Turkish petrochemicals industry is challenging

MOSCOW (MRC) --The short-term outlook for the Turkish petrochemicals industry is challenging, with the depreciation of the lira and the rising cost of credit dampening domestic demand, but export growth and low stocks should help lift demand in H214, said Balkans, citing Turkey Petrochemicals Report Q3 2014.

The pace of polymers growth will be partly determined by the strength of the export-oriented automotive sector as well as the domestic construction industry. Although we have revised down 2014 GDP growth forecast for Turkey from 2.6% to 1.5% and the lira may not have ended its depreciatory run, there are upsides.

Demand for major polymers declined in Turkey owing to the fall in domestic currency in the first few months of 2014. A few domestic polyethylene converters have suspended production lines and major domestic petrochemicals producer Petkim has stopped producing at full capacity due to payment issues prompted by an interest rate hike. BMI believes this trend will be reversed through H214 as stocks are depleted and orders increase.

Local producer Petkim has been able to counter a decline in sales by successfully reducing costs through cuts and efficiency savings, while running plants at an overall capacity utilisation rate of around 83%. As a result, while its revenue declined 4.4%, its net income nearly doubled to TRY49mn.

As MRC wrote previously, Petkim together with its key owner, Socar plans to transform Aliaga into an industrial cluster. The transformation has several positive effects on Petkim. Star refinery, Petlim and Petkojen projects are the key earnings drivers. Among these initiatives, the building of Star refinery by Socar-Turcas, the container port project Petlim and co-generation plant project Petkojen are the key additions. Star refinery allows Petkim to receive feedstock at lower cost and better quality. Petlim utilizes the port area belonging to the company more efficiently. Petkojen lowers the overall energy cost of the company by turning the boilers to dual mode.

Petkim is the leading petrochemical company of Turkey. Specializing in petrochemical manufacturing, the company produces ethylene, polyethylene, polyvinyl chloride, polypropylene and other chemical building blocks for use in the manufacture of plastics, textiles, and other consumer and industrial products.
MRC

MOSCOW (MRC) -- China's state-owned Sinopec said Wednesday it has signed a pact with Kuwait Petroleum Co to enhance cooperation in the oil sector, including refining, said Apic-online.

Sinopec, or China Petrochemical Corp., said the deal was signed in Beijing in the presence of Chinese Premier Li Keqiang and Kuwaiti Prime Minister Sheikh Jaber Mubarak Al-Sabah.

Sinopec said both companies will continue to deepen cooperation in crude oil trading, crude reserves storage, refinery projects and refinery engineering services. No other details were provided.

The new deal indicates both sides could be reviving stalled talks for a joint venture refinery in Zhanjiang in China's southern Guangdong province.

Sinopec last said in its 2013 annual earnings statement issued late March that the 15 million mt/year Zhanjiang refinery would be delayed by a year to 2017. The plant will include an 800,000 mt/year ethylene unit and a 300,000 mt/year jetty.

Sinopec and KPC's overseas arm, Kuwait Petroleum International, had signed a joint venture agreement for the refinery in June 2011, following over five years of talks.

Sinopec was to hold a 50% stake in the refinery, and KPI the remaining 50%, although the Kuwaiti company had indicated its desire to farm out a 20% interest to a third partner.

The plan was for the USD9 billion refinery to run on Kuwaiti crude. Since 2012 however, there has been little update on the equity sharing in the project and sources have previously said KPI's interest was waning and it was not clear if the company was still involved. Sinopec has also made no mention of KPI's involvement in its updates in the last two years.
MRC

MOSCOW (MRC) - European producers of polypropylene (PP) announced price rise of EUR20/tonne and more for June delivery for the CIS markets, according to ICIS-MRC Price Report.

The June contract price for propylene in Europe was agreed up by EUR10/tonne, compared with the May level.
Production volumes of polypropylene in the region were reduced because of the propylene shortage and shutdowns at some plants.

As a consequence, given the tight supply European producers announced price increases for polypropylene of EUR20/tonne or more.

Deals for European homopolymer PP were discussed this week in the range of EUR1,220-1,280/tonne, FCA.
The low end of the PP block copolymers price was at EUR1,300/tonne FCA.

Some companies said they did not managed to buy all the required PP volumes from European producers. However, some producers have already completed all their PP deals for June delivery.
MRC

MOSCOW (MRC) -- Eastman Chemical Company, a global specialty chemical company, has announced that it has completed the acquisition of BP’s global aviation turbine oil business, as per the company's press release.

The acquired business is expected to be accretive to 2014 earnings excluding acquisition-related costs and charges. The newly acquired business is part of Eastman’s Specialty Fluids & Intermediates business segment.

"This acquisition brings a profitable and growing specialty chemical business to our portfolio that aligns very well with our existing aviation product offerings," said Mike Humby, vice president and general manager of Eastman’s Specialty Fluids & Intermediates business segment. "Bringing our Skydrol team together with the experienced team from BP’s turbine oil business will provide our customers around the world with an unparalleled level of service for their aviation needs going forward."

As MRC reported before, earlier this year, Eastman Chemical Company enhanced its medical packaging portfolio with Eastalite copolyester, the company’s first opaque offering, which is styrene-free and can be a sustainable alternative to high-impact polystyrene (HIPS).

Eastman (headquartered in Kingsport, Tennessee, USA) is a global specialty chemical company that produces a broad range of products found in items people use every day. With a portfolio of specialty businesses, Eastman works with customers to deliver innovative products and solutions while maintaining a commitment to safety and sustainability. Its market-driven approaches take advantage of world-class technology platforms and leading positions in attractive end-markets such as transportation, building and construction, and consumables. As a globally diverse company, Eastman serves customers in approximately 100 countries and had 2013 revenues of approximately USD9.4 billion.
MRC

MOSCOW (MRC) -- Repair work at Lukoil’s 350,000-tonne/year Stavrolen petrochemical complex in Budennovsk, Russia, following a February fire will shutter production of ethylene and propylene at the site for 6 months, said Ogj.

A completed investigation of the Feb. 26 incident determined the fire, which broke out in the plant’s ethylene and propylene production unit No. 2, was caused by depressurization of the aluminum heat exchanger, Lukoil said.

The depressurization of the heat exchanger resulted from the fracture of a corrugated plate in the left heat-exchange section, the company said.

While repair and maintenance work at the site already is under way, Lukoil said it does not expect ethylene and propylene production capacities at the plant to resume until January 2015. Polypropylene production from imported propylene feedstocks will resume this month, the company added.

Lukoil previously said it planned to commission of the first stage of a 2 billion cu m/year gas processing plant and modernization of existing ethylene and polyethylene units at the Stavrolen complex in 2015.

Stavrolen is the second largest Russian HDPE producer after Kazanorgsintez and the third largest PP producer after Nizhnekamskneftekhim and Tomskneftekhim. Stavrolen"s HDPE and PP annual production capacities are 300,000 tonnes and 120,000 tonnes, respectively.
MRC