Lotte Chemical swings to loss on weaker olefins, aromatics

MOSCOW (MRC) -- Lotte Chemical (Seoul, South Korea) reports a first-quarter net loss of 90 billion South Korean won (USD73.7 million), compared with a net profit of W224 billion in the same period of the previous year, according to Chemweek.

The company recorded an operating loss of W86 billion versus an operating profit of W298 billion a year earlier. Sales were W3.2 trillion, a drop of 9.6% year on year (YOY).

Lotte Chemical says its olefins segment registered an operating loss of W12 billion in the first quarter compared with an operating profit of W191 billion in the year-ago quarter. Revenue decreased by 10.4% YOY to W1.6 trillion for this segment due to a decline in product prices.

Lotte Chemical says that an explosion at its petrochemical complex at Daesan, South Korea, reduced group profit. The complex at Daesan, based on a naphtha cracker, accounts for 21.8% of Lotte Chemical's sales. It says the sharp drop in oil prices led to inventory-valuation losses in the segment. The coronavirus disease 2019 (COVID-19) pandemic weakened demand in the company's polyethylene-polypropylene segment. However, demand for packaging and medical items grew. Demand for ethylene glycol (EG) declined. Lotte Chemical projects profit to improve in the second quarter due to the “low cost of feedstock.”

Lotte Chemical's aromatics division swung to an operating loss of W41 billion, versus an operating profit W58 billion a year earlier. Sales were down 39% YOY to W438 billion, versus W718 billion a year earlier. Sales were pressured by a decrease in product prices caused by falling oil prices and operating-rate adjustments at overseas subsidiaries.

Aromatics profit decreased due to oversupply caused by China’s new large-scale paraxylene (p-xylene) plants starting operation despite improved demand during the polyester peak season. Operating profit for the advanced materials unit declined 65% to W31 billion. Polyester demand in China is weak due to COVID-19, but this was partially offset by the rise in demand for sanitation and disposable items since February. The company projects profit to improve gradually in the second quarter on the onshore polyester peak season despite continued oversupply.

Operating profit for the advanced materials unit increased 32.2% YOY to W41 billion. Sales for this unit grew by 14.7% YOY to W809 billion. Profit at the acrylonitrile-butadiene-styrene (ABS) unit improved on the drop in raw material prices. The polycarbonate (PC) unit performed poorly owing to “oversupply and weak demand in compounding,” the company says. The COVID-19-related lockdown led to a decline in sales for construction materials. A decline in worldwide car production weakened demand for the company’s mobility unit. Earnings for this unit are expected to decrease in the second quarter. Lotte expects compounding volumes to decline owing to the shutdown of client companies in the US and Europe for sectors such as home appliances and automotive.

The company’s Lotte Chemical USA business unit achieved an operating profit of W14 billion, down 57.5% quarter on quarter (QOQ), on lower sales of W109 billion, down by 14% QOQ. The company says that profit was hurt by a maintenance turnaround of its ethane cracker at Lake Charles, Louisiana. The cracker, which was inaugurated in May 2019, has capacity for 1 million metric tons/year (MMt/y) of ethylene. COVID-19 and the low oil price led to a decline in the price of EG. Lotte projects profitability for this business unit will decrease due to “feedstock price rise and weak product prices.” Weak demand and continued oversupply of EG are is expected, it says. Demand for polyester in the US and Europe is expected to remain low. However, the company anticipates demand for disposable sanitation items and food packaging to rise.

The company’s other overseas unit, Lotte Chemical Titan Holding (Kuala Lumpur, Malaysia), reported a net loss of 169.4 million ringgit ($38.9 million) for the first quarter, versus a net profit of RM55.8 million during the corresponding period in the previous year, due to a margin squeeze resulting from a decline in selling prices. Revenue was down 33% YOY to RM1.4 billion, also due to lower selling prices and sales volume, which were caused by weakening demand following the different levels of COVID-19 related movement controls established locally and across Southeast Asia since late January.

As MRC wrote previously, on 4 March, 2020, Lotte Chemcial shut its naphtha cracker after an explosion at the plant in the southwestern city of Seosan, which injured 31 people. The explosion, which was triggered by a fire at a compressor in Lotte Chemical’s naphtha cracker at around 3 a.m. local time (1800 GMT), was soon contained and under control, the company said then in a statement. The cracker may resume production this October, although initially the restart was planned in a couple of weeks after the accident.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 557,060 tonnes in the first three month of 2020, up by 7% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments rose because of the increased capacity utilisation at ZapSibNeftekhim. Demand for LDPE subsided. At the same time, PP shipments to the Russian market was 267,630 tonnes in January-March 2020, down 20% year on year. Homopolymer PP and PP block copolymers accounted for the main decrease in imports.

