COVID-19 is crippling plastics recycling industry, EU group says

MOSCOW (MRC) -- Buffeted by COVID-19-related problems that include lack of demand due to the closure of converting plants and the record low prices of virgin plastics as well as decreased global activity, the European plastics recycling industry is now facing severe headwinds, an industry association says, as per Canplastics.

According to Plastics Recyclers Europe (PRE), an organization representing the voice of European plastics recyclers, these market developments are turning plastics recycling into an unprofitable business in the short term and risk “grave environmental consequences” in the longer term.

“If the situation persists and no actions are taken, plastics recycling will cease to be profitable, hampering attainment of EU recycling targets and putting in jeopardy the transition toward circular plastics,” PRE president Tom Emans said in a press release. “In such a case, recyclable plastic waste will have no alternatives but to be sent to landfill or incineration."

PRE is asking the European Union (EU) and individual countries to include recycling in their recovery plans.

“Safeguarding the positive developments within this market is essential to reduce Europe’s use of virgin plastics and, therefore, for the survival of the secondary raw materials market as well as further investments in the sector,” PRE said in its statement.

As MRC informed earlier, globally, only about 9% of plastic waste has been recycled and about 12% has been incinerated. The vast majority ends up in landfill or leaks into the environment. This is far away from the global vision for plastics to be 100% reusable, recyclable or compostable. Rising public awareness and concern about plastics has encouraged businesses to increasingly communicate this information about their packaging. However, the information is not always clear or actionable for consumers.

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.

Equate Petrochemical raises USD1.6 bln via dual-tranche bonds

MOSCOW (MRC) -- Kuwait’s Equate Petrochemical Company has recently raised USD1.6 billion through a dual-tranche bond offering in the first public issuance in international debt markets by a Gulf company since February, reported Reuters.

The company sold USD1 billion in five-year bonds with a 5% coupon and USD600 million in 10-year bonds at 5.875%, a document from one of the banks leading the deal showed. Both tranches were 50 basis points tighter than the initial price guidance earlier this month.

Equate hired Citi, JPMorgan, MUFG, NBK Capital, First Abu Dhabi Bank, HSBC, Mizuho, SMBC Nikko and Banca IMI to arrange the deal.

As MRC informed before, Kuwait-based Equate Petrochemical Company continued its global growth through its wholly owned subsidiary MEGlobal with the launch of work on a new world-scale ethylene glycol (EG) manufacturing facility in Freeport, Texas, US, in August 2016. With this plant, Equate is the first Kuwaiti petrochemical company to invest in the US. The new facility, to be completed during 2019, will increase Equate’s monoethylene glycol (MEG) capacity by 750,000 metric tonnes annually and will enhance the company’s global presence to meet customer needs.

Equate is the world’s second largest EG producer with 12% of the global market share.

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

According to 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.

Equate Petrochemical Company K.S.C.C., together with its subsidiaries, manufactures, markets, and distributes petrochemical products. The company produces ethylene, polyethylene terephthalate, polypropylene, styrene monomer, paraxylene, heavy aromatics, and benzene; polyethylene for various applications, including flexible and food packaging, industrial packaging, agricultural films, HIC, and others; and monoethylene and diethylene glycol that are used in polyester fiber for fabrics, water-based adhesive materials, shoe polish, and printer inks, as well as automotive anti-freeze and coolants. The company sells its products in Kuwait and other Gulf Cooperation Council countries, North America, Asia, Europe, and internationally. Equate Petrochemical Company K.S.C.C. was founded in 1994 and is headquartered in Safat, Kuwait.

Cosmo Energy has not been notified of any cut in Saudi oil supply

MOSCOW (MRC) -- Japanese oil refiner Cosmo Energy Holdings has not received a notice from Saudi Arabian oil company Saudi Aramco cutting its crude supply, a company executive said, as per Hydrocarbonprocessing.

Saudi Arabia and other major oil producers agreed last month to cut 9.7 million barrels per day of output in May and June to offset the plunge in fuel demand because of the coronavirus outbreak. Aramco told at least three Asian buyers it would trim June shipments by up to 30% for some crude grades in line with the cuts.

However, Takayuki Uematsu, Cosmo’s senior executive officer, said Aramco had not sent any notice of a cut or a change in crude grades. Cosmo expects Japan’s gasoline demand to fall 16% and jet fuel demand to plunge 44% in the financial year to next March from a year earlier, with air traffic and vehicle transport being restricted because of the coronavirus, Uematsu said at an earnings briefing.

But Cosmo’s annual fuels sales will only drop 4% as it supplies gasoline to gas station operator Kygnus Sekiyu, he said. Japan’s third-biggest refiner aims for an average run rate of 86% at its refineries this year, including scheduled maintenance, against 87.9% a year earlier.

The company has no plans to extend any maintenance or shut refineries despite the pandemic, as it needs to keep its run rate at “almost full if turnaround impact is excluded, to meet demand,” Uematsu said.

