Russian LLDPE market up by 11% in 2019

MOSCOW (MRC) -- The Russian linear low density polyethylene (LLDPE) market remained the fastest growing market, demand for this polyethylene (PE) has almost doubled for the past nine years. In 2019, the main increase in demand for LLDPE was provided by manufacturers of film products, according to MRC's Annual report.

The year of 2019 was a successful one for Russian LLDPE consumers over the past few years. Domestic producers significantly increased their output, including that on metallocene catalysts, thereby reducing dependence on foreign suppliers. And LLDPE prices fell by more than Rb15,000/tonne in the second half of last year under pressure from the situation in foreign markets. Traditionally, in recent years, the main increase in demand for LLDPE has been provided by manufacturers of film products, but in 2019, demand from producers of large-sized items and cable and wiring products also increased.

Nizhnekamskneftekhim became the key LLDPE supplier to the Russian market last year, the Tatarstan producer managed to increase its output of this PE grade by 17%, reducing the dependence of local consumers on imports from the United States and the Middle East.

Also, another Tatarstan producer - Kazanorgsintez - significantly increased its share of LLDPE in PE production, including that on metallocene catalysts, in 2019. And in November 2019, ZapSibNeftekhim launched its own LLDPE production with a capacity of 700,000 tonnes per year.

Thus, Russia's overall LLDPE production rose to 254,000 tonnes from 175,400 tonnes in 2018. At the same time, imports decreased less significantly - from 183,400 tonnes in 2018 to 180,900 tonnes last year. And overall LLDPE production capacities in Russia exceeded 1,000,000 tonnes per year as of 1 January, 2020.

Prices of butene LLDPE were in the range of Rb91,000-93,000/tonne CPT Moscow, including VAT, in the Russian market in January 2019. Prices of Middle Eastern PE reached Rb98,000/tonne CPT Moscow, including VAT, in late May. But already in June, a gradual decrease in LLDPE C4 prices began partially because of a similar situation in the global markets, which lasted until the end of the year. Some sellers' LLDPE prices had reached Rb77,000/tonne CPT Moscow, including VAT, by December.

Films producers were the main driver of last year's demand for LLDPE, demand for film grade LLDPE exceeded 362,000 tonnes last year, showing more than a double growth over the past nine years. Stretch films producers were the key LLDPE consumers.

Large-seized items producers by rotational moulding was the second largest LLDPE consumption segment. Last year's demand for PE in this segment exceeded 18,000 tonnes.

Compounds and masterbatch producers closed the top three manufacturers.

A major increase in LLDPE production in Russia, along with a proportional rise in exports, is expected in 2020.

Solvay withdraws its full-year guidance, reduces capex in view of COVID-19 impact

MOSCOW (MRC) -- Solvay announced that it is withdrawing its full year 2020 guidance issued in February due to heightened uncertainty and prolonged duration of events caused by the COVID-19 global pandemic, according to Kemicalinfo.

The company has reduced its capital expenditure plans for the year by over EUR250 million (USD273 million).

"During these challenging times, we are mobilized and we are taking decisive action on matters that are within our control, especially protecting our people, meeting customer needs, and prioritizing cash generation and cost reduction," said Ilham Kadri, chief executive officer.

"We are deleveraging pension liabilities and are reducing our capital expenditure by over EUR250 million in 2020. Our balance sheet strength - with liquidity reserves of around EUR4 billion comprised of cash and undrawn credit facilities - and our focus on cash-flow generation gives me confidence that Solvay is able to navigate this period effectively," continued Ms. Kadri.

Further, Solvay confirmed its dividend recommendation, highlighting the strength of its cash flow generation, balance sheet, and liquidity.

The company confirms that it will maintain its total dividend recommendation of EUR3.75 gross per share, on the back of the strong 2019 results announced on 26 February 2020. This leads to a final gross dividend of EUR2.25 per share payable on May 20, 2020, which follows the interim dividend payment in January 2020 of EUR1.50 per share.

Solvay also announced plans to establish a Solvay solidarity fund to support Solvay employees and dependents who may experience hardship related to COVID-19.

As MRC reported earlier, in response to urgent needs by medical professionals for protective equipment to combat COVID-19, Solvay is supplying high-performance, medical-grade transparent film to Boeing for its production of face shields. Boeing approached Solvay due to its experience in the use of advanced composite and adhesive materials on multiple commercial and defense programs.

