Asian naphtha profit margins hit lowest in more than a decade

MOSCOW (MRC) -- Profit margins for making petroleum feedstock naphtha have hit their weakest in over a decade in Asia and a seven-year low in Europe as the global economy weakens and large-scale processing unit outages hurt demand, reported Reuters.

The benchmark naphtha margin NAF-SIN-CRK last week closed at a USD15.38 a tonne discount to Brent crude, the lowest since December 2008, when the financial crisis roiled the global economy.

The 124% slide in profit margins from March’s 2019 peak means naphtha - used chiefly as a dilutant in crude oil refining, as well as in products like varnishes and cleaning products - has the worst-performing margin of all oil products.

In Europe, northwest European naphtha cracks hit their lowest since June 2012 on Thursday at around - USD15.41 a barrel.

Benchmark European gasoline margins sank below USD5 a barrel on Thursday to their lowest since March this year. The fall in gasoline weighed further on naphtha, which is used as a blending component in the motor fuel.

South Korea’s LG Chem does not expect to restart its 1.3 million tonne per year (tpy) naphtha cracker until next week, after closing it last week following technical trouble.

Scheduled maintenance is also ongoing at a raft of processing units, or crackers, in North Asia, while Hanwha Total’s Daesan cracker in South Korea is also shuttered following a turnaround that started in late March.

A planned turnaround at Royal Dutch Shell’s Moerdijk petrochemical plant in the Netherlands was also contributing to lower naphtha demand in Europe.

One naphtha trader, asked for the reason behind the weakness in naphtha cracks globally, said: "Demand, demand, demand - and peak cracker turnarounds are not helping".

He said the sell-off in naphtha prices had been brewing for a couple of months.

"The naphtha market is very weak at the moment," said Matthew Chew, principal oil analyst at IHS Markit.

Chew said a plunge in prices for liquefied petroleum gas (LPG), a competing feedstock fuel, was also putting downward pressure on naphtha.

"The recent weakness in LPG prices has heavily influenced the preference for naphtha in the last five weeks," Hui Heng Tan of brokerage Marex Spectron said.

Not all oil companies active in the downstream sector are set to suffer. Refiners of oil products who also have petrochemical plants have a natural hedge in times of low naphtha prices.

OMV’s Chief Executive Rainer Seele told Reuters recently that he was ebullient about a market awash with cheap naphtha because it would benefit OMV’s push into petrochemical markets, providing a natural hedge in its operations.

A weakening global economy, which has started to dent oil and fuel demand growth, is weighing on industry profits as well.

"Over the past week or so our economists have revised down their GDP growth outlook for the US, China, India and Brazil,” Barclays bank said on Monday in a note about the economy and its impact on oil demand.

Those countries account for more than three-quarters of the British bank’s oil demand growth assumptions for this year, it said.

"The revisions imply a 300,000 barrel per day reduction in our current global oil demand outlook of 1.3 million barrels per day" for this year, Barclays said.

Falling margins in the petrochemical industry were also weighing on naphtha margins.

"The ethylene-naphtha spread is now around USD350 a tonne, about half of what it was some three months ago," said Sri Paravaikkarasu, director for Asia oil at energy consultancy FGE.

Ethylene is a building block for plastic and is the product most commonly made at most petrochemical facilities.
Paravaikkarasu said naphtha cracks should receive some relief from the full return of crackers from maintenance later in the northern hemisphere summer.

He added however: "The recovery path will be slow."
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MOSCOW (MRC) -- Quebec-based technology company Loop Industries is getting USD35 million in funding from a Toronto investment firm to help fund a recycling plant to produce tens of millions of pounds of RPET each year, said Canplastics.

The buyer of Loop’s stock, Northern Private Capital (NPC), is the exclusive investment vehicle of CFFI Ventures, a company wholly owned by billionaire entrepreneur John Risley. Risley made his fortune in the seafood and cable TV/internet provider businesses.

“Rarely in my long career have I come upon a company as well positioned to disrupt a giant market as Loop is today,” Risley said in a press release. “On top of that, we are proud to be playing a part in reducing plastic pollution in the world today.”

The RPET plant – which will be Loop’s first commercial recycling facility – is a project that’s part of the Montreal company’s joint venture with global virgin plastics producer Indorama Ventures Public Co. Ltd.

Loop owns patented and proprietary technology that depolymerizes low-value waste PET plastic and polyester fibre, including plastic bottles and packaging, carpet and polyester textile of any colour, transparency or condition and even ocean plastics that have been degraded by the sun and salt. Those monomers are then purified and repolymerized into PET.

After the purchase, NPC will have a 10.5% ownership stake in Loop. The transaction is expected to close by June 28 at the latest.

In January 2019, Loop Industries, Inc, a leading technology innovator in sustainably produced plastic, and ThyssenKrupp Industrial Solutions’ division, Uhde Inventa-Fischer GmbH, a leading global polyester technology provider and polyester plant engineering firm, entered into a strategic collaboration that would shape the future of PET and Polyester manufacturing.

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MOSCOW (MRC) -- Poland’s biggest oil refiner, state-run PKN Orlen, expects clean oil from Russia to reach its refinery in Plock within days, reported Reuters with referrence to the company's statement.

Polish pipeline operator PERN confirmed that clean oil supplies from Russia had been partially restored on Sunday morning after Russia’s oil export flows to Europe were disrupted in April due to contamination.

