Saudi Arabia petchem sector under pressure

(chemicalexplorer) -- The global economic uncertainty continues to put pressure on the Kingdom's petrochemical sector. Weak demand and increasing supply is restricting price growth. Operational inefficiencies at the new startups are also contributing to the weak performance.

Petrochemical demand in China is expected to remain weak in the near term due to lower industrial activities and slowing domestic demand. China's GDP is expected to grow by 7.8 % in 2012 and 8.2 % in 2013 lower than the 9.2 % in 2011. Slow recovery in the US economy and the ongoing credit crisis in Europe are expected to result in a weak demand for petrochemical products. Excess supply from low-cost producers will pressure prices.

Three petrochemical projects - Petrochem's Saudi Polymers Company, Industries Qatar's LDPE facility, and Saudi Kayan's LDPE plant - started the commercial/trial operations in H2, 2012. This coupled with other projects such as Borouge 3 expansion, Sadara Chemical Co., PetroRabigh II expansion, and Sipchem Phase III expansion will increase the GCC's petrochemical capacity by 19.4 percent to 145-146 million tons per annum by 2016 from 121 million tons per annum in 2011.

The increasing supply from low-cost producers will result in excess supply and will pressure prices in the long term. Petrochemical and fertilizer prices are expected to decline in 2013. Continuing weakness in demand in key markets and increasing supply from low-cost producers are expected to exert downward pressure on petrochemical prices in 2013.

However, polyethylene, ethylene glycol and polypropylene prices are expected to remain flat as demand for these products remain strong.

Currently, Saudi petrochemical firms have one of the lowest production costs globally. Although increasing feedstock prices will decrease their cost advantage, the cost structure of Saudi petrochemical producers will remain lower than their global peers. Net income is to grow in 2013 on higher earnings from startups.

This will offset the negative effect of weak demand and prices. In 2013, earnings will increase as a result of the contribution from petrochem's facilities and Saudi Kayan's LDPE plant, which started the operations in Q4, 2012. Higher productivity at Saudi Kayan's petrochemical complex and the contribution from Sahara's three projects (SAMC, SAP and ACVC), which are expected to start operations during 2013, will further support earnings growth during the year.

November imports of PE to Ukraine decreased by 12%

MOSCOW (MRC) - After October record high the imports of polyethylene (PE) to the Ukrainian market expectedly declined. In November, the total volume of imports decreased to 28,800 tonnes. The eleven months’ external supplies of PE made 297,400 tonnes, according to MRC DataScope.

In November the imports of polyethylene to the Ukrainian market after the October record went down again. External supplies decreased by 12%, from October and made 28,800 tonnes. The decline in imports was seen in all grades of polyethylene, with the only exception of LDPE.
In November, imports of high-density polyethylene (HDPE) decreased to 14,300 tonnes, while in October it reached a record 17,300 tonnes. The greatest decrease was seen in importsof pipe polyethylene.

Despite the seasonal factor the import of LDPE last month, on the contrary, increased by 14% compared with October and amounted to 9,000 tonnes. Supply of polyethylene from Belarus increased significantly. The deliveries of LDPE from Ethylene-Polyethylene (Sumgait, Azerbaijan) were resumed.

External supplies of linear polyethylene in the Ukrainian market in November fell by 25% compared with October - up to 4,700 tonnes. Decline in imports resulted from the limited supply of polyethylene in November from a number of European makers.

In the whole, the eleven months’ imports of polyethylene to Ukraine amounted to 297,400 tonnes, up by 8% year on year. The most significant increase in imports was seen indeliveries of linear polyethylene , with the market growth by 38%.


Evonic introduces new generation of PVC plasticizers

MOSCOW (MRC) -- As part of the company's strategic portfolio expansion, Evonik plans to launch a new generation of PVC plasticizers, according to Evonik's press-release.

Apart from its product lines expansion, the company will also develop a new brand of products. Thus, Evonik is broadening its range of sustainable plasticizers. The new company's product is the phthalate-free plasticizer 1,2-Cyclohexane dicarboxylic acid diisononyl ester.

Evonik started construction of the production facilities with the estimated production capacity of 40,000 tpa at the Marl Chemical Park this summer. Production of the new plasticizers is scheduled to begin in the second half of 2013. Total investment in the project is in the double-digit million Euro range.

The company is also planning to conduct research on innovative products to add to the new generation of plasticizers. These plans include the launch of bio-based plasticizers.

