MRC news digest as of 28.01.13.

MOSCOW (MRC) -- MRC news digest as of 28.01.13.

1. Production of large volume polymers in Ukraine decreased by 22%.

Ukrainian producers amid uncertain conditions in 2012 reduced production of large volume polymers by 22%. By now only one of the three petrochemical complexes works - Stirol. After a successful 2011 the last year for the Ukrainian makers of large volume polymers become catastrophic. Only one of three petrochemical complexes currently operates - Stirol (DF Group), which produces polystyrene (PS). The largest of them complex - Karpatneftekhim (Lukoil Group) stopped production for indefinite time. Linik (TNK-BP) may resume operation only at the end of Q3 2013. The production of large volume polymers in 2012 amounted to 238,000 tonnes, down 22% from 2011. Linik was the first, which stopped production of polypropylene in April 2012 because of economical inexpediency. Over the less than four months in 2012 Linik produced 23,600 tonnes of polypropylene, while the total score of production in 2011 amounted to 94,000 tonnes. Currently Linik is under a change of ownership, and unofficially the new owner is planning to resume polypropylene production in September. The largest producer of polymers in Ukraine - Karpatneftekhim (annual capacity of 300,000 tonnes of PVC, 100,000 tonnes of PE) due to unprofitability was forced to stop production of polymers in September last year. The question of resuming production of polymers Karpatneftehim is not considered. The oldest chemical complex - Stirol continues production of polystyrene, but last year it was forced to cut production due to limited supply of styrene and low demand for polystyrene. In 2012, the company produced about 19,000 tonnes of polystyrene, which is 16% lower than in 2011.

2. PP imports to Russia in 2012 increased by 43%.

Imports of polypropylene to Russia in 2012 increased by 43% compared with 2011. Start of production of two new sites in Omsk and Tobolsk in 2013 should significantly change the balance of the Russian market of polypropylene. PP imports to Russia in December last year rose to 20,400 tonnes. Total imports in 2012 to Russia made about 276,400 tonnes of polypropylene, up 43% year on year. Production capacities are unable to meet the growing needs of the Russian market of polypropylene, but in the second half of 2013, the balance of the market may change with the launch of two new sites with total capacity of 430,000 tonnes. The total volume of import of PP-homo to the Russian market in 2012 amounted to 138,500 tonnes, up 35% more than a year ago. External supplies of block copolymers of propylene increased by 35% to around 51,400 tonnes. Imports of stat- copolymers of propylene increased by 67% to 47,000 tonnes. Two new production sites are expected to be launched in the middle of the Q2. Omsk Polyom (Titan Group) has an annual capacity of 180,000 tonnes. Technology "Spheripol" from company LyondellBasell allows to produce about 80 grades of polypropylene, including copolymers of propylene. Tobolsk-Polymer (Sibur Group) plans to launch first polypropylene plant capacity of 250,000 tonnes per year. However, production range will include only homopolymers of propylene. Given the launch of new capacities and existing production sites in the second half of the year we can expect a major structural change in the market of PP homo. The specifics of the market of copolymers of propylene will slow down substitution of import by Russian product.

3. PET prices rose by 3,5-5% in Kazakhstan.

Last week, PET spot prices grew by Tenge11.5-15.5m/tonne in Kazakhstan, which is by 3,5-5% higher than the price level announced in the first half of January. The reason of the price increase was a rise in the cost of feedstock in China and good consumer activity from Kazakh converters of granulate. The price dispersion voiced by traders made Tenge330.5-331.5m/tonne, CPT Almaty, including VAT. According to sellers, the PET market in Kazakhstan had perked up noticeably by mid-January. Market players did not expect a noticeable improvement in sales at the beginning of the year. However, this year, sales of the material in January improved significantly when compared with the indices of the past years, a source said. Market participants also noted that producers of sunflower oil are showing the high consumption of preforms. According to a trader, the market demand was due to a price hike of PET for the past two months. Many buyers anticipate that PET bottle prices will have been even higher by the beginning of the season. It is worth noting that last week, purchasing prices of Asian PET granulate rose by USD30-40/tonne, following the growth of prices in foreign markets.