Cosmo on Thursday reported a net loss of 28.2 billion yen (USD262 million) for the year ended in March, as a collapse in oil prices led to a massive appraisal loss on its inventories.

But it forecast a profit of 14.5 billion yen for the current year, with an assumption of Dubai oil prices gradually recovering to USD40 a barrel in the January to March 2021 quarter.

As MRC informed earlier, Cepsa and Cosmo have signed a memorandum of understanding (MOU) to study new business opportunities in the lubricants market, both in Spain and Japan and internationally. The agreement covers potential synergies in the production of lubricants and coolants, the exchange of technology and formulations, and the search for possible partnerships in the marketing of these products, to increase their efficiency.

As it was written earlier,Cepsa Quimica has postponed planned maintenance to the turn of Q3/Q4 on unit 3 of its Huelva, Spain, phenol and acetone plant that was initially scheduled from mid May to mid June, according to a market source. Its other phenol and acetone production unit (2) at Huelva will remain operational.

Phenol is one of the main feedstocks for the production of bisphenol A (BPA), which, in its turn, is used for the production of polycarbonate (PC).

According to MRC's ScanPlast report, Russia's estimated consumption of PC granules (excluding imports and exports to/from Belarus) totalled 78,500 tonnes in 2019, up by 15% year on year (68,100 tonnes a year earlier).

Abu Dhabi, Qatar offer most competitively priced crude in Middle East

MOSCOW (MRC) -- Despite sharp cuts by Saudi Arabia in its official selling prices for crude oil recently, it's the relatively smaller producers like Abu Dhabi and Qatar that are emerging as attractive suppliers from the Middle East, an analysis by S&P Global showed last week.

Middle East crude producers have engaged in competitive pricing since March of this year, when Saudi Aramco slashed its OSP differentials by around USD6/b to Asian customers. Other producers followed suit with similar cuts to their respective grades.

While most Middle East producers tend to track monthly OSP changes by Saudi Aramco, the divergence in the final sale price of crude they are offering stems from the various benchmarks that different producers use.

Most Middle East producers offer their crude to Asian buyers at a premium or discount to either Platts Dubai, Platts Dubai/Oman average, Platts Dubai/DME Oman average or DME Oman average.

The sharp divergence in the value between Platts Oman and DME Oman is key to deriving the final price that endusers pay to the producer. The DME contract's premium stands out in the wider Asian market due to a combination of specific fundamentals, namely deep supply-side production cuts from Oman and rising import demand from China.

"Demand in China seems fairly robust now. With new quotas and domestic pricing, they are rushing to buy what they are used to, for example, Oman and ESPO etc," a Singapore-based crude trader said.

With fresh OPEC+ production cut quotas coming into effect this month, Oman said it would cut oil production from its six largest producing blocks by 23% from its October 2018 baseline levels of 883,000 b/d to adhere with the OPEC+ production cuts coming into effect for May and June.

Back in March, Saudi Aramco slashed the price of its April Arab Light crude by USD6/b, far outstripping a cut of USD3.98/b for Abu Dhabi's Upper Zakum crude OSP differential and USD5/b for Qatar's Marine crude for the same month.

On the surface, all three grades are of similar quality, and all load from neighboring countries in the Persian Gulf. With this in mind, the OSP differentials for Saudi Arab Light seems cheaper by a wide margin.

For the same pricing period, the DME Oman futures contract averaged USD$3.17/b higher than Platts Oman over April, exceeding its previous record high seen in March.

In the same month, the DME Oman's premium over Platts Cash Dubai averaged USD3.27/b, then the widest spread between the two Middle East markers since averaging USD1.81/b in July 2008, Platts data showed.

"The DME Oman value was minus USD2.70/b one day when window (Dubai) value for medium sour at the time was minus $9.70/b," said the trader, pointing to the wide variation seen of late between the two references for Middle East crude in Asia.

As a result, Asian customers paid USD18.92/b for a cargo of Saudi Arab Light loading over April, while paying USD17.34/b for Upper Zakum, and USD17.53/b for Qatar Marine crude loading in the same month.

For a 500,000-barrel cargo typical of Middle East crude loadings, that difference amounts to USD791,500 between an April loading cargo of Arab Light and Upper Zakum, or a USD695,000 difference between Arab Light and Qatar Marine.

Moving this sentence up ? In the same vein, a 500,000-barrel cargo of Iraq's Basrah Light crude loading over April would cost USD17.23/b compared to USD17.97/b for Saudi Arab Medium, or a total difference of USD370,000 for the entire cargo.

The difference is likely to be compounded by the continuing divergence between underlying reference markers, with the spread between DME Oman and Platts Oman averaging USD3.83/b so far in May, while posting similar increments against Platts M1 Cash Dubai and the front-month ICE Brent futures contract over the same time period.