Evonik’s plasticizers are primarily aimed at the plastics industry, as well as the automotive and construction industries.

We remind that, as MRC informed previously, in August the company developed and launched on the market a novel combination of bio-based high-performance polyamides and bio-based high-performance fibers.

Evonik is one of the world leaders in specialty chemicals.The company is involved in fine, performance, construction and industrial chemicals, health and nutrition, coatings and advanced fillers, and speciality polymers.

MRC news digest as of 18.12.12.

MOSCOW (MRC) -- MRC news digest as of 18.12.12.

1. November production of PS in Ukraine made 2,120 tonnes.

Stirol Group, Gorlovka, Ukraine in November produced 1,450 tonnes of expandable polystyrene (EPS) and 670 tonnes of general purpose polystyrene (GPPS), according to MRC ScanPlast. In November 2012, the output of EPS in Gorlovka made 1,450 tonnes, up by 800 tonnes from October 2012. Year-to-date Stirol’s production of EPS made 10,450 tonnes, down 19% from January-November, 2011. Production of GPPS in November increased to 670 tonnes. Generally, over January-November, 2012 Stirol Group produced 7,000 tonnes of material, up 41% year on year.

2. North American PVC keeps growing in value for Russia.

North American PVC for the Russian market keeps rising in value in December. Some market players expect the further growth of PVC prices for shipment in January, according to ICIS-MRC Price report. After a short-term slash of export PVC prices in the USA in early November, the North American resin has kept rising in price rapidly. By mid-December, the cost of North American PVC for the Russian market had grown to the level of USD980-1,000/tonne, CFR St Petersburg, on the back of high demand in the foreign markets. North American producers have not still voiced their PVC prices for January deliveries, but some traders have already predicted a possible price rise to the level of USD1,050/tonne, CFR St Petersburg.

3. European PE for CIS markets rose by EUR10-40/tonne.

Despite the rollover of the contract price of ethylene, some European makers managed to increase export prices of polyethylene (PE). European producers are going to continue the upward trend in January, according to ICIS-MRC Price report. The increased demand for polyethylene from CIS markets, as well as a limited supply of polyethylene due to lower capacity utilization allow European producers to keep export prices for December at November level, while prices of some grades increased by EUR10-40/tonne. Most European makers increased export prices of HDPE for December in the markets of CIS countries by EUR10-20/tonne, from November, to EUR1,250-1,320/tonne, FCA. LLDPE for CIS markets increased more significantly. In January 2013, many European makers are going to continue the upward trend of prices of polyethylene, citing the high prices of feedstock (oil and naphtha), and low margins of production.

4. Russian prices of DOP still go down.

Prices of plasticizer DOP continue to fall in the Russian market on weak demand and seasonal changes in the market, according to MRC analysts. Prices of plasticizer of dioctylphthalate (DOP) in the Russian market continue to decline under the pressure of seasonal factors and changes in the structure of suppliers. By mid-December the Russian DOP prices fell to Rb68,000-70,000/tonne, CPT Moscow, including VAT, after the October peak of Rb82,000-84,000/tonne, CPT Moscow, including VAT. The appearance of the "old new producer" led to a dramatic price cuts of DOP in the Russian market. The second factor resulted into weakening of demand for DOP in the key sector of consumption - production of soft compounds of PVC. Traditionally, the production of non-rigid PVC in Russia is reduced in the end of the year and reach its minimum in January and February. Many makers of non-rigid PVC in the first half of January stop their capacities on the scheduled turnaround, as a result, the demand for DOP reduced significantly.

5. Council of the Eurasian Economic Commission to simplify life for importers of linear polyethylene.

The Council of the Eurasian Economic Commission is going to clear in the near future the duty on imports of copolymers of ethylene (code FEACN 3901 90 900 0), under which there were declared sufficiently large volumes of imports of linear polyethylene to Russia, according to MRC analysts. The decision comes into effect after 30 days from the date of its official publication. According to the rules of the Common Customs Union all polymers of ethylene, etc, containing the total mass of copolymer chains of more than 5% refers to FEACN code 3901 90 900 0. Thus, copolymers of ethylene often include linear polyethylene containing a total mass of more than 5% of the copolymer chains of butene, hexene or octene. While linear polyethylene, FEACN code 3901 10 100 0, was not the subject to import duty. This confusion in the legislation significantly complicates the activity of importers of linear polyethylene in Russia and led to additional costs for customs clearance. The decision was not published officially yet.