We remind that earlier this year, DOMO Chemicals completed its acquisition of Solvay’s Performance Polyamides Business in Europe. This Business includes Engineering Plastics operations in France and Poland; High Performance Fibers in France; Polymer and Intermediates operations in France, Spain and Poland. The Business comprises Production, Sales, Technical Support, R&D and Innovation services in France, Spain, Poland, Germany and Italy that currently have a combined headcount of approximately 1,100 employees. The agreement also involves a joint venture between BASF and DOMO in France for the production of Adipic Acid.

And on January 31, 2020, BASF, the world's petrochemical major, closed the acquisition of Solvay's polyamide (PA 6.6) business. The transaction broadens BASF's polyamide capabilities with innovative and well-known products such as Technyl. This will allow BASF to support its customers with even better engineering plastics solutions, e.g., for autonomous driving and e-mobility. The transaction also enhances the company's access to growth markets in Asia as well as in North and South America.

We also remind that BASF restarted its No. 1 steam cracker on September 30, 2019, following a maintenance turnaorund. The plant was shut for maintenance in mid-August, 2019. Located at Ludwigshafen in Germany, the No. 1 cracker has an ethylene production capacity of 235,000 mt/year and a propylene production capacity of 125,000 mt/year.

Ethylene and propylene are feedstocks for producing PE and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 383,760 tonnes in the first two month of 2020, up by 14% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments increased due to the increased capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 192,760 tonnes in January-February 2020, down by 6% year on year. Homopolymer PP accounted for the main decrease in imports.

North American PVC prices fell by more than USD200/tonne in April for the CIS countries

MOSCOW (MRC) - A serious decline in oil quotes and demand in key markets has forced North American producers of polyvinyl chloride (PVC) to significantly reduce export prices. Offers for April shipments to the CIS markets were reduced by more than USD200/tonne compared to early March, according to the ICIS-MRC Price Report.

The dynamic spread of coronavirus in the world made many countries to introduce emergency measures, including stopping processing plants. Because of an oversupply, oil, and with it polymers, became seriously cheaper.

Polyvinyl chloride was no exception, and because of this North American producers had to cut prices significantly for April shipments, including to the markets of the CIS countries. Market participants reported that even in early March, prices for PVC shipments from the United States exceeded the level of USD910/tonne CIF, and most sellers had a limited offer due to a stop on the turnaround of part of the facilities.

But already in the second half of March, a drop in demand in key export markets, including India, forced sellers of North American PVC to adjust their prices. By early April, price offer for the shipment of PVC from the United States reached the level of USD675/tonne, CIF, for the markets of the CIS countries, while agreement of lower prices for significant volumes is not excluded.

Most consumers were in no hurry to agree deals on April shipments of PVC from the United States. One of the reasons is quarantine in their own countries and a reduction in processing volumes.

The second reason is a similar price level for European producers, which, according to logistics indicators, are much closer to potential consumers from the CIS countries.

Perstorp converts production to solve Swedish national disinfection crisis

MOSCOW (MRC) -- Perstorp, a global leader in the specialty chemicals market, has started the large-scale production of hand sanitizer and surface disinfectant for the Swedish healthcare sector - at cost price, as per the company's press release.

Thus, leading specialty chemicals innovator Perstorp has converted part of the production at its’ Perstorp plant to now produce hand sanitizer and surface disinfectant. Perstorp has the capacity to produce more than 2 million liters per month. The production capacity is expected to exceed the healthcare sector’s current disinfection shortage. The products are being offered at cost price.

Jan Secher, CEO of Perstorp Group, comments: "Extraordinary times call for extraordinary care. Our large scale production capacity can make a real difference at this time and help to solve the disinfectant shortage in the healthcare sector. This is our contribution to the important work that healthcare professionals are doing every day. I am proud that our innovative staff saw this opportunity to help. They have driven this initiative forward together with valuable help from authorities and partners."

Production has started this week and the aim is to continue for as long there is an acute shortage of disinfection products within the Swedish healthcare sector, that regular suppliers cannot fulfill. Permits and agreements for production have been finalized in record quick time together with authorities and partners. In order to produce the disinfectant, Absolut Company delivers ethanol, which is mixed together with other ingredients. This is delivered to the Perstorp industrial plant with help of Univar Solutions and ExxonMobil. The disinfectant is bottled by Lefab Production and transported by Bertschi, Scandibulk och Eurolink to Socialstyrelsen, which distributes the products to healthcare services in regions across Sweden. The first delivery is expected to reach Socialstyrelsen after the Easter weekend.