South Korean Lotte Chemical is a global petrochemical company, established in 1976. It produces low density polyethylene (LDPE), high density polyethylene (HDPE), linear low density polyethylene (LLDPE), polypropylene (PP), functional resins, styrene monomer (SM), polyethylene terephthalate (PET), etc.
MRC

MOSCOW (MRC) -- Lotte Chemical (former Honam Petrochemical), a subsidiary of the South Korean Lotte Group, has planned to take off-stream its monoethylene glycol (MEG) unit No. 3 for a catalyst change work, according to Apic-online.

A Polymerupdate source in South Korea informed that, the company is likely to halt operations at the unit by end-May, 2020. The maintenance work is expected to remain in force for around one month.

Located at Yeosu in South Korea, the unit has a production capacity of 160,000 mt/year.

As MRC reported before, Lotte Chemical restarted its No.3 MEG plant on September 29, 2016. The plant was shut in end-August, 2016, owing to a bearish market fundamentals. Located in Yeosu, South Korea, the No. 3 MEG plant has a production capacity of 160,000 mt/year.

The company also operates two other MEG units in Yeosu with the capacity of 120,000 mt/year each.

MEG is one of the main feedstocks for the production of polyethylene terephthalate (PET).

As per MRC's ScanPlast report, March estimated PET consumption in Russia was 65,3700 tonnes, up by 1% year on year. Russia's estimated PET consumption decreased in January-March 2020 by 3% year on year to 175,170 tonnes.

South Korean Lotte Chemical is a global petrochemical company, established in 1976. It produces low density polyethylene (LDPE), high density polyethylene (HDPE), linear low density polyethylene (LLDPE), polypropylene (PP), functional resins, styrene monomer (SM), polyethylene terephthalate (PET), etc.
MRC

MOSCOW (MRC) -- Russian President Vladimir Putin discussed the oil market with Saudi Arabia's Crown Prince Mohammed bin Salman on Wednesday and agreed the need for "close coordination" between their respective energy ministers ahead of OPEC talks next month, reported S&P Global with reference to a Kremlin statement.

"Both sides noted the importance of joint efforts in achieving OPEC+ agreements in April to limit oil production," said the statement. "They agreed that further close coordination on this issue should take place between energy ministers."

The group is due to meet between June 8-10 to discuss oil market conditions, its current production agreement, and potential future steps. In April, the 23 members of the so called OPEC+ alliance agreed to reduce output by an unprecedented 9.7 million b/d in May and June in response to plummeting demand caused by the coronavirus pandemic.

Since then, Saudi Arabia has said it will voluntarily cut a further 1 million b/d in June. The UAE and Kuwait said they will cut an additional 100,000 b/d and 80,000 b/d, respectively.

The current agreement also includes a cut of 7.7 million b/d in the second half of the year, and 5.8 million b/d cut from January 2021 to the end of April 2022.

Dated Brent has more than doubled in value since hitting a 21-year low in April. Prices have recovered as major consuming nations begin to ease lockdowns and producers reduce supplies.

As MRC informed previously, China's crude oil imports from Russia rose 17.7% year on year to 7.2 million mt or 1.76 million b/d in April, resulting in Russia overtaking Saudi Arabia to become the country's top supplier in the month, latest data from China's General Administration of Customs showed.

We also remind that LyondellBasell, the world’s largest licensor of polyolefin technologies, has announced that Advanced Global Investment Company (AGIC) has selected LyondellBasell’s PP technology for a new world-scale facility in Jubail Industrial City, Saudi Arabia. AGIC’s proposed project includes two polypropyelene (PP) plants with capacity of 400,000 tons/year each.

According to MRC's ScanPlast report, PP shipments to the Russian market was 267,630 tonnes in January-March 2020, down 20% year on year. Homopolymer PP and PP block copolymers accounted for the main decrease in imports.
MRC

MOSCOW (MRC) -- Crude oil futures traded lower in mid-morning trade in Asia Wednesday, stepping back from a 10-week high hit overnight, on growing geopolitical tensions between the US and China, reported S&P Global.

At 10:10 am Singapore time (0210 GMT), ICE Brent July crude futures fell 36 cents/b (1%) from Tuesday's settle at $35.81/b, while the NYMEX July light sweet crude contract was 46 cents/b (1.34%) lower at USD33.89/b.

"Optimism nestled within the markets at the start of the week, carried by reopening hopes, though fresh aggravating news on US-China relations appears to be changing the mood going into midweek," IG market strategist Pan Jingyi said in a note Wednesday.

Crude futures hit 10-week high Tuesday, amid hopes the continued reopening of economies could bring balance to oversupplied oil markets in coming weeks.