6. HDPE import fell by 27% in December.

In November, on the back of seasonal declining demand and resumption of production at Stavrolen, HDPE imports to Russia slashed to 33,900 tonnes, down 27% from October. Imports were reduced to all the consumption sectors. Imports of blow moulding and film HDPE fell more substantially in November. The decline in imports made 53% and 41%, respectively. Imports of pipe polyethylene dropped only by 14% and made about 16,900 tonnes. In general, over the past eleven months, the total import volumes of HDPE to Russia made about 371,000 tonnes, up 35% year-on-year. Such a significant growth of import volumes of HDPE is largely due to a long-term outage at Stavrolen.

7. Asian PET prices rose for Russian converters.

The price rise of the material in the Asian markets has resulted in a price growth of PET granulate for Russian preform makers. Over the past week, the price of Asian PET, including delivery to the Central region of Russia, grew by USD30-40/tonne, according to MRC Price Report. Asian PET makers are raising their prices to change the current situation with the negative margin. The rise in demand for the material from soft drinks and beer makers has boosted a renewal of the upward price trend in anticipation of New Year holidays. Market players report that the price for granulate has growing for the third consecutive week. The increase of bottle PET prices in the foreign markets has affected Russian importers’ purchasing prices in direct ratio. At present, prices for Chinese grades of PET in Russia, including delivery, is at the level of USD1,540-1,560/tonne, DAP Moscow, excluding VAT. The price of Korean PET, including delivery to the county, will make USD1,550-1,560/tonne, DAP Moscow, excluding VAT. The upward price trend in the Asian markets along with the seasonal factor have contributed to the increase in spot purchases in the Russian domestic market. According to market players, Russian PET prices might rise already this week.

8. November PVC import to Russia decreased by 28%.

In November, imports of PVC to the Russian market decreased by 28% to around 35,200 tonnes on seasonal decline in demand. The eleven months’ imports of suspension to Russia amounted to about 387,000 tonnes, according MRC DataSkope. The deliveries of North American PVC in November made 18,000 tonnes, from 25,000 tonnes in October. The imports of resin from the United States is expected to decline further in January-February 2013 on seasonal decline and decrease in procurement of resin in December by some traders. Last month the supplies of acetylene PVC from China fell to 10,000 tonnes, from record-high 14,700 tonnes in October. Imports of PVC from China are also expected to be reduced in the coming months. In January-November 2012, the total imports of PVC to Russia amounted to 387,000 tonnes, down 11% year on year. Decline in imports of resin in the current year resulted from the increase in domestic production, as well as serious stock inventories of PVC in the beginning of the year at the producers and trading companies.

9. LDPE in Russia dropped in price by Rb8,000-10,000/tonne over the past six weeks.

Sluggish demand and ample supply of low density polyethylene (LDPE) in the Russian market has resulted in a major price cut. From October to mid-December, LDPE went down in value by Rb8,000-10,000/tonne, according to ICIS-MRC Price report. Traditionally, in October, demand for LDPE starts going down in the Russian market. This year makes no exception. However, while in prior years Russian producers shipped excess volumes of LDPE to foreign markets, this year demand in the foreign markets is also weak and exporting the material is not very profitable for producers. As a result, ample supply of polyethylene amid low demand makes Russian makers reduce prices. In early October, deals for LDPE 158 were concluded on average in the range of Rb63,000-65,000/tonne, CPT Moscow, including VAT, in the spot market. By mid-December, on the back of weak demand LDPE prices fell to the level of Rb53,500-55,500/tonne, CPT Moscow, including VAT.

European producers keep November PP prices for December

MOSCOW (MRC) - Despite a decrease in the contract price of propylene, European makers have agreed the December export prices of polypropylene at the rollover from November. In January, the European makers are going to raise prices, according to ICIS-MRC Price Report.

In Europe contract price of propylene for delivery in December was agreed down by EUR17/tonne, from November level. As a result, many market participants expected at least a proportional price cut of polypropylene from European makers.

Limited offer for export of polypropylene and an increased buying interest in the CIS markets allow European producers to keep November prices for shipments in December. Some producers raised the price by EUR30-40/tonne, but this refers more for the lower price bound.

Most European producers settled December export prices for homopolymer propylene for the CIS markets at EUR1,170-1,240/tonne, FCA. The offers for the supply of copolymers of propylene are in the range of EUR1,240-1,320/tonne, FCA.

In January 2013, many European manufacturers are going to raise their export prices of polypropylene, citing the low margins of production.