4. PE imports to Ukraine increased by 10% in 2012.

In December the imports of polyethylene (PE) to Ukraine increased to 33,800 tonnes, up 18% from November. Total imports of PE in 2012 into the Ukrainian market exceeded 331,000 tonnes, up 10% year on year. Market participants hurried to replenish inventories on the back of anticipation of price increases. In general, in 2012 imports of polyethylene to Ukraine grew by 10% and exceeded the level of 331,000 tonnes. Imports of high-density polyethylene (HDPE) to Ukraine in December in fact were at the November level and exceeded 14,200 tonnes. The imports of HDPE did not grow so notably in the first eight months of 2012 due to the production of domestic maker Karpatneftehim (Lukoil Group), but in September. In 2012, the total imports of HDPE increased by 5% and amounted to 132,300 tonnes. External supply of low-density polyethylene (LDPE) to Ukraine in December increased to 11,000 tonnes, from 9,000 tonnes in November. Total imports of LDPE last year amounted to 114,300 tonnes. The high dynamics of growth of demand remains in the market of linear polyethylene (LLDPE). In December, imports of LLDPE increased by 63% in anticipation of price increases and 7,600 tonnes. Last year, the demand for LLDPE in the Ukrainian market increased by 39% compared with the 2011 and amounted to about 74,000 tonnes.

5. In 2012 imports of PET to Russia dropped to the lowest level over the past 10 years.

In 2012, the total supplies of PET to the domestic market of Russia slashed by 120,000 tonnes year-on-year and fell to the lowest level over the past 10 years. 2012 turned out to be a rather difficult year for importers of PET to the domestic market of Russia. On an increase of the output by Russian plants, overall imports of PET by domestic companies dropped by 44% (120,000 tonnes) and made about 154,000 tonnes in 2012. One of the reasons for the fall of purchases in foreign markets is carry-over stocks of PET granulate and the finished goods from 2011. As per some market players' estimates, the total carry-over residues of PET at the market participants' warehouses made from 30,000 to 50,000 tonnes, which resulted in decline in purchases in the first half of the previous year. Also, Russian makers of granulate had a negative impact on import sellers. Programs of Russian plants on imports replacing, increase of production volumes by domestic producers and loyal pricing policy resulted in a growth of purchases in the domestic market. It is worth noting that unlike the trend of the previous years, last year supplies of Chinese PET prevailed over the general volumes of imports of Korean bottle grades of PET granulate.

6. The output of PVC in Russia rose by 6%.

In 2012, the production volume of PVC in Russia grew by 6% year-on-year and exceeded 612,000 tonnes. In December, Russian makers produced 58,500 tonnes of unblended polyvinylchloride (suspension and emulsion PVC). SayanskKhimPlast and Kaustik (Sterlitamak), the market leaders, accounted for the main increase in the production volumes. The petrochemical majors increased their output almost by 40,000 tonnes due to expanding capacities. In 2012, the major Russian producer of suspension PVC SayanskKhimPlast raised its output by 14,000 tonnes year-on-year to 273,000 tonnes. The current plans of the company for 2013 are to increase production of PVC to 280,000 tonnes and in 2014 - to raise the output to 350,000-370,000 tonnes. Sayanskkhimplast strategic development program involves the construction of another pyrolysis oven for the production of vinyl chloride monomer (VCM) with bringing the total production capacity of the monomer up to 400,000 tonnes per year, and by 2020 the production of PVC is to be increased up to 600,000 tonnes. Kaustik (Sterlitamak), the second largest producer of PVC in Russia, also had quite a good year. In 2012, due to a series of operations the company increased its annual capacity up to 220,000 tonnes. The final output of suspension PVC rose up to 200,000 tonnes, while in 2011 this index made only about 174,000 tonnes. In the future, the Bashkir company does not exclude the expansion of production capacity of PVC up to 600,000 tonnes per year, given an increase in ethylene capacity by the key Russian producers. Last year, Kaustik (Volgograd) reduced its production of suspension PVC by 4% year-on-year to about 87,000 tonnes. The decline in production was due to technical issues after a scheduled outage for maintenance in April-May, 2012. Last year, SIBUR-Neftekhim (Sibur group) increased its PVC production by 17% year-on-year to nearly 35,000 tonnes. In July 2012, Sibur announced its intention to gradually shut all its chlorine units of the former plant "Caprolactam" belonging to its subsidiary Sibur-Neftekhim until the spring of 2013. The only operating producer of emulsion PVC in Russia Khimprom (Volgograd) increased its production volumes in December to almost 2,000 tonnes. Last year, the company produced about 21,000 tonnes of emulsion PVC, down 5% year-on-year.