Nonetheless, oil pared gains amid growing tensions between the US and China over the origins of coronavirus.

Earlier in the week, US President Donald Trump warned that Washington was considering sanctions on China for its crackdown on Hong Kong, according to media reports.

This came after China's announcement at its National People's Congress in Beijing, saying it would pass a national security law on Hong Kong this summer.

"The fact of the matter is that it could remain a bumpy ride in the sessions ahead as the situation evolve," Pan said with regards to Asian markets.

Meanwhile, analysts surveyed by S&P Global Platts are expecting total commercial crude inventories to decline 1.2 million barrels during the week ended May 22 to around 525.3 million barrels.

While this seemed like a third straight week of falling inventory levels, the nationwide surplus to the five-year average is still expected to increase to around 10.7% from 10.1% the week prior, Platts reported.

As MRC wrote earlier, the heads of the world's largest oil and gas producers pledged Tuesday to maintain a strategic focus on producing cleaner energy and helping to mitigate climate change despite reeling from the impact of the coronavirus pandemic on oil and gas prices.

We remind that global oil consumption cut by up to a third in Q1 2020. What happens next in the oil market depends on how quickly and completely the global economy emerges from lockdown, and whether the recessionary hit lingers through the rest of this year and into 2021.

Earlier this year, BP said the deadly coronavirus outbreak could cut global oil demand growth by 40 per cent in 2020, putting pressure on Opec producers and Russia to curb supplies to keep prices in check.

We remind that, in September 2019, six world's major petrochemical companies in Flanders, Belgium, North Rhine-Westphalia, Germany, and the Netherlands (Trilateral Region) announced the creation of a consortium to jointly investigate how naphtha or gas steam crackers could be operated using renewable electricity instead of fossil fuels. The Cracker of the Future consortium, which includes BASF, Borealis, BP, LyondellBasell, SABIC and Total, aims to produce base chemicals while also significantly reducing carbon emissions. The companies agreed to invest in R&D and knowledge sharing as they assess the possibility of transitioning their base chemical production to renewable electricity.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 557,060 tonnes in the first three month of 2020, up by 7% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments rose because of the increased capacity utilisation at ZapSibNeftekhim. Demand for LDPE subsided. At the same time, PP shipments to the Russian market was 267,630 tonnes in January-March 2020, down 20% year on year. Homopolymer PP and PP block copolymers accounted for the main decrease in imports.
MRC

MOSCOW (MRC) -- Petron Corp, the Philippines’ largest oil refiner and retailer, said it has temporarily shut down its 180,000-barrel-per-day Bataan refinery on the main island of Luzon, as the coronavirus lockdown pummelled global oil demand, according to Hydrocarbonprocessing.

“Since May 5, Petron’s Bataan Refinery has been on a scheduled turnaround to give way to maintenance activities on major process units,” the company said in a statement after posting its quarterly results.

The plant shutdown will also mitigate the impact of lean fuel demand and poor refining margins, Petron said, without giving details on when the refinery would resume operations.

Petron, a unit of conglomerate San Miguel Corp, provides nearly 30% of the Southeast Asian country’s petroleum requirements, with 30 terminals and more than 2,400 stations nationwide.

“Demand recovery will depend upon the lifting of quarantine measures and ultimately, finding a vaccine to fully restore mobility,” Petron President and Chief Executive Officer Ramon Ang said in a statement.

The oil refiner said it has enough fuel inventory to supply domestic market requirements that will be replenished through importation of finished products.

Earlier this month, Philippines President Rodrigo Duterte had temporarily increased tariffs on imported crude oil and refined petroleum products to fund measures aimed at mitigating the economic impact of the outbreak.

Pilipinas Shell Petroleum Corp has also shut down its 110,000-barrel-per-day Tabangao refinery in the Philippines, for one month starting the middle of this month.

Petron suffered a net loss of 4.9 billion pesos ($97 million) in the first quarter, compared with a net income of 1.3 billion pesos in a year-ago period, as fuel prices collapsed due to demand contraction in both local and international markets.

We also remind that Shell Singapore restarted its naphtha cracker in Bukom Island this week following a two months maintenance shutdown since the beginning of October 2019. Thus, this cracker was taken off-stream for the turnaround on 1 October 2019. The cracker is able to produce 960,000 tons/year of ethylene and 550,000 tons/year of propylene.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 557,060 tonnes in the first three month of 2020, up by 7% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments rose because of the increased capacity utilisation at ZapSibNeftekhim. Demand for LDPE subsided. At the same time, PP shipments to the Russian market was 267,630 tonnes in January-March 2020, down 20% year on year. Homopolymer PP and PP block copolymers accounted for the main decrease in imports.
MRC