as the once prosperous OPEC nation’s economy unraveled, putting many of its overseas assets at risk of seizure.

As MRC informed before, in May 2019, Curacao’s state-owned Isla oil refinery received an exemption from US sanctions on PDVSA, the Caribbean island’s government said in a statement. The US Treasury Department slapped sanctions on PDVSA in late January in a bid to force out socialist President Nicolas Maduro, who has overseen a collapse in the OPEC member nation’s economy. The license for the refinery, along with two other related companies, will allow the facility to continue to do business with US companies through Jan. 15, 2020.
MRC

MOSCOW (MRC) -- US monoethylene glycol exports to China and South Korea rose dramatically in January compared to the year-ago month, reported S&P Global with reference to the latest federal data.

US International Trade Commission data showed that China shot up to be the top export market for US MEG having received 86,846 mt, up from 18 mt in January 2018. South Korea received no US MEG in the year-ago month, but was the third-largest US MEG export market in January this year with 20,015 mt received.

However, the coronavirus outbreak hit China and Southeast Asian countries in January and began reaching other regions as well including the US and Europe. MEG prices started falling as demand plunged and widespread petrochemical plants either shut down or cut rates.

Activity in China was seen crawling back from widespread factory and manufacturing shutdowns and slowdowns as workers inched back to their jobs. US workers, by contrast, are increasingly telecommuting when possible as companies order them to work from home amid closed schools and businesses, such as restaurants. Major sports events and conferences have been cancelled throughout March in an effort to prevent crowds from spreading the disease.

US petrochemical plants had yet to show rate cuts, but market sources said such cuts may come if entire shifts are shut down because a worker showed up sick.

US MEG and many other petrochemicals and raw materials still face 25% tariffs imposed by China in August 2018 in response to 25% tariffs imposed on Chinese goods by the US the same month. Some tariffs imposed by both countries in 2019 were reduced as part of a Phase One trade pact reached in January, but 2018 tariffs remain in place.

This week, US President Donald Trump said he saw "no reason" to further lift or reduce tariffs.

China is the largest global consumer of MEG for its vast polyester industry as well as a feedstock for polyethylene terephthalate, a resin used to make plastic beverage bottles and fibers. MEG also is used as a solvent and antifreeze.

Last year China was the fifth-largest export market for US MEG, having received 142,706 mt, up from 79,063 mt in 2018. While flows to China increased year on year in 2019, they rose more to Belgium, South Korea and Turkey. Mexico remained the top export market for US MEG last year, but fell behind China in January this year with 31,320 mt.

As per MRC's ScanPlast report, the estimated consumption of polyethylene terephthalate (PET) in Russia increased in January 2020 by 9% year on year. Totally, Russia recycled 55,390 tonnes of PET chips in January (excluding shipments of Russian material to the countries of the Customs Union). PET chips production in Russian in January 2020 totalled 43,200 tonnes.
MRC