7. Imports of GPPS to Russia rose by 58% in 2012.

Imports of general purpose polystyrene (GPPS) to the Russian market grew by 58% in 2012 and made almost 65,000 tonnes of the material. Styrolution material accounts for the bulk of shipments, namely 57,4% of the total GPPS imports or about 38,000 tonnes in volume terms. In 2012, Styrolution GPPS supplies to the Russian market rose by 167% compared to the total shipments of BASF and INEOS. Supplies of the Taiwanese maker Taita Chemical made almost 6,000 tonnes of GPPS, which is 8,5% of imports. The import of the material increased by 22% year-on-year.
In 2012, the Ukrainian PS producer concern Stirol (Gorlovka) increased supply of GPPS to the Russian market by 3,4 times year-on-year. The import volumes of Gorlovka material made about 4,000 tonnes in 2012. The growth of imports of the Ukrainian material was due to the increase in demand from converters of the Southern regions of Russia.

8. In 2012 production of HDPE in Russia declined by 13%.

In 2012, the production of high-density polyethylene (HDPE) in Russia decreased by 13% compared with 2011 and amounted to 733,000 tonnes. Nizhnekamskneftekhim and Kazanorgsintez could only partially compensate the long-time stoppage of Stavrolen. In December 2012, Russian makers increased capacity utilization and produced 86,000 tonnes of HDPE. Long time outage of Stavrolen (Lukoil Group) after the accident at the gas distribution unit was partially offset by Nizhnekamskneftekhim and Kazanorgsintez, Tatar makers of polyethylene. In total, these companies in 2012 increased the output of high-density polyethylene by 114,000 tonnes. Kazanorgsintez, Russia's largest producer of HDPE, in 2012 increased its output to 443,000 tonnes, up 84,000 tonnes year on year. Following the incindent in December 2011, Stavrolen managed to resume its production of HDPE only in the beginning of October. Nizhnekamskneftekhim last year focused on the production of high-density polyethylene. Its production volume of HDPE in 2012 exceeded 171,000 tonnes. Its current capacity of PE production makes 220,000 tonne/year, and over the next five years, the company plans to increase its production capacity of ethylene from 600,000 tonnes to 1 mln tonnes per year and to launch 600,000 tonnes/year PE production. Gazprom neftekhim Salavat due to long time turnaround in July-August 2012 reduced the output of high-density polyethylene by 7,000 tonnes. The total output in 2012 exceeded 48,000 tonnes.

9. In 2012 PP imports to Ukraine increased by 41%.

In December 2012, imports of polypropylene (PP) in Ukraine rose to 11,600 tonnes. In 2012 the imports of PP to the Ukrainian market increased by 41% to about 113,000 tonnes. December growth in external supplies resulted from the desire of some market participants to replenish inventories ahead of price growth. The stoppage of LINIK (TNK-BP), the only Ukrainian producer of polypropylene, in April 2012 increased the dependence of the imports. This year LINIK is to change the owner, and according to unofficial information, the new owner will resume the polypropylene production in September. The capacities of LINIK makes 90,000 tonnes of homopolymer of propylene (PP-homo) a year. In May 2012, due to the stoppage of LINIK , the imports of PP-homo to the Ukrainian market began to grow rapidly. Last December, the external supplies of homopolymer of propylene hit a record - 9, 000 tonnes. Asian and Middle Eastern PP provided the main increase in December imports.