Ingrid Bergman, Head of Purchasing at Swedish Region Skane, says: "Due to the global COVID-19 pandemic the shortage of disposables such as sanitizers is a major challenge and an issue of great priority. Perstorp has shown tremendous responsibility and initiative in securing the production chain. They have made production possible by arranging all permits from the healthcare sector in cooperation with us, as well as several authorities and other companies."

As MRC reported earlier, as of May 28 2019, Perstorp has obtained FCN 001967 (Food Contact Notification) from the FDA for the use of Pevalen as a plasticizer in polyvinyl chloride (PVC) polymers for use in repeated use food contact articles.

According to MRC's ScanPlast report, contrary to the seasonal factor, Russian producers of unmixed polyvinyl chloride (PVC) kept a high level of capacity utilisation during the first two months of the year. Overall PVC output totalled 177,100 tonnes in January-February 2020, up by 5% year on yeart. February production of unmixed PVC in Russia was 85,400 tonnes versus 91,700 tonnes a month earlier, producers Bashkir Soda Company and RusVinyl decreased capacity utilisation. Nevertheless, despite lower production in February, the total output of polymer increased in January-February 2020 to 177,100 tonnes from 169,500 tonnes a year earlier.

Perstorp is one of the world leaders in various sectors of the specialty chemicals market, it's pioneer in formalin chemistry, plastics and surface materials. Perstorp was founded in 1881 and is controlled by PAI partners,a major European private equity company. The company has around 1,500 employees in with 22 production plants in Europe, Asia and North America.

Propylene outlook transformed by COVID-19

MOSCOW (MRC) -- The coronavirus disease 2019 (COVID-19) pandemic and the crude oil crash are interacting in complex ways to transform the propylene market, reported Chemweek with reference to the statement of Carlo Barrasa, executive director/global olefins at IHS Markit. Barrasa spoke Tuesday during a live session of the IHS Markit World Petrochemical Conference 2020 Online.

"During the financial crisis, propylene demand fell 3.5% year over year, but then it rebounded by over 11% the following year," Barrasa notes. "Today however, we're not only dealing with a single event - the spread of the coronavirus - we're also dealing with an equally influential event in the crude oil price shock. On the one hand, you have a virus that can greatly impact propylene demand via lower consumption. But on the other hand, you have lower oil prices, which can dramatically change the chemical production dynamics over the upcoming quarters."

The sharp decline in crude oil pricing has lowered the cost of propylene feedstocks and flattened the production cost curve, he says. Indeed, naphtha cash costs have fallen low enough to be favored over liquefied petroleum gas (LPG).

"Less LPG cracking means more propane will be available, which means PDH (propane dehydrogenation) will likely be the preferred on-purpose vehicle, especially in Asia," says Barrasa. "MTO/CTO (methanol-to-olefin/coal-to-olefin) looks like the odd technology out. Some of these units may keep running due to their downstream integration, but at some point the economics have to win out."

Meanwhile, the economic disruption created by the COVID-19 pandemic has crushed demand.

"Optimistically, we're looking at an environment that can range from flat demand to what we think is a worst-case scenario, where the world loses a month's worth of demand," says Barrasa. "This equals roughly twice the demand loss we saw during the financial crisis. Either way, we're looking at something other than growth."

The lower cost to produce propylene will not translate directly into greater availability. With populations around the world ordered to limit travel in order to contain the pandemic, fuel demand is way down, and crude oil refining - the cheapest source of propylene - is under pressure to cut back operations. "If there isn't enough RG (refinery-grade propylene), this makes room for other sources of propylene supply."

We reminad that, as MRC informed before, Enterprise Products Partners' Mont Belvieu propane dehydrogenation (PDH) unit in Texas restarted from planned maintenance in the first week of December, 2019. The PDH unit went offline for maintenance on November 13. That day, the company said in a filing with the Texas Commission on Environmental Quality that the RAC "B" turbine shut down, which resulted in flaring. The flaring was estimated to last 72 hours. The unit has a capacity of 750,000 mt/year, according to Platts data.

Propylene is the main feedstock for the production of polypropylene (PP).

According to MRC's ScanPlast report, PP shipments to the Russian market were 192,760 tonnes in January-February 2020, down by 6% year on year. Homopolymer PP accounted for the main decrease in imports.