PKN Orlen also said that the suspension of Russian oil supplies had no impact on the refinery’s output.

As MRC wrote before, in early June 2019, the Czech oil refinery at Litvinov, owned by PKN Orlen unit Unipetrol, started receiving oil from state emergency reserves due to halt in Russian supplies via the Druzhba pipeline.

PKN Orlen is a major Polish oil refiner and petrol retailer. The company is a significant European publicly traded firm with major operations in Poland, Czech Republic, Germany, and the Baltic States. It currently (2015) ranks 353, with a revenue of over USD33.8 billion.
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MOSCOW (MRC) -- Honeywell announced it launched a new category of software, Enterprise Performance Management for Operations Technology, that will improve the way a variety of companies collect, analyze and act on data from their operations, said the company.

The software solution, called Honeywell Forge, will leverage the company’s more than 100 years of expertise in asset and process control technology and will transform the way work gets done by owners and operators of buildings, airlines, industrial facilities and other critical assets and infrastructure.

Honeywell Forge converts massive quantities of data from equipment, processes and people into intuitive, actionable insights that enable monitoring of enterprise operations from a single screen. In turn, this helps customers optimize the efficiency, effectiveness and safety of their business.

Honeywell Forge is designed to be quick and cost-effective to implement, with a hardware- and software-agnostic approach that allows for use of existing systems. Honeywell Forge leverages predictive analytics to help identify maintenance issues before they happen; enable workers to be more productive, proficient and safe; reduce costs; and increase productivity. The company is developing Honeywell Forge to incorporate the latest cybersecurity protections.

“Large enterprises around the world consistently lack top-to-bottom visibility into how their operations are performing, and most lack the ability to derive business intelligence from their disparate data sources. Their existing systems are disjointed and have shortcomings that slow growth and cut into profitability,” said Que Dallara, president and chief executive officer of Honeywell Connected Enterprise. “Honeywell Forge can provide leaders of complex businesses with the visibility they need to transform their operations quickly and efficiently, at every level and with minimum disruption, enabling users to focus resources on innovation and achieving business objectives."

According to a recent Honeywell survey[1], more than 80 percent of C-suite executives and senior decision makers believe it is important to implement a holistic solution as companies look to digitize and better connect their operations. The same survey shows key decision makers believe better enterprise management will offer superior predictive information, leading to safer and more secure facilities, enhanced efficiency and profitability in the supply chain, more efficient use of resources, and better real-time decision making to avoid downtime. Honeywell Forge offers these advantages and more to customers looking for quick adoption and fast payback.
MRC

MOSCOW (MRC) -- Sibur, Russia's largest petrochemicals company, may carry out a long-planned initial public offering (IPO) no earlier than 2020 and eyes Moscow as the main venue for the listing, reported Reuters with reference to Sibur's Chief Executive Dmitry Konov.

Sibur had previously said it would be better placed for an IPO, which it last year estimated at as much as $3 billion, after its huge new plant in western Siberia, ZapSibNefteKhim, is launched.

Konov told Reuters on Thursday that Sibur has completed construction of the plant but said he would rather not predict when the plant will start working at full pace.

"We will launch production this year, there will be output. But the exact timing of reaching the projected capacity depends on many factors," Konov said.

Speaking on the sidelines of an economic forum in St Petersburg, Konov said Sibur would prefer listing on the Moscow Exchange to having shares also traded on a bourse abroad. He declined to comment on a possible IPO price.

Speaking about the trade row between the United States and China, Konov warned this could have a negative impact in the long term, while it could provide some opportunities in the near future.

China in May decided to levy an additional tariff of 25% on some US goods including liquefied natural gas, soy oil, peanut oil, petrochemicals, frozen vegetables and cosmetics.

Washington promised to retaliate. This week, US President Donald Trump threatened to hit China with tariffs on "at least" another USD300 billion worth of Chinese goods, a move that crowned trade tensions that have risen sharply since talks aimed at ending a festering trade war broke down in early May.

"Any trade wars and a decline in the international trade entail lower economic growth, which is bad... In the near term, some could make money on changes in (trade) flows," Konov said.

"But that's a win in the short term and a loss in the long term."

Amid global trade issues, Sibur and China Petroleum & Chemical Corporation (Sinopec) signed a number of cooperation agreements earlier last week to join forces, particularly in processing natural gas into petrochemicals in Russia and China.

The deals were signed on the day that Chinese President Xi Jinping met his Russian counterpart Vladimir Putin in Moscow and called him his "best friend". The two leaders are also set to speak at the same panel at the St Petersburg forum on Friday.

Sibur and Sinopec have also signed a distribution agreement to supply polyethylene to China from Sibur's ZapSibNeftekhim site, the plant that plays the milestone role in its IPO plans.

"This agreement hedges us against the way we are doing on other priority markets," Konov said, referring to the polyethylene deal without giving details on how it will affect Sibur's production figures.

SIBUR is a uniquely positioned vertically integrated gas processing and petrochemicals company. We own and operate Russia’s largest gas processing business in terms of associated petroleum gas processing volumes and are a leader in the Russian petrochemicals industry. As of 31 March 2014, SIBUR operated 27 production sites located all over Russia, had over 1,400 large customers engaged in the energy, chemical, fast moving consumer goods (FMCG), automotive, construction and other industries in approximately 70 countries worldwide and employed over 27,000 personnel.
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