10. Asian PET price for CIS customers declined the first time for nine weeks.

Last week prices of Asian PET for CIS buyers was reduced by USD10-40/tonne on weak consumer activity and growing stocks of local converters. After nine weeks' price growth, the export prices of Asian bottle PET has been reduced by USD10-40/tonne. The greatest decrease in prices showed Chinese material, which fell by USD30-40/tonne. The price of Korean PET for CIS converters decreased by USD10-20/tonne. Market players said that the high demand for bottle PET, amid soaring prices of granulate in previous weeks, led to the accumulation of excessive stocks in Asia. Following the decline in export prices, the cost of PET for Russian customers, including delivery to the Central region dropped to USD1 ,630-1, 680/tonne, DAP Moscow. The purchase price for the Ukrainian PET converters makes USD1 ,620-1, 670/tonne, CIF Odessa.

11. Russian output of polymers has increased by 6-25% depending on the sector of the market.

Despite the serious difficulties faced by Russian converters of polymers, last year there was an increase in consumption in all consuming sectors. The growth of production volumes made from 6% to 25% depending on the type of the product. Last year was quite difficult for Russian converters. Polyethylene and polypropylene markets faced with deficits and a record rise in prices. In the PVC market there was also a shortage of PVC in the autumn months, but the polymer prices did not beat the records of the previous years. However, despite these negative factors, the production of the finished products from polymers grew in all positions, the highest increase was recorded in a sector of plastic pipes production - about 25%.According to Rosstat, in 2012, the total volume of production of pipes, hoses and fittings made from polymers in Russia exceeded 700,000 tonnes, up 25% year-on-year. The output of polymer unreinforced and non-combining films rose by 10% to 818,000 tonnes. July-October accounted for the highest level of production. Last year the volume of production of large bottles, bottles, flasks from polymers increased by 8.4% to about 12.1 billion items. Window profiles, their frames and polymer sills accounted for the smallest volume of production. In 2012, the total output of these goods made 24.3 million m2, which is only 6% more than in 2011.
MRC

MOSCOW (MRC) -- JBF Petrochemicals, a wholly-owned subsidiary of JBF Industries Ltd, has granted Technip an important contract for a 1.25 million tonnes per year latest-generation purified terephthalic acid (PTA) unit, according to Technip's press release.

The new facility is to be located in the Special Economic Zone in Mangalore, India. The contract, worth from EUR100 to EUR250 million, covers the basic engineering, front-end engineering design, detailed engineering and procurement services of the unit. The plant will feature BP’s leading-edge proprietary PTA technology, as MRC reported earlier.
Technip is supposed to complete all works as per this contract in the first semester of 2015.

The company "is very proud to be selected for this world-scale PTA project", which wiil reinforce Technip's strong long-lasting collaboration with BP for PTA, commented Marco Villa, Senior Vice President of Technip Region B, composed of Italy, Greece, Eastern Europe/Russia/CIS and South America.

PTA is the primary feedstock for polyesters used in textiles and packaging and PET production.

Technip is a world leader in project management, engineering and construction for the energy industry. As MRC informed previously, Technip was awarded two contracts for the front-end engineering design (FEED) services of two refineries in Kazakhstan. Besides, ZapSibNeftekhim LLC, an affiliate of JSC Sibur Holding, awarded two front-end engineering and design (FEED) contracts to Technip for polyethylene plants located in Tobolsk, in the Tyumen region of Russia. The first contract concerns a linear-low/high-density gas phase polyethylene plant.
MRC

MOSCOW (MRC) -- The Chemistry Industry Association of Canada estimates that its members' aggregated operating profit fell 21% last year, while overall sales declined 3%, or were flat in constant dollar terms, said Leaderpost.

In fact, the Canadian petrochemicals industry is short on ethane - a key natural gas component and vital ingredient for chemicals producers.

Natural gas drilling activity was down 23% in Canada, which meant the industry is short on ethane, while ethylene-based derivative units are also running under capacity.

Canadian petrochemical exports to the U.S. - its biggest market - are estimated to have fallen 9% last year, and are forecast to decline a further 4% this year as the U.S. chemicals industry rises once again.

After decades of high and volatile natural gas prices that "destroyed industrial demand," shale gas offers a new era of U.S. competitiveness that will lead to greater investment and employment, says the American Chemistry Council.

Dr. Thomas Kevin Swift, chief economist and managing director of the ACC, says the council's members are working on more than 60 projects with a value of USD43-billion in capital investment. "It is a game changer," he said.

Fixed capital expenditures over the past two years have shot up considerably, and are expected to hit USD2.7-billion in 2013, the highest investment outlay the industry has seen in well over a decade. Companies are getting innovative and importing ethane from North Dakota and Marcellus shale, and recovering off-gases from bitumen upgraders, according to CIAC.

As MRC wrote earlier, Nova's polyethylene investments are in Canada. These include a USD1-billion polyethylene project expansion near Red Deer, Alta., and a USD250-million conversion of its Corunna cracker facility in Ontario to natural gas liquids to take advantage of the low-gas environment.

Petrochemicals giant Dow Chemical Co. is so worried about losing the United States' low natural gas price advantage that it is pulling out of a USD6.5-billion proposed LNG export plant at a Texas terminal it owns partially. It even quit a manufacturing trade group last week which supports U.S. gas exports, as it fears exporting gas "indiscriminately" would lift natural gas prices.
MRC

MOSCOW (MRC) -- DuPont, the US chemical giant, has reported better results than the market expected for 2012, and was optimistic for this year even though its net profit lost almost 20% to USD2.78 billion, reported The Business Times.

As it was wrote earlier, DuPont had reported of investments that the company was making in all its divisions keep on delivering results which are offset by the weakness in titanium dioxide (TiO2) markets.

For 2013, DuPont said that sales should climb to about USD36.0 billion, but revealed that in the fourth quarter of 2012, its net profit was more than three times lower than the figure for the same period in 2011, at USD111 million.

We remind that, as MRC informed previously, earlier this year DuPont Co. struck a deal to sell its car paint business to Washington-based investment firm Carlyle Group LP for USD4.9 billion. The transaction is expected to close in the first quarter of 2013.

DuPont is an American chemical company that was founded in July, 1802. DuPont was the world's third largest chemical company based on market capitalization and ninth based on revenue in 2009. DuPont manufactures a wide range of chemical products, leading extensive innovative research in this field. The company is the inventor of many unique plastics and other materials, including neoprene, nylon, Teflon, Kevlar, Mylar, Tyvek, etc. The company was the developer and main producer of Freon used in the production of refrigeration equipment.
MRC

MOSCOW (MRC) -- Ukraine took its first major step away from dependency on Russian gas imports on Thursday when it signed a USD10 billion shale gas deal with Shell, said Upstreamonline.

The 50-year production sharing agreement, signed on the sidelines of the World Economic Forum in Davos, marks the biggest contract yet to tap shale gas in Europe and the largest foreign investment in the former Soviet republic.

Ukraine chose Shell last May as a partner to develop the Yuzivska field in the east of the country and regional councils there approved the production-sharing deal last week, removing the last hurdle to signature.

Ukraine is said to have Europe's third-largest shale gas reserves at 42 trillion cubic feet (1.2 trillion cubic metres), according to the US Energy Information Administration.

The Yuzivska field could be producing 20 billion cubic metres of gas in 2018.

Ukrainian officials said earlier this month that Shell saw investment under the deal of at least USD10 billion "under the most likely scenario" and possibly as much as USD50 billion.

The government chose Chevron to develop the Olesska field in the western Lviv and Ivano-Frankivsk regions bordering the EU.

Ukraine has also chosen an ExxonMobil-led consortium to explore for offshore gas in the Black Sea and is seeking foreign partners to help it build a liquefied natural gas terminal.

As MRC wrote earlier, Ukrainian government cut 99% of fees for the shale gas deals for the world's largest oil producer Shell, Chevron and ExxonMobil.

MRC