Petrochemicals remain Barito priority despite continued losses

MOSCOW (MRC) -- Publicly listed diversified giant Barito Pacific (Indonesia) will continue with the expansion of its petrochemical wing, Chandra Asri Petrochemical, despite the business having been booked continual losses in the past few years, as per GV.

Barito Pacific director Henky Susanto said that the firm’s revenue was estimated to rise by about 8% to hit USD 2.7 billion this year, compared to USD 2.52 billion last year, 96 % of which would be contributed by Chandra Asri.

"To achieve this year’s target, we plan to disburse USD 135 million in capital expenditure, of which about USD 120 million will be used to finance our petrochemical business," he told reporters.

Barito Pacific, which is owned by local tycoon Prajogo Pangestu, is currently working on two petrochemical investment projects, worth USD 815 million, which aim to be completed by 2017.

The first is via Chandra Asri, which has reached a deal with French tire maker Compagnie Financiere du Groupe Michelin for a USD 435 million synthetic rubber plant.

The two entities agreed last year to establish a joint venture that would be 55% owned by Michelin and 45% by Chandra Asri’s wholly owned subsidiary, PT Petrokimia Butadiene Indonesia (PBI).

Construction of the synthetic rubber plant is expected to be launched in early 2015 and completed within two years.

Meanwhile, the second project also involves the chemical subsidiary expanding the capacity of its naphtha cracker plant in Cilegon, Banten, which is expected to be finished next year. The overhaul, which will include the purchase of new machinery, will cost approximately USD 380 million.

The expansion plans will enable the company to increase its production capacity of ethylene, propylene, mixed C4 and pygas by more than half for each.

As MRC wrote previously, in March 2014, Moody's Investors Service, changed the outlook of Chandra Asri Petrochemical Tbk (CAP), the country’s largest petrochemical producer, to stable from negative. Concurrently, Moody's affirmed CAP's B2 corporate family rating (CFR). The change in rating outlook to stable reflects our expectations of an improved operating environment in 2014 relative to the cyclical trough which meaningfully depressed CAP's margins and cash flows in 2012. CAP's operating performance, which improved substantially in 2013, is expected to generate mid to high single digit EBITDA margins in 2014 bolstered by earnings from its new butadiene plant, which became operational in Q4 2013.
MRC

MOSCOW (MRC) -- European producers have announced an increase of EUR20-30/tonne from May in prices of polyethylene (PE) to be shipped in June to the CIS markets, citing higher ethylene prices and limited export quotas, according to ICIS-MRC Price report.

The June contract price of ethylene in Europe was agreed up by EUR10/tonne from May. European producers announced a more significant price increase for June PE shipments to the CIS countries on the back of higher prices of the basic feedstock (ethylene) and reduced production, which resulted in limited export quotas.

Negotiations over European PE prices for June began this week. Deals for low density polyethylene (LDPE) were negotiated in the range of EUR1,260-1,330/tonne FCA. Some producers said they had contracted all their export quotas over the first three days of the trades.

Deals for June shipments of high density polyethylene (HDPE) were negotiated in the range of EUR1,175-1,240/tonne FCA, up by an average of EUR20-30/tonne from May. European producers' export quotas were also limited in the HDPE market with pipe grade PE100 to traditionally account for the greatest shortage in supply.
MRC

MOSCOW (MRC) -- A. Schulman has agreed to purchase a majority of the assets of the specialty plastics business of Ferro Corp. for USD91 million in cash, said Hydrocarbonprocessing.

The purchase agreement includes four facilities located in the US as well as operations in Spain. Subject to the satisfaction of customary closing conditions and regulatory approvals, the transaction is anticipated to close during the fourth quarter of A. Schulman's current fiscal year ending August 31, 2014.

Excluded from the transaction are Ferro's plastics business and operations in Edison, New Jersey, and Carabobo, Venezuela.

The acquisition is expected to be accretive to adjusted earnings per share, and Schulman anticipates achieving approximately USD5.5 million in synergies within 12 to 18 months following the close of the transaction, driven primarily by sourcing activities and plant efficiency actions.

The assets included in the pending transaction achieved sales of USD154 million in 2013, with approximately two-thirds of these revenues generated in the US. As a result, this acquisition is expected to deliver important geographic diversification benefits to A. Schulman.

The specialty plastics segment is a global supplier of custom engineered plastic compounds, colorants, and liquid coatings, primarily focused on thermoset plastic technology. The business offers a broad portfolio of proprietary products and recognized brand names serving a wide range of end markets including packaging, transportation, construction, appliances and agriculture.