The Arab Light May OSP was set at minus USD7.30/b, minus USD6.85/b for Upper Zakum, and Qatar at minus USD7.10/b for its Marine grade.

"The May UZ OSP is Dubai minus USD6.85/b, if (producers like) Saudi and SOMO don't cut (their prices) more, that means Upper Zakum is cheaper than Arab Light, Basrah Light etc," said a crude trader with a China-based company earlier this month.

As MRC reported earlier, in October 2019, McDermott International announced that it had been awarded a contract by Saudi Aramco and Total Raffinage Chimie (Total) for their joint venture (JV) Amiral steam cracker project at Jubail, Saudi Arabia. Amiral is a JV in which Aramco holds 62.5% and Total the rest. The plant, designed to produce 1.5 million metric tons/year (MMt/y) of ethylene, will be one of the world's largest mixed-feed crackers.

Aramco and Total launched their USD5-billion Amiral JV project in October 2018. The steam cracker will be fed with a mixture of 50% ethane and refinery off-gases. It will supply ethylene to a downstream 1 MMt/y polyethylene manufacturing complex and other petrochemical products. The project aims to fully exploit operational synergies with the adjacent refinery, owned by Satorp, another JV between Aramco and Total. Third-party investors, including Daelim and Ineos, will locate plants at the value park adjacent to Amiral with a combined investment of USD4 billion. A final investment decision is expected in 2021.

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

According to MRC's ScanPlast report, 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.

Global oil demand recovery constrained more by economy than fuel switching

MOSCOW (MRC) -- Global oil demand may struggle to fully bounce back from the COVID-19 pandemic any time soon but will likely be constrained more by the pace of economic recovery than a sudden slide in the world's dependence on fossil fuels, reported S&P Global with reference to BP's chief economist Spencer Dale.

Even when global lockdowns to contain the pandemic are lifted, some market watchers have speculated that a shift to more home-based working, a sharp drop in business travel and other permanent changes in energy use will result in a major hit to near-term oil demand.

Any fall in the world's oil intensity after the lockdowns, although still unclear, will be overshadowed by the ability of the global economy to reboot itself, Dale said in an interview with IHS Markit.

"I think the factor that's going to dominate oil demand and everything else is how much can the economy recover," he said. "In a world where there's not a vaccine and you're still having to do social distancing... my hunch is... it's not the oil intensity of GDP it's just the level of GDP and how much GDP will come back."

Most market watchers estimate that the global economy will shrink by around 5% this year, the first contraction in decades and some three or four times worse the impact of 2008-2009 financial crisis. Last week, the head of the International Monetary Fund Kristalina Georgieva said the global economy will likely take longer to recover from coronavirus than initially expected with a full economic recovery next year still unclear.

Although now recovering, global oil demand likely collapsed by up to 30 million b/d, or 30%, during peak lockdowns in April, according to most oil analysts. While the massive demand collapse was historically unprecedented, Dale noted that the world was still consuming about 70 million b/d, demonstrating a level of oil demand resilience that might not have been expected.

"It's worth remembering that even in a world which is shut down and streets were deserted and people were kept inside their houses, the world was still consuming in the order of... 70-75 million b/d of oil," he said.

Dale said it also remains unclear whether social behavior changes post-pandemic might mitigate any slide in oil intensity from less travel. More home deliveries of food and goods in addition to greater private car use to avoid public transport could push demand in the other direction, he said.

Another big question mark over the pace of economic recovery remains key emerging markets such as Brazil, India, Russia, and Africa, where the pandemic is far from under control, he said.

"The impact that COVID has on those economies is critical both because of the nature of their health systems and because the ability of governments to support with fiscal policies is far more vulnerable, so I think that's the other big unknown."

Looking further out, Dale said he sees "big forces pushing in both directions" in terms of the outlook for long-term oil demand post-pandemic.

Massive levels of public debt for fiscal support programs could distract policy makers from pushing ahead with decarbonization and climate change agendas as they focus more on domestic resilience.

The pace of future globalization and expansion of international trade is also in question, he said, with more countries potential turning inwards in terms of their policies and spending priorities.

"What COVID has done is encouraged people to place more weight on resilience and less on optimization and stretching their supply chains," he said.

"On the other side ... COVID has reminded all of us about the fragility of the planet and the way where we're living. It's reminded people about the nature of global threats and the fact that global threats don't recognize national borders," he said.

Some countries may also start to worry more about energy security, focusing on locally produced energy rather than imported sources, he said. As a result, oil and gas imports into major consuming countries such as China and India could fall sharply and they push harder into renewable energy or local coal.

In its most recent long-term energy outlook, published in February last year, BP forecast that global liquids demand could peak by 2035 at around 108 million b/d as more of the world's energy needs are met by booming renewable fuels.

As MRC informed previously, global oil consumption cut by up to a third. 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.