"We continue to strengthen our US operations and expand our global capabilities in engineered plastics, masterbatch solutions and custom performance colors, which represent outstanding profitable growth opportunities and are integral to our value creation strategy," said Bernard Rzepka, chief operating officer of A Schulman.

We remind that, as MRC wrote previously, in mid-2012 A. Schulman Inc. inked a definitive agreement to acquire ECM Plastics, a privately owned plastics compounder located in Worcester, Mass., for USD36.5 million. Besides, Jeddah-based National Petrochemical Industrial Company (Natpet), a subsidiary of Alujain Corporation, entered into a joint venture agreement with A. Schulman to produce polypropylene compounds.

A. Schulman is a global plastics supplier, headquartered in Akron, Ohio, and a leading international supplier of high-performance plastic compounds and resins, which are used as raw materials in a variety of markets. A. Schulman has 33 manufacturing facilities globally. A. Schulman's fiscal third-quarter earnings fell 69% amid continued sluggishness in European markets and higher-than-expected costs in Latin America, where the company has been consolidating its Brazilian operations.
MRC

MOSCOW (MRC) - Mexico's national oil company Pemex will sell a 7.9% stake in Spanish oil firm Repsol, worth about 2.2 billion euros (USD3.0 billion), said Reuters.

The sale ends a long relationship between Pemex and Repsol that had run into trouble in recent years over disagreements on policies ranging from top management to the handling of Repsol's investments in Argentina.

Through this sale, Pemex will divest nearly all of its holding in Repsol, where its 9% stake has made it one of the top three shareholders.

As a result of the divestment, Pemex will lose its seat on Repsol's board. The companies had hoped to team up to explore for offshore oil in the Gulf of Mexico, so the sale represents a lost opportunity for both.

Both Repsol and Pemex declined to comment.

Still, Repsol shares could benefit in the short term, analysts said, as the sale erases uncertainty that had been holding back gains over past months, even as the company made a successful USD6.3 billion exit from Argentina.

Repsol itself is on the hunt for acquisitions to expand its exploration and production business, with a preference for oil assets that offer cash flow, banking sources said.

As MRC informed previously, Pemex and Mexichem in 2013 entered into a joint venture, which will enable greater competitiveness of the domestic petrochemical industry in the global market through the integration of a new company, which will create value to the chlorine-vinyl chain. The joint venture includes a cash investment and assets contribution up to the amount of USD518 million, of which Pemex will participate with USD228 million in assets while Mexichem will contribute with both, USD90 million in assets and USD200 million in cash in order to modernize the Pajaritos complex.

Pemex, Mexican Petroleum, is a Mexican state-owned petroleum company. Pemex has a total asset worth of USD415.75 billion, and is the world's second largest non-publicly listed company by total market value, and Latin America's second largest enterprise by annual revenue as of 2009. Company produces such polymers, as polyethylene, polypropylene, polystyrene.

Repsol S.A is an integrated Spanish oil and gas company with operations in 28 countries. The bulk of its assets are located in Spain.
MRC

MOSCOW (MRC) -- Lotte Chemical has restarted a polypropylene (PP) plant, reported Apic-online.

A Polymerupdate source in Malaysia informed that the plant restarted on May 29, 2014. It was shut on May 17, 2014 for maintenance turnaround.

Located at Pasir Gudang, Malaysia, the plant has a production capacity of 240,000 mt/year.

As MRC wrote previously, Lotte Chemical Titan shut down its PP plant in Malaysia on February 5, 2014 for a brief outage. The plant, located at Pasir Gudang, Malaysia, with a production capacity of 200,000 mt/year resumed operations on February 6, 2014.

We remind that in early 2014, Hyundai Oilbank and Lotte Chemical Corp. established Hyundai Chemical as a new venture in the "oil refining and synthetic fiber materials business". The venture, owned 60 % by Hyundai and 40% by Lotte, will invest up to 1.2-trillion won, with production targeted to begin in the second half of 2016 at Hyundai’s Daesan plant in South Chungcheong province.

In early 2013, a major South Korean pertochemical and polymer producer, Honam Petrochemical, and one of the largest South Korean PET and PTA producer, KP Chemical, decided to merge into a new company with a new name Lotte Chemical Corporation. The newly formed company believes that this move will strengthen its position both in domestic and international markets and is in a line with Lotte Chemical's strategy to become a leading global company.

The Lotte Group currently has a presence in Indonesia via its subsidiary, Honam Petrochemicals, which acquired Malaysia’s polyolefin major Titan Chemicals in July 2010. Included in the acquisition was Titan’s Indonesian subsidiary - PT Titan Petrokimia Nusantara (TPN), which has a polyethylene (PE) production capacity of 450,000 tonnes/year